The Oxford English dictionary defines price as “the amount of money expected, required, or given in payment for something.” On the other hand, value is “the regard that something is held to deserve; the importance, worth, or usefulness of something.” Price-based selling is for commodities, while value-based businesses skip the rat race and focus on providing the best outcome.
In this post, we’ll discuss the difference between price and value, and the essential nuggets to create the best outcome, communicate it, and avoid ever getting price-shopped by your customers.
Value is Providing the Best Outcome for Your Customers
One of my clients owns a carpet cleaning and restoration company. Price-wise, they’re more expensive than the rest, but their value is undeniable. They have:
- The latest equipment and materials;
- Trained textile cleaning specialists on the team;
- Special booties to wear inside homes;
- Guards to protect damage to corners and furniture; and
- a special process for tough stains.
So yes, their prices may be higher, but they also clearly provide more value because their outcome is by far better than the competition.
Longer carpet life. A better-looking investment (the home), even with kids and pets. Cleaner air for healthier breathing. Undamaged walls, corners, and furniture.
Not every customer wants the best outcome. For example a property manager may just want the cheapest option. They may not be interested in the deepest clean, and instead just want to be able to say the rental units are cleaned between tenants.
In the property manager example, they would not be a right fit customer for the carpet cleaning company. They aren’t interested in the best cleaning outcome, instead are focused on the transaction.
Here’s another example.
When I go shopping for clothes, I need help. It’s hard for me to see clothing on the hanger and imagine how it would look on me or how best to combine with other pieces. At boutique stores, they do just that. Someone will help put outfits together, and I don’t even have to think about it.
Perhaps other people can purchase clothes based on price alone, or they’re able to take the time to sort, combine, and pick out clothing items from discount racks. For these types of people, discount stores may be perfect.
I just don’t have the time, patience, or eye to sift through clothing and find pieces that I’ll actually wear. The clothes in the back of my closet that still have tags prove this.
For me, the value of a boutique is worth it. Someone helps me pick out clothes, and they have a great eye for making sure it’s the right fit. Yes, I understand that the price may be higher, but my time is valuable, too. Boutiques help me save time and money by getting the picks right every time. And what’s more important for me, I feel confident wearing the outfits created.
Know the Value You Create
You and your team need to know the value you create for your customer and have confidence in the outcomes you provide to avoid being price-shopped. To do this, ask:
- What are the outcomes you create?
- How do you create these outcomes?
- How do you communicate your value, and what sets you apart?
If a customer asks a price question, celebrate because they are communicating they are a buyer. In return, discover what outcome they are looking for with probing questions so you can help them make an effective buying decision and see the value in what you provide.
Probing questions are less scary than they sound. They are simply follow-up questions that you’d ask to guide your customer to make the best purchase for their needs. For example, online businesses have all kinds of quizzes that lead their customers down the path towards their perfect solution. Check out Function of Beauty to see how they do it.
Another simple example is buying a TV, which, as it turns out, isn’t as simple as just selecting a TV within your budget. If you speak to an team member who knows the value they provide, before giving a TV recommendation, they might ask:
“How big is the room you’ll put the TV in?” or “What will you mostly be watching on it?” “Do you mostly watch digital streaming or cable programs?”
Answering these questions will allow the team member to make recommendations on TV size and image type, so you get what you really want and need, and are happy with your purchase.
That’s the power of helping your customer make an effective buying decision, and it’s your responsibility to ask questions then provide the right solution. If you don’t, they just base their decision on price because that’s all they know to compare. This is true for anything we aren’t an expert in. And I don’t know about you, but I’m not an expert in carpet cleaning, styling, or TVs!
To avoid being commoditized – forced to compete on price, you must be able to communicate how you’ll deliver more value than your customer will pay or how they’ll save more money (or time) than they’ll pay (or lose!). For your target audience, this will make doing business with you a no-brainer.
It’s critical to differentiate between price and value in your business and with your team, especially now. Click here to join our email list (we carefully guard it and never abuse) and receive your free copy of the Never Waste a Crisis ebook to learn more.