Everyone appreciates the lure of a great bargain – the product you can’t go past because it’s so darned affordable, the deal you can’t resist for fear of missing out.
For business, it can be tempting to believe catering to the deal seeker and offering a cheap service will provide a steady stream securing sales.
Yet the reality is in any one market only one person will ever be the cheapest. The rest will need to offer something different to reach their target market and engage them to secure a sale.
In that case it comes to the value they offer, as in the problem they solve and the quality they provide specifically for their customer’s needs.
Here’s an insight into cheap versus value in business and the marketing strategy required…
The problem with cheap
Call it a bargain, cheap and cheerful, cheap and nasty, or just a deal not to be missed, in an internet age price point is more transparent than ever before.
Cheap is easy to market – it’s the lowest price, the EOFY sale, the 10 per cent less guarantee and the “you won’t find a better deal”.
Yet in reality, customers do not buy solely on price and those who do can often present some of the biggest challenges for business.
Instead, most customers base their purchasing decision on a complex weigh-up of a product’s price point and the perceived value it offers them.
Importantly, when every business in a sector is focussed on offering the lowest price, it quickly becomes a race to the bottom with no value to the businesses involved and little benefit to the customers in terms of choice.
The challenge of value
Value means different things to different people, but strike the right chord with your customer and value can offer very real benefits to both them and a business bottom line.
As McKinsey Research explains: “The real essence of value revolves around the tradeoff between the benefits a customer receives from a product and the price he or she pays for it.”
Value encompasses everything from the point of difference to the quality of the product, its reputation longevity or lifespan, or the expertise of the service involved.
So how do you market value?
Your target market
Offering value involves understanding your customer. You need to know their budget, their problems and the factors that drive their purchasing decisions.
This is about finding the “right” customer, who Inc.com explains “ will be receptive to hearing why they should pay more for a certain product over another”.
“About one-third of consumers are purely hung up on price, while the other two-thirds are open to at least hearing your argument,” they note.
And the best way of finding your ideal customer is by creating a customer persona.
A customer persona
Akin to having an imaginary friend in the room when making business decisions, a customer persona is a very specific profile of who your customer is, how they spend their time, what they believe and how they live.
Critically, this customer persona will give you an insight into how your consumer makes decisions and where their pain-points lie.
Creating a customer persona involves asking the following questions:
- How does your customer spend most of an average day?
- What is their disposable income?
- What brands are they attracted to?
- What is their position on a specific issue?
- What are their priorities in life?
- Which sources of information do they trust?
- What are the keywords that indicate who they are?
- What quote sums up their frame of thinking?
- What goals do they strive to meet?
Then the value of your product lies in solving their problems…
The problem they face, the issue you solve
Creating value-driven marketing lies in empathy. It indicates you understand you customer and where their concerns lie. Critically, it clearly illustrates you know the problem they face and how to solve it. And solving that problem isn’t just about the product you offer.
Your customer’s problem might encompass:
- After sales service
- Product longevity
- Product reliability
- A warranty or guarantee
- Higher quality
- Customer service
- Ease of use
And the list goes on, but each offers a point of difference from just positioning a product at the very lowest price, and each indicates value to the customer.
Playing to your strengths
Understanding the value you offer is also about knowing your business strengths. What are the unique points of difference that you as a business offer?
These points of difference can include one or a number of the factors below:
- a quality product
- your history as a brand
- customer service and knowledge
- after-sales service
- a proven track record with reviews and testimonials
- honesty and integrity
In other words…
- What do you offer that few if any others do?
- How do you provide service differently?
- How are you regarded by your marketplace?
- What does this mean for you customer?
Now, it comes down to highlighting those benefits to the people who want to hear about them most.
Your position in the market
In addition to understanding what your customer wants and how you meet their needs better and differently, it’s also critical to understand your position within the context of your peers.
A timelessly classic way of grasping this is through a SWOT analysis.
One of the most well-known strategies in business, SWOT sees operators take a critical view of their enterprise to analyse its Strengths, Weaknesses, Opportunities and Threats.
SWOT is a technique used throughout the life of a business when planning and clarifies both internal and external factors that are favourable and unfavourable for achieving any objective, including marketing.
Within this framework, strengths and weaknesses tend to be focussed on the internal workings of the business, while opportunities and threats look at the external environment.
It works by seeing you list the following…
Strengths – These are the characteristics of the business or project that give it an advantage over others
Weaknesses – These are the characteristics of the business that place the business or project at a disadvantage relative to others
Opportunities – Elements in the environment that the business or project could exploit to its advantage.
Threats – Elements in the environment that could cause potential problems for the business or project
A case in point – the iPad
Since it was first released in 2010, the Apple iPad has consistently ranked the world’s best-selling tablets. At its peak it accounted for over 60 per cent of tablet sales globally.
And it is far from the cheapest tablet available, with a price point that starts at a few hundred dollars compared to just above $50.
For the customer it is widely accepted the iPad offers excellent value. In fact Tech Radar labels it “Hands down, the best value for your dollar”.
So how did it attain this reputation?
The power of a brand
Apple has established itself as a brand renowned for innovation, foresight and reliability, so the very brand that backs the iPad has value. Support is well-regarded as is after-sales service, including regular software updates.
In the interim, the iPad itself is seen as…
- Long lasting
- Sought after
However, the tablet’s position has not been without challenge over the years. Initially iPad hit the market as the first tablet of its type. Since then the market has diversified beyond belief, so Apple has consistently sought to present a point of difference in the value it offers clientele.
The final word
Creating value for a customer is critical to achieving sales and establishing a reputation in any competitive market.
As McKinsey notes: Although a select number of clients will look for cheap, “customers do not buy solely on low price”.
“They buy according to customer value, that is, the difference between the benefits a company gives customers and the price it charges.
“More precisely, customer value equals customer-perceived benefits minus customer-perceived price. So, the higher the perceived benefit and/or the lower the price of a product, the higher the customer value and the greater the likelihood that customers will choose that product.”
For business, creating perceived customer value can be the difference between marginal and major profit. But it’s a strategy that takes marketing nous and an ongoing conversation with your consumer, educating them about:
- Who you are
- What you do
- Why you are different
- How you are better
Create value, you create loyalty, sales and a reputation that allows you to stand out from the crowd without engaging in cheap competition and a race to the bottom of the price war.
At Openseed we specialise in planting the seeds of customer reach through compelling brands and SEO optimised websites. We then nurture kernel of great content, devising strategies and storytelling to support business in their ongoing conversation with their customer. Ultimately it reaps an ongoing harvest that delivers business real and proven results.