What's More Important: Value or Price? How to Represent Value for Customers?
People often confuse value with price. What is the difference between them and why is it important to you? Aren't they interconnected? Let's break it down to answer these and many other questions.
What is the first question people often ask when they want to buy something? How much is it? Today, the concepts of value and price have merged. But these are not synonyms. You may be wondering why some people still buy expensive items when most are planning their expenses carefully. The answer can lead to the truth about value and price.
Price is simply the amount, expressed in monetary terms, assigned to an item or service. As a business owner, you want to stay competitive without alienating your customers. This is about your profit. If you set the price too low, you will undermine your own business and lose money.
Value can be described as the benefit a customer receives from purchasing a product or service. Simply put, value is what the customer considers valuable to themselves. Value refers to the value we attach to a product or service. It has to do with brand perception. For example, there are car brands that have earned a reputation for being reliable vehicles. This way, people will invest more in the purchase because it will keep their families safe and they can drive for a long time. The buying decision goes beyond simple pricing. It is more than that, which is perceived as an additional benefit associated with the purchase of this type of vehicle.
Consumers rarely have enough information about a product, so they often rely on the assumption that a popular product must be of high quality and great value.
The price of a product can influence the perception of value by the consumer. For example, consumers may perceive an expensive product to be of higher quality, while a product with a lower price may be perceived as having less value.
Lower prices, however, do not always mean lower value. If the buyer thinks they are getting a good deal, then lower prices can help you sell. On the other hand, low prices can also create the impression that the product is of poor quality.
Think about the last time you got hungry but didn't know where to eat. You were comparing the perceived value of similar restaurants when trying to make a decision. This is entirely based on subjective perception.
According to McKinsey, the true essence of value lies in the benefits the buyer gets from the product and the price the seller offers. This is important to focus on because many companies are misusing value-based pricing.
The value can change throughout the purchase journey. Customers define value when they first experience your products or services, and this value can change as they interact with your brand.
Reporting and establishing value for the customer is important because the results of your value creation efforts are measured in customer perception of that value. The stronger your relationship with the client, the higher the perceived value.
To create value, you need to understand what benefits your customers. Good research of your audience, including surveys and customer interactions, can reveal what matters most to them.
Identify your strengths and use them.
Ask customers why they choose you, use feedback to add value to your offer, and talk about the benefits of your service so that customers can appreciate its value.
Thus, the best value for money is defined as the most favorable combination of cost, quality, and the ability to meet customer requirements.