Why you pay more to be there on the same time

For years I’ve thought what’s the correct pricing strategy for a product/service. In simple terms everyone will calculate per unit/service cost add the margin and sell. In this methodology we unconsciously comes to an assumption that the product/service that we produce is as same as what is out there in the world already. E.g., if we develop a HR Software, we tend to look at all the HR software out there and plan to place the price pretty similar to stay competitive. But how sustainable is your business if you are only price competitive? Out there what would be your growth plan if all what you have to offer over others is a big discount?

On the contrary, think of the iPhone and an Android. Why would one buy a BMW over a Toyota? Why would someone prefer Armani over local store? Why everyone wants Gmail instead of Ymail? Why travel 1st class in a train rather than coach? Almost everything out of the offers the same functionality over the other and almost same output. Then what’s the secret behind the more costly product.

Secret is there are 4 attributes which is in play here. Once you understand that you would think of your business in a different way. Almost all these superior products offers one, many or all of following features;

Reliability, design, simplicity and belief.

Reliability

This is achieved by years of service, continuous rigorous testing and great customer focused approach in service delivery. Delivering on what you promised is the 1st step towards reliability. How often can you keep up your promise would be the 2nd step. How long can you keep up your promise would be the 3rd step. If you are not reliable your customers won’t trust you. More complex the situations become you have to see your customer through with your product/service. That’s what will make you reliable.

Design

Humans are designed to work their minds from simple to complex problems. In order to do such we all use our senses. You have to rethink of your design in this way. What are the senses that your product or service offered in? How does it look? How is it heard? What does it feel to use it? You have to become a user of your product/service and see how it looks and feels. That’s the key to a successful design. If your product or service is not good looking you have to rethink weather you like it or not. Have you looked at a  Ferrari, Apple, Rolex, Louis Vuitton, Lamborghini and thought it is ugly?

Simplicity

Think of your hand. It’s an extension of your body. Though its so complexly made from inside its quite simple to use and quite effective. Do you need a manual to use your hand? All the best products out there are so simple though it may quite complex sometimes from inside. Everyone uses a product or a service to enable some other resource as a tool, or to consume. No one wants to learn how to use it unless it is so critically required. So make it as simple as possible.

Belief

This is the trickiest out of four. You and your product need to have belief. You may call it vision, tagline, slogan etc. But you need to show what you believe. And you must deliver on what you believe. Objective here is not to do business with the entire world, it is to do business with people who believe what you believe. Beauty of it is that once you include and demonstrate what you believe through your product after some time, people will come to you looking for your product. Because they believe in it and it is a part of who they are. This would be the ultimate state of any fine product.

Embed the right mix of these 4 elements for what you sell. Then name your price. Because now what you offer is not just the functionality or output. You are giving away true value. People won’t mind paying extra for those values. That is when you understand why people pay more and buy 1st class tickets to arrive at the train station exactly the same time as others.