Today, I want to talk about a critically important issue as we head into 2009 and what many are worried will be a tough year financially.

What I want to discuss today is the difference between PRICE and VALUE.

In times of economic uncertainty, it is a common reaction for many marketers to start driving their prices downward. The hope is that by discounting their prices, they will appeal to the more frugal and cost-concious sensibilities of the financially strapped consumer.

On the surface, this can seem sensible. The thinking goes that if A costs less, more people will be inclined to buy A because B and C cost more.

However, what is not always self-evident is the unfortunate truth that competing solely on price rarely appeals to the BUYERS in most markets — at least not the ones that you REALLY want.

What I have generally found to be true is this:

Shoppers shop price… Buyers buy value.

Shoppers will check 15 websites to try and save $4 on something… Crazier still, they’ll often decide after an hour of searching the web that they’re going to “hold off on pulling the trigger” until they’re absolutely certain that they’ve gotten the best deal humanly possible. More frequent than not, that means never…

Shoppers have great trouble in making buying decisions because of an irrational fear of getting “ripped off”.

Buyers, on the other hand, look for the greatest VALUE in what they buy. Will the product or service deliver the end result they want? Will it last and continue to provide value for a long time to come in the future?

Buyers will gladly pay a premium for something that they perceive to be a greater value for their money.

Case in point, Apple and the iPhone.

Shoppers scour the sunday paper and the internet to find the best “buy one get one free” promotion on a cheap crappy cell phone that they’ll never like… “I don’t like the phone much, but it was cheap!”, they’ll say…

Buyers walk into the Apple store knowing they are not going to find much of a discount anywhere and walk out with one of the most expensive cell phones you can buy, one that even requires a premium priced service plan from AT&T.

Getting into the discount ANYTHING business is often a way to price-compete yourself directly out of business. The margins shrink and you can’t grow a business with shrinking profits, can you?

So what’s the solution? It’s simple — ADD VALUE!

Look for the holes in what you and your competition offer and FILL them.

If you’ve noticed, electronics manufacturers often stick to certain price point and build up the feature sets when creating new products.

The ever present $900 “prosumer” digital camera bundle is a perfect example. For many years, this price point has been there. Each year, the camera, it’s features, and the extras you get may change, but the price does not.

You pay the same money, but the value you get from it goes up.

In my next post, I’ll tackle how you can add more value and why cutting your prices will absolutely guarantee your failure in being able to add that value.

Until then…

Best,

Brian

Like this post? Subscribe to my RSS feed and get loads more!