We’ve all felt that sucker-punch of regret when we feel like we’ve just paid too much for something. We’ve also experienced the pride and excitement of getting what we think is a great deal.
But how do we really know if something is a good value or not? How do we determine the value of a certain product, experience, or service?
Recently, I encountered this equation, and it’s helped me grasp what value actually means.
We perceive value by dividing what we’ve gotten by what we’ve paid. (Important note—the way we decide what we get is far more a function of perceived value than actual worth).
For this exercise, put yourself in the shoes of the business who is doing the selling. The temptation (and more frequent strategy) is to increase the value number by making the “what you pay” number smaller. You discount the product, so the customers are getting the same thing for less money. And to the credit of many in business, this is one way to increase value. This is the route most fast food restaurants take. Think about the McDonald’s Dollar Menu or Taco Bell’s $5 Cravings Box. You’re getting more for less money, so the value of the food increases in your mind.
But what if there is another approach to increasing value?
Chick-fil-A has become one of the largest and most profitable fast food chains. Do you ever remember getting a discount at Chick-fil-A? Now, you’ve probably received a coupon for a free sandwich or other menu item, but you will never see the actual price of an item discounted. There will be no “Dollar Menu” at Chick-fil-A. They believe as soon as you start reducing price to increase value that you begin to jeopardize your relationship with the customer. Why? Because the next time the customer has to pay full price, they feel like they’ve gotten ripped off—now the value has decreased. No one believes a business is losing money when they charge less (even though they may be), so when the business charges more, people feel cheated.
I laugh at the Jos. A. Bank sale around the holidays. It seems crazy. Buy one suit; get 17 free. Take 97% off today only! (OK, it’s not that extreme, but you know what I’m talking about!) It’s not a knock to Jos. A. Bank, but why in the world would you ever go there and pay full price for anything? By reducing what we pay, they’ve created a short-term increase in value, but now, they’ve allowed their customers to devalue the clothing they sell.
At ADDO, one of the most important things we talk about is the value we offer our customers. When a person balks at the cost of one of our products, I don’t want our first reaction to be to lower the price. I want us to do two things:
- Work harder to show them what they are getting. A lot times, if we’re able to communicate what we’re offering effectively, they will see that they are getting a good value.
- If we do need to make a change in order to get a client, we want to focus on increasing what we are giving instead of decreasing the amount they pay.
Here’s my challenge to all of us who offer a product, experience, or service to people: Stop thinking about how to decrease what people are paying, and start thinking about how to increase what people are getting.
Add to the offering.
Increase your service.
Help make your customers’ lives better.
Do whatever you can to increase what people are getting instead of decreasing what people are paying.
You’ll gain fans and faithful customers, and you’ll dramatically improve your products for the good of the people you serve.
