A simple way to explain value

A lot of people struggle to explain and justify their prices.

Perhaps you have been there too - your product or service is great - you have worked hard to make sure it is. Then you find yourself in conversation with a potential customer and they love what you do! There is only one problem - they want a discount, or perhaps they just think you are too expensive. Heart sinking, you feel like your only choice is to give a discount or lose the sale.

It doesn't have to be that black and white. If you can demonstrate value, then actually price becomes much less of an issue. However, I realise that there is a lot written about value and it can feel confusing. So let me share an example I use in my training. It's simple and it means you will be able to work out your own value from the prospect's perspective.

First of all, we need a really simple product - it could be a pen, a mug or anything really. I am going to use the example of a pen.

Imagine you are going to buy a pen. You have a choice of 3 shops (with apologies to all of them, as I am generalising to prove the point). Each of them offer something different in terms of value:

In the Pound Shop, you would expect to pay, well, ￡1 for your pen. You know the pen may not be the greatest quality and if it lasts for a week or even a month, then you will be satisfied. The design is not amazing but the pen fulfils the function of a pen - it writes and that is what you want.

In John Lewis, you might expect to pay ￡3 or ￡5 for the pen. Here, you know that the pen has a guarantee, so if it stops working or is faulty, you will be able to either get a refund or a replacement. However, you also know that the quality is better so it is unlikely that the pen will fail in the first few weeks. You should get a lot of use out of this pen. Oh, and it looks nice too.

In Harrods, you might pay ￡20 or ￡30 for a pen. However, it comes with a lovely box, is hand wrapped by a uniformed member of staff who calls you sir or madam. The pen has a lifelong guarantee and a great design. It has extra features like a special grip and just feels like a quality item. As a bonus, you get a branded Harrods carrier bag, so you can advertise to the world where you go shopping and that makes you feel good.

Now, there is nothing wrong with any of these choices, but this is the point; the pound shop customer is unlikely to go shopping in Harrods. The Harrods customer might not go to John Lewis. John Lewis customers may avoid pound shops. Each store has it's own ideal customer. The pound shop will go for cheap, Harrods will go for exclusivity and John Lewis will be in the middle providing good quality at a reasonable price.

So where are you? Are you a 'Pound Shop', a 'John Lewis' or a 'Harrods'? When you know where you are positioned, you will understand what sort of people will buy from you. The more exclusive you are, the more people will be prepared to pay. Go in too cheap for these customers and they will think you are not providing a good service, so they won't use you, even though they are actually your ideal customers.

So work out what you give customers. A useful tool is to do a SWOT Analysis to help you work it out. You may list things like be great design, excellent customer service, 24 hour delivery, guarantees, gift wrapping, free service, emergency call out or whatever. You get the idea. The more they get, then the more they should pay. It helps to understand what the competitors offer, but don't get too distracted by this at the moment. Then, when a customer challenges you on price, you can explain all the things they get. If they pay, great - that means they are your ideal customer. If they don't, then perhaps they are not your ideal customer and, let's be honest, they are no great loss anyway.

I hope this helps explain value in a simple way.

If you would like to read more of my blogs, you can check them out here: More Blogs from Janet