Return to: GROK Dot Com 9/01/2001
Its’ NOT the Price, It’s the VALUE!
I just read a funny urban legend the other day about an apocryphal statement any number of former astronauts are said to have made. 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!"
Humans have some interesting notions about what constitutes value. If they pay a lot for something, they either think they've purchased a high-quality product or just got ripped-off. Stuff with bargain-basement price tags is considered … well … bargain-basement. Find a high-quality product at a substantially-reduced price, and, hey, you've just found value!
But that's not remotely the complete picture. And online, it's still an e-commerce legend that value is all about price even though that balloon was popped in the offline world long ago (can you say “Nordstrom’s”?). Sure, you might get lucky and make a few sales based on a super-discounted price alone. 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 ‘em coming back.
You are not just offering your customers a price proposition; you actually are 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, top-notch customer service, plus lots of nice little guaranteed-to-make-'em-smile extras you devise to set yourself apart from the guys and gals that just offer, well, 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% of the consumers … bought from the lowest-priced seller … in fact … price was the least important factor."1 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 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 the value your product.2 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 ain't gonna 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 you make the shopping experience delightful? What is the long-term nature of your guarantees and customer service? How responsive are you to problems or concerns? Are your shipping policies reasonable? Do you meet expectations, fall short or them, or go way beyond?
"(Successful) business people 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."3
So, if you want real long-term success, set the issue of your 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.
beats price on the Web, study finds." Melissa
2 Dr. Witt's Marketing Psychology Report, January 2001.
3 "An Interview with Jay Walker." Randall Rothenberg, Strategy & Business, Issue 19, Second Quarter 2000
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Return to: GROK Dot Com 9/01/2001
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