Compete on Value

Old Cash Register

As I’m building out Human Business Works, I’m experimenting with creating new products and understanding what works and what doesn’t. It’s exciting, because it’s a chance to own all aspects of the experience, instead of being the marketer who’s brought in to work on making something sell better. In other words, it’s having my own ponies in the race.

Part of this is thinking about price. I’ve written about price points before. It’s something I think about often, as it’s one of the core parts of understanding business, business models, and marketing. I once read this article by Russell Simmons, where he talked about why his clothing line spread out from value stores to premium stores, where most people were working to catch just one segment of the market. It was fascinating reading. In a way, that’s what I’m working through, as well, including giving a $27 webinar on blogging. It’s a way to reach more people who could benefit.

Competing on Value

But here’s the big point: I compete on value, not price. Meaning, if I give you something at whatever price point I charge you, I’m going to give you as much value as I can afford to put into it. The difference, in my view, is everything. Some people look for ways they can give you something cheaper than the other guy. Others look for ways to make a less-functional version of what they sell at higher points. But that’s competing on price.

To compete on value, the goal is, “always deliver more than what people expect at that price.”

In Third Tribe, I give away lots of my business methods to members as part of what they get for their money. When I consult with clients, I give them as many ideas as I can possibly come up with, and then New Marketing Labs works to execute the ones they like. When I speak professionally, I try to give as much of my time and attention to the people I’m speaking with, instead of just doing my speech and leaving (oh, and I write custom speeches for each audience).

That’s my view on value. Give more than people expect. Find the right price points to reach others, but don’t create those price points by taking something away. Do it by finding out just how much value you can afford to stuff into that price point.

Thoughts?

ChrisBrogan.com runs on the Genesis Framework

Genesis Theme Framework

The Genesis Framework empowers you to quickly and easily build incredible websites with WordPress. Whether you're a novice or advanced developer, Genesis provides you with the secure and search-engine-optimized foundation that takes WordPress to places you never thought it could go.

With automatic theme updates and world-class support included, Genesis is the smart choice for your WordPress website or blog.

Become a StudioPress Affiliate

  • http://nmachijidenma.com Nma

    This makes absolute sense Chris! Consumers are ultimately always looking for the companies with the best value proposition, consciously or unconsciously. Personally, I only recommend services or product that deliver so much value that it almost seems ridiculous. And I suspect that this is what makes such products viral as it is essentially their “hook” or “buzz value.”

  • http://nmachijidenma.com Nma

    This makes absolute sense Chris! Consumers are ultimately always looking for the companies with the best value proposition, consciously or unconsciously. Personally, I only recommend services or product that deliver so much value that it almost seems ridiculous. And I suspect that this is what makes such products viral as it is essentially their “hook” or “buzz value.”

    • http://chrisbrogan.com Chris Brogan

      And it explains why we spend premium amounts on products we perceive to offer us a value.

  • http://nmachijidenma.com Nma

    This makes absolute sense Chris! Consumers are ultimately always looking for the companies with the best value proposition, consciously or unconsciously. Personally, I only recommend services or product that deliver so much value that it almost seems ridiculous. And I suspect that this is what makes such products viral as it is essentially their “hook” or “buzz value.”

  • http://askaaronlee.com Aaron Lee

    It makes perfect sense to compete on value.
    Value = Loyalty + Comeback

    Cheap price may mean that they may not put so much effort on it as well hence, no loyalty, no comeback :)

    • http://chrisbrogan.com Chris Brogan

      Right, Aaron. You’re right down the middle there. : )

  • Ottawainsurance

    Love it! Great thoughts.

  • Ottawainsurance

    Love it! Great thoughts.

  • http://www.margieclayman.com Marjorie Clayman

    Other than the fact that this completely encapsulates my professional ethos, I can’t stand this post…:)

    • http://chrisbrogan.com Chris Brogan

      Happens to me all the time.

      • http://www.margieclayman.com Marjorie Clayman

        you encapsulating my professional ethos with a blog post? Yep. Happens to me all the time too :)

  • http://twitter.com/ThrowingaBrick Roy Scribner

    I think there is a place for competing on price, Chris, but only if that widget drives secondary sales of premium products. You came for the cheap gas, but that real value is that you can also purchase convenience food, without making another stop :) Some still refer to gasoline as a commodity product, but it has really become more of a marketing tool for convenience food.

    • http://chrisbrogan.com Chris Brogan

      Okay, you’ve got a point there. The way WalMart uses loss leaders to bring people in, for instance. : )

  • http://twitter.com/barbaraling Barbara Ling

    Value trumps all. You can buy the exact same widget at various/sundry online sites….but you can ONLY get a unique CUSTOMER EXPERIENCE (hence, additional value) at specific vendors.

    I think it’s the customer experience that lingers…and causes people to tell their friends….that helps boost the value as well.

  • Anonymous

    You make an important point about professional speaking here that might be overlooked as general… but it should be noticed by those who speak….AND those who hire speakers:

    You said: “When I speak professionally, I try to give as much of my time and attention to the people I’m speaking with, instead of just doing my speech and leaving (oh, and I write custom speeches for each audience). ”

    This is a real value to the meeting planner and the audience. Too many speakers “speak and run”, and their contract often stipulates they do not need to mingle with the attendees or attend a any social funtions. But my experience shows that people like to talk to the speaker, and not just being breezed through a line to shake a hand. There is real value that you stay and participate and are accessible. Not every event schedule lends itself to this type of participation, but most do ….. yet lots of speakers get out as fast as they can.

    As a professional speaker, this is my pet peeve (those who speak and run). I too try my best to make sure my value is more than a 60 or 90 minutes stage talk. You should write a whole post on this topic!!!

    thom

    • http://chrisbrogan.com Chris Brogan

      I’m with you, Thom. I’ve found that I’m actually the exception to the rule on this, and I *always* get people saying, “Wow! It’s so cool that you just hang out with us.” I mean, if that’s a big deal, I’m happy to give them a big deal. : )

      • http://twitter.com/darleenw darleenw

        Yes this is what makes you stand out from the crowd. Also fact that you write custom for the audience, not a stock script/speech. Authenticate and Value!

    • http://chrisbrogan.com Chris Brogan

      I’m with you, Thom. I’ve found that I’m actually the exception to the rule on this, and I *always* get people saying, “Wow! It’s so cool that you just hang out with us.” I mean, if that’s a big deal, I’m happy to give them a big deal. : )

  • http://twitter.com/ehagborg Erik Hagborg

    Agreed. As Marjorie noted, this is also part of my ethos. I’ve never defined it before–never really felt I needed to or for that matter could. Nor is it unique in anyway, as many smart people know this unconsciously. After having read Patrick Lencioni’s “Getting Naked” and seeing this post I recognize that “value” has always driven my dealings with clients. Value is the only thing that drives customers. You can charge anything you like as long as customers feel that they have received value. Cost savings are the most basic version of value, but far more motivating is value due to experience and perception. People will walk two blocks farther and pay more more for a starbucks because they believe they are getting more value than the coffee at the cornerstore. And they’ll never question an invoice if they feel they are getting value.

    • http://chrisbrogan.com Chris Brogan

      Excellent, Erik. Glad to know we agree on that. : )

    • http://chrisbrogan.com Chris Brogan

      Excellent, Erik. Glad to know we agree on that. : )

  • http://www.addingitup.com Rod Watkins

    And yet most businesses compete on price, price, price. Take telecom. If you’re a business buying teleco services there is no such thing as a set price. Unless you’re located in a monopolized wire center (meaning that there is only one viable provider) then you’re probably able to play carriers off each other. I once had the job of lowering telco prices in response to requests from the sales force who felt the only way they could win the business was to cut the price. This wasn’t entirely their fault. All though the industry nobody could figure out a better way. So for all the massive expenditures in infrastructure it all came down to a junior analyst and a spreadsheet.

    Now some my argue there simply is no other way. Maybe so. But simply taking that position assures they’ll never find a way to sell on value.

    • http://chrisbrogan.com Chris Brogan

      I quite agree, Rod. I think that people put themselves into the commodity business.

    • http://chrisbrogan.com Chris Brogan

      I quite agree, Rod. I think that people put themselves into the commodity business.

  • http://www.addingitup.com Rod Watkins

    And yet most businesses compete on price, price, price. Take telecom. If you’re a business buying teleco services there is no such thing as a set price. Unless you’re located in a monopolized wire center (meaning that there is only one viable provider) then you’re probably able to play carriers off each other. I once had the job of lowering telco prices in response to requests from the sales force who felt the only way they could win the business was to cut the price. This wasn’t entirely their fault. All though the industry nobody could figure out a better way. So for all the massive expenditures in infrastructure it all came down to a junior analyst and a spreadsheet.

    Now some my argue there simply is no other way. Maybe so. But simply taking that position assures they’ll never find a way to sell on value.

  • http://www.philsforum.com PhilWrzesinski

    Chris,

    All purchases are made on “value”. When we choose to buy something the first thing we do is assign it a value – what it is worth to us. Then we look at the actual price. If the actual price meets our assigned value, we buy. If it is too high, we don’t. Also, if it is too low, we pause, trying to figure out why it is too low. Until we determine why the price is lower than expected (either because the quality isn’t there, or we misjudged the price) we won’t buy.

    That calculation happens subconciously or conciously on every purchase we make.

    What you do by packing in the value causes two things…

    First, by packing in as much value as possible, you raise the perceived worth of what you’re selling which gives you flexibility to charge more for it. You make it worth more, and people know it is worth more, so they will spend more.

    Second, you create loyalty and word-of-mouth by giving what the French-Cajun call lagniappe – a little extra. When we give away more than promised, more than advertised, it becomes special to the receiver, enough to talk and rave about it, to become a loyal fan.

    There is much more profit and much more growth in doing it your way. Unfortunately, too many people don’t get this and languish in low growth and profit.

    By the way, this applies to retail, to service, to all businesses. Thanks for highlighting it here.

  • http://www.carlnatale.com/about-carl-natale/ Carl Natale

    I agree Chris. Providing value is essential to successful business. And it goes beyond pricing strategy.

    Any chance you have the link to Russell Simmons’ piece? I would love to read it.

    • http://chrisbrogan.com Chris Brogan

      Not at all. It was a magazine article from a few years ago. : )

  • Wes

    Nothing worse than feeling like you overpaid for something, and nothing better than feeling like you got a terrific deal.

    • http://chrisbrogan.com Chris Brogan

      That’s the goal, Wes. : )

  • http://marktzk.com/ Mark Tosczak

    Great post. One of my business school professors used to say you never want to compete on low price. There’s only ever one winner in that game, and the low-price winner only wins if it has a lowest cost infrastructure to go with it (that’s why K-Mart almost went out of existence a few years ago when it tried to match Wal-Mart’s prices – K-Mart didn’t have the low costs to go along with the low prices). It’s much better to compete on offering some kind of unique, additional value, therefore making price a less important part of the equation for the buyer.

    • http://chrisbrogan.com Chris Brogan

      You’re right about that, Mark. There’s a place for low prices, but it’s PART of a system.

  • http://wwwjackbenimble.blogspot.com/ The JackB

    Businesses that can’t demonstrate the value of their/product service focus on price because that is all they have to work with.

  • http://www.azreg.com Alex Casteel

    Great post, Chris. In the real estate world, so many brokerages have competed on price and lost, where those who have competed on value have survived, if not prospered, in our current market cycle. Those offering value are now the “trusted agents” as we’ve been able to demonstrate a competency well above our competitors; a trust that is required to navigate through challenging waters. In our vernacular, anyone can stick a sign in the yard–not everyone can sell a home.

    • http://chrisbrogan.com Chris Brogan

      It’s strange that we end up there, though, isn’t it, Alex?

  • http://www.lynetteradio.com/ LynetteRadio

    Never EVER compete on price. Someone, somewhere, will always underbid you by $1. Value is much harder to cut.

  • YPICommunications

    Great article — simply but and packed with good food for thought, and a rule of thumb to adopt. Value is oftne times more important than price point…

  • YPICommunications

    Corrected comment — Great article Chris — simply put and packed with good food for thought, and a rule of thumb worth adopting. Value is often more important than the price point.

  • Donny Gamble

    I think this is a battle that I would like to win about having the most value orientated content

  • http://mimosaplanet.com James M Cooper

    Price is always the deciding factor when nothing else sets you apart… so, what if you have the same or very similar offering as someone else? Panic. Or, become value obsessed. Either option will likely set you apart nicely.

  • http://ichomesforsale.com Denise Hamlin

    I couldn’t agree more Chris. When it comes to price there will always be someone cheaper. The question becomes what you get for the price. As you point out, the client needs to feel they are getting more than they expect. I lived in Germany for many years and they have a wonderful language that allows you to express this in just three words: Preis-Leistungs-Verhaeltnis. Getting the Price to Value ratio right is an art all of its own…

  • http://twitter.com/RichWP Felix Krusch

    In my opinion price and value go hand in hand.

    There is great value in simplifying things, taking functions out, making it easier to adapt or focusing on some breaking points.

    Making a “less-functional version” that is focusing on catering just some specific needs might as well justify the same pricing than an “all features, bells & whistle” version.

    I totally agree with “always delivering more than what people expect at that price”, but what people expect is in the eye of the beholder.

    Confusing by over-delivering is as bad for business than under-delivering and the line between can be very fuzzy ;-)

    Great and thought provoking post, thanx for sharing.

  • http://twitter.com/RichWP Felix Krusch

    In my opinion price and value go hand in hand.

    There is great value in simplifying things, taking functions out, making it easier to adapt or focusing on some breaking points.

    Making a “less-functional version” that is focusing on catering just some specific needs might as well justify the same pricing than an “all features, bells & whistle” version.

    I totally agree with “always delivering more than what people expect at that price”, but what people expect is in the eye of the beholder.

    Confusing by over-delivering is as bad for business than under-delivering and the line between can be very fuzzy ;-)

    Great and thought provoking post, thanx for sharing.

  • Rahul @ MazaKaro

    very helpful ! there is always the cheaper one !
    thank You

  • Rahul @ MazaKaro

    very helpful ! there is always the cheaper one !
    thank You

  • http://www.wilkiecraft.com Bill

    I know I cannot compete on price, and have been putting thought into my value proposition. I like the statement, “To compete on value, the goal is, ‘always deliver more than what people expect at that price.’”

  • http://www.flashxml.net/ flash menu

    That’s true that one should give more than what people are expecting, but there are very less people who does this. They focus more on price and provides that much information only which fits to price , if want to know something more than have to pay more.

  • commoncents

    Thanks Chris for the information about value. You certainly always include tons of information with every ‘conservation’ you post here. You do deliver. I purchase on the internet, and leave feedback with the words ‘great value’. It’s that important.

    “”To compete on value, the goal is, “always deliver more than what people expect at that price.”” Thanks for that too.

  • Sjkato

    Nice. Very nice. I am happy to read that there are people in the business world who do care about value, given that many are more interested in the profit they can make rather than anything else.
    Giving value is important after all. If you can give a customer more value than they paid for, they will return to you and think positively about you. It means more work of course, but to keep a good customer, the effort is worth it.

  • http://www.superiorpromos.com Eddie

    This is a great point, make sure you charge for your worth not to compete with some cheap business, that doesn’t offer the same value you do.

  • http://www.joelbroughton.com Joel Broughton

    Awesome Chris, I’ve just recently started taking a different approach to my business which is just this….create more value for my customers than they even think is possible for the price they are paying, and not only will they continue to pay monthly, but they will want even more from me when I decide to add more products for them to buy. Value truly creates a strong bond with our customers.

  • http://www.blackfridayplanet.com/ William Hushburn

    I like this post and also the image that you clipped.

  • Pingback: Creativindie | Productivity, promotion and marketing tips for indie authors and artists

  • Pingback: Optimism is having faith in youth — a blogoff | DogWalkBlog