Oscar Wilde is credited with the quote “The cynic knows the price of everything and the value of nothing.”
Today, many of us confuse the meaning of the word “value” with the word “price”. Or maybe the word “cost.”
Speak to a group of marketing people and I’d bet that most of them would tell you that for something to be perceived as having a high “value for money” rating, it needs to either be either:
- Cheaper than the competition’s offering.
- Offering “more” than the competition.
Selling your widgets 25% cheaper than the ones sold by the guy down the street doesn’t mean that everyone’s going to buy your widgets and no-one’s going to buy his. Perhaps some people value that he offers online ordering, or free delivery. Perhaps he puts his widgets in a nicer-looking package than yours. Whatever the reason, some buyers prefer to buy from him, even if he’s more expensive than you.
The fact is, nobody would buy any product or service – at whatever price it was sold at, from whatever business – if they didn’t see the ‘value’.
Price is what you pay. Value is what you get.Value has little to do with price. A corkscrew is inexpensive to buy, but if you’re trying to get into a bottle of wine it has immense value. Similarly just because something costs more than its peers doesn’t mean it’s poor value. If it did, nobody would buy an Apple computer, or a BMW automobile, or an IWC watch. Every brand that exists today has ‘value’ to someone.
The only reason that a product or service absolutely needs to be cheaper, or offer more for less, is when it is deemed to be a commodity. An item can be considered a commodity when it has no other inherent communicable “value” that its market would pay for, other than its price in relation to the competition. For example, I don’t care what brand of paperclips I buy. I’m just looking for the best deal.
The problem with selling commodity is that there’s always someone, somewhere, who’s prepared to sell it cheaper. With price as your most important differentiator, you’re in a race to the bottom. Supermarkets, for example, often sell daily staples at less than their cost as an enticement to get you through the door. Once you’re in, they gamble on you buying other stuff while you’re in the store, evening-out their profit-per-customer stats.
Today, there’s no future in selling something perceived as a commodity. That space has been monopolized by the giant brands. In order to prevent your business value from being commoditized, it’s essential to position your product or services in a way that creates value in the minds of your audience. Enough value that they’ll pay good money for what you’re selling.
It’s about creating a brand – the focus of companies like Apple, BMW, and IWC.
It’s not about “25% extra free.”