Business directory for the Central Coast of NSW, Australia
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I hear this question time and time again. It’s often preceded with ‘that big monstrosity just opened up down the road and there’s no way I can match their price’.
To understand why consumers are so fixated on price, we need to understand what goes on in a consumers head before they make a purchase. This takes the shape of the value equation, where it’s the difference between the benefit received vs the cost outlaid (remembering that the cost can refer to money, time, effort, stress, risk, etc).
When evaluating the value of a product or service consumers will assess the amount of benefits they get vs the costs the outlay. The key problem for so many businesses is that without highlighting the benefits of your offer versus your competition or the reduced cost (less money, less time, less stress, less likely to breakdown, etc) vs your competition.
If a consumer doesn’t know or understand the benefit of a product then they will turn to the cost side of the equation to work out whether it’s worth the investment. When it comes to making a purchase, what’s the easiest thing to compare. Price.
Take for instance a can of baked beans in the supermarket. When you look at the packaging, some look better than others, but how else do you compare them? Ultimately you can’t (short of opening each tin and seeing what they taste like), so the only way to compare them is with price and risk. If you pay an extra dollar for that tin will it be that much better than the tin next to it? What’s the risk that you’ve wasted your money?
They key for your business is to look at the value equation for your customer. What benefits are they looking for your in your product / service and what are all the costs they will incur. So the benefits significantly outweigh the costs? The real question is, are you communicating all the benefits so they can properly evaluate the value equation.
Just to through another spanner in the works, this value equation is currently being exacerbated by the daily deals and constant discounting in the supermarkets. Consumers are being trained to not pay full price. 50% off is a standard occurrence these days. So what does this mean for your business, you have to work twice as hard to communicate how your products and services are valuable and worth the cost (time, money, risk, etc).
The morale of the story being: know your product / service and the benefits it provides vs the costs. Understand who your customer / client is and find out what’s important to them. Based on that, you can show them how you can provide them with more value than the competition.
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