It’s Not the Price, It’s the Value

I read a funny urban legend the other day about an apocryphal statement by a former astronaut. The comment went something like this: “It really makes you think when you realize you are hurtling through space in a craft built by the lowest bidder!”

People have some interesting notions about what constitutes value. If they pay a lot for something, they think they’ve either purchased a high-quality product or just gotten ripped off. Stuff with bargain-basement prices is considered… well… bargain basement. Find a high-quality product at a substantially reduced price, and, hey, you’ve just found value!

Just in case you’re thinking this doesn’t apply to your Web site or your industry, think again. Value is the key determining factor in all purchases, for both consumers and businesses. There are always “price shoppers,” and they are a minority. Additionally, price shoppers are notoriously disloyal, so unless you have an overwhelming competitive pricing advantage, you are destined to lose out to those with deeper pockets and more staying power.

The notion that value online is all about price prevails, even though that concept was proved incorrect in the offline world long ago. Sure, you might get lucky and make a few sales based alone on a super-discounted price. But if that’s all you’re offering, you’re building zero loyalty, and you’re begging for competition. If you want lots of delighted, loyal, repeat customers, you have to realize superior value goes way beyond price and it’s superior value that keeps customers coming back.

You are not just offering your customers a price proposition; you are actually offering them a value proposition. It’s a complete package, filled with lots of human-friendly usability elements: attractive but fast-loading and functional design, great information, great products, appropriate prices, and top-notch customer service, plus plenty of nice, little guaranteed-to-make-them-smile extras you devise to set yourself apart from competitors that just offer, well, a low price.

Think this new medium isn’t about sustainable value? Then have a look-see at the results of an MIT study of online buying that discovered “only 47 percent of the consumers… bought from the lowest-priced seller… In fact… price was the least important factor.” And what beat price? The biggest factor was whether the customer had visited the site before (see why I go on about making the right impression with your site?), followed by the company’s familiarity, then shipping time (think “service”).

Truth is, value is so subjective that you can often be more successful charging higher prices, provided you pay close attention to all the other factors that influence the buyer’s perception of your product’s value. A lot of that perception hinges on your market position. If you’re selling coffee, are you a Denny’s or a Starbucks?

Remember: Image alone isn’t going to cut it, particularly online, where it’s that much harder to enable your prospects to bask in fancy ambiance. Folks flat out require real substance, and they consistently vote with their mice.

Want to make more money? What are you doing to make the shopping experience delightful? How do your guarantees and customer service perform over the long term? How responsive are you to problems or concerns? Are your shipping policies reasonable? Do you meet expectations, fall short on them, or go way beyond?

Jay Walker, of fame, said: “[Successful] businesspeople engineer value equations. And they don’t care whether it’s about more or less cost: They only care about whether there’s more or less value. And if they can charge for the value they create, that’s where the successful business lies.”

So, if you want real long-term success, set the issue of price aside for a moment, and take a long, close, hard look at your comprehensive value proposition. That’s where the path to your goal lies.

Bryan is taking Friday off for Independence Day. Today’s column ran earlier on ClickZ.

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