Home – New Forums Marketing mastery Overcoming customer price concerns by building value – your perspective

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  • #968539
    Jay-T
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    Howzit guys,

    I’ve seen a lot of posts on this forum where people have had difficulty around how much to charge their clients and the answer is pretty much always the same “you need to show value”.

    So my question is this:

    1. What are your thoughts on how value is created AND/OR

    2. How have you (in real business situations) clearly outlined the value you deliver to your customer so that they’re less concerned with price?

    I’d like to get everyone’s unique perspective on the concept of value so startup FS’ers and also people who are constantly struggling with price concerns from prospects can look at ways to overcome it.

    Cheers!

    #1033751
    Gordon Akman
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    Pricing should be a major part of your business planning. When doing your market research and planning your business model you will obviously research a huge amount of information including: the market in general; the size of the market; the market’s growth prospects; existing market participants (potential competitors); existing market participants’ pricing; what costs your competitors face; your own costs; etc etc etc. There are just so many things you can research to develop a business model and dramatically increase your chances of success.

    At the end of the day you need to set prices that suit you. Let’s look at a couple of examples.

    Tiffany sell diamonds. Costco sell diamonds. As you can easily guess they have very different business models. Tiffany is a very successful company. Costco is a very successful company. What does this tell you? It tells you their is no one price for any product or service in the world. It all comes back to your particular business model.

    If your focus is profitability (most company’s focus) you should charge as much as you can get. Look at the hugely successful expansion of Boost Juice Bars over the last 10 years. If you have bought smoothies with some regularity from them over the last 10 years you will know how they have maximized profitability by working out what the market will bare. After establishing a great business model and enjoying fantastic success they consistently increased their prices. They continued to increase their prices as high as they could only stopping their price increases (and in fact lowering them slightly) once they determined the optimum price.

    So to answer your questions directly:

    1. My thoughts on how value is created is by having a clear business model, communicating a clear message to the market, then delivering on what you have said you would in your communications with the market.

    2. In my own business I clearly outline the value I deliver through a consistent and clear message on my website, marketing materials and terms and conditions (including fee schedule), and advertising campaign. If you have done these things properly you should not struggle with justifying your price to prospects. In fact, your prospects should be able to understand your pricing through the information you have provided about the products or services you sell and the service you deliver.

    #1033752
    Carbonite Australia
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    One of teh challenges we have faced in terms of pricing our software has been the pricing in the US and the fact that our pricing is directly determined by the exchange rate.

    I used to have clients call up and ask a whole heap of questions and then go to the US to buy the service directly from there because it worked out to be a few dollars cheaper (usually 10% because we need to add GST).

    So I needed to differentiate the service and I did so through our Customer Service. The US charges for telephone support, something we in Australia aren’t so used to. I decided to make this a core part of the offer. If you buy from us in Australia, you have a local number to call and get direct support from and it wouldn’t cost you anything else.

    The reality was that we were already offering thing this but most people didn’t know that they wouldn’t get the direct service if they purchased via the US.

    The next thing I did was concentrate on giving the best service I could. My focus was never to get off the phone as soon as I could it was to ensure that the customer’s issue was solved.

    The same principle was applied to resellers. I built a personal relationship with them so they knew me and knew I would solve any issue that arose.

    It worked and we started to see some great results, particularly since the start of this year.

    So in the in end I was upfront with customers and told the $A price as well as the $US price and the difference in service that they received and most came back to us. Some just preferred to buy local, others wanted the Tax Invoice to claim and other wanted the local support.

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