What’s it really worth? How to know when your ‘price is right'
Water offers a great illustration on how Value is monetized. In Coeur d’Alene, residential customers can purchase 3,000 gallons of city water for about $12. On Amazon a gallon of distilled water costs $4.33. A 16 oz bottle of drinking water may cost you $1.85, and a 750ml bottle of ACQUA DI CRISTALLO TRIBUTO A MODIGLIANI will set you back $60,000!
It’s all water, H2O, so what is going on here? The secret is the Value perceived by the customer.
City water seems so cheap, we don’t mind running gallons down the drain to get hot water from the tap. When we are thirsty out on the bicycle trail, that $1.85 for a bottle of water is of no concern. And that Italian water offers incredible levels of exclusivity and snob appeal that some customers will actually pay to obtain.
In the Business-to-Consumer [B2C] sales channel, customers care about having their problems solved, their needs met, and convenience. We have learned to buy just about everything from Amazon for the convenience it represents. Families will spend $200/mo on cell phone service to satisfy the need to stay connected. And hi-speed internet at $100/mo is a “must” to solve the problem of how to work from home.
As Sellers, the more points of Value we can add to our offering, the greater our ability to monetize the Value of our offering through higher Pricing. Your ability to monetize that Value also increases as that Value works to differentiate you from your plain-Jane competition.
Talk to your customers, but don’t just ask them if they like your offering. Ask them why they like it. Or, what they don’t like about it, or how it could be better.
Your offering isn’t just your product or your service. It is everything connected with how customers learn about, acquire, and use your offering for their satisfaction.
Companies like Amazon, Apple, Mercedes, and Southwest Airlines are relentless at probing customers to learn about needs and ways to meet those needs. As small business Sellers we need to be just as relentless. Often times a customer complaint is just a need screaming to be met!
When customers receive a dose of increased Value from your offering versus a competing offering, something very special happens inside their brains. Their Willingness-to-Pay goes up. This WTP is the mental budget we live by when shopping.
When our WTP goes up, we unconsciously give ourselves permission to pay more than we had originally intended. As Sellers, we can often increase that WTP even more by relational selling. This educational type of selling increases the perception of Value received, increasing WTP.
When the customer has given themselves permission to spend more, Sellers have the opportunity to price higher. And if our increased price versus the competition is a realistic representation of the increased Value the customer has received, price will not be an issue.
Want to learn more about Pricing and Monetizing Value? At the North Idaho College Small Business Development Center our mission is to help your business thrive and grow. Monetizing the Value you deliver to your customers is just one aspect of fulfilling that mission. Digital marketing, E-Commerce, Leadership Development, Budgeting, Strategic Planning, and other tools are available to take your business to the next level.
Call us at 208-665-5085 or visit us at https://nisbdc.com/ to start the conversation.
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Warren Mueller is a business coach for the North Idaho Small Business Development Center at North Idaho College. He previously spent 15 years in the defense contracting business and another 15 driving business and marketing in emerging international markets.
