Rick Meekins is the Managing Partner at Aepiphanni, a Business Consultancy, an Atlanta, GA based small business consultancy that provides Management Consulting, Implementation and Managed Services to business leaders and entrepreneurs seeking to improve or expand operations.
The Price/Value Matrix
Your customers purchase from you, or from anyone or any company for that matter, because they have a need or a want, that is a given. You will hear until the cows come home that you must sell your product or service to help your consumer overcome whatever their pain is. The greater the pain, the greater value they place on overcoming that pain. You can see that every time there is a gas shortage; the prices for gas go up.
When looking at our company, the problem people come to us with is how to overcome their obstacles to growth, whether that is through sales, marketing, changing their business model or creating an expansion plan. The pain they have is the obstacle. However, notice there is another dimension – they want to get to a better place. So it isn’t a single message or single desire that they would have with us. Either approach has been appropriate to win new business.
If you are selling mattresses, you might create a pain point that consumers aren’t aware of, such as bed bugs and the plethora of such vermin after sleeping on the bed for eight years. A consumer’s very real pain point might be the pain that they are in after sleeping uncomfortably. But there is also the idea of sleeping on a new, state-of-the-art mattress that bends, flips, slides and makes breakfast.
In both scenarios, note that people will purchase for different reasons. Some to gain greater pleasure, others to get away from pain or discomfort.Therefore they will have different perceptions of what the ideal price/value matrix will look like. So your pricing strategy must take into consideration:
- why people will pay for your offering – (achieve a goal, demonstrate a status, solve an issue or fill a critical gap)
- how much they value what you are offering (passing fantasy, nice to have, important (status symbol in some cases), or essential (emergency services)
- what the solution you are selling actually is (better sleep, solid advice, reliable transportation)
- perception – what people think about both your company/offering and their problem. Sometimes, consumers must be educated on the existing problem.
- buying cycle – are you entering a saturated market or do you have something that is a new or continuous innovation? Is your consumer going to be the market leader who will try anything new, or a market follower, who will purchase out of need after something has been tested in the market
- category – the category you place your good in will shape people’s perception (garbage man vs. sanitation engineer)
You could take this list against your product or service in order to do some market research on similar items your target markets have purchased. If you are a taxi replacement service, for example, your market is paying a pretty fixed price for taxi service, and not really in need of another solution, per se. So while your service might be more convenient, you aren’t offering a limo service (exclusivity) and people already have a viable solution, you don’t have much room to wiggle in once the product has matured.
However, you do have your early adopters, who will jump on board early on and will pay a bit more for it because it is new and different, and perhaps there is a shiny, new app to make it convenient. And perhaps you don’t refer to it as a taxi replacement but rather on demand transportation service to change perception and get people to think differently about what you are selling.
Whenever you are building something that is extraordinary, you are thinking in terms of striving to do things better than what is considered to be the standard. Getting the right product or service to the right people at the right price is a key component in that thinking.
Rick Meekins is the Managing Consultant at Aepiphanni, a Business Consultancy that provides Management Consulting, Implementation and Managed Services to business leaders and entrepreneurs seeking to improve or expand operations. We are the trusted advisor to those seeking forward-thinking operational and strategic solutions to help them plan for and navigate through the challenges of business growth.
If you are ready to discuss how Aepiphanni can help you with business strategy, overcoming challenges to growth or any number of business solutions for your business, whether a small, growing or established company, contact us directly or submit a request for a complimentary Coffee & a Consult to learn how we can help you CREATE | DESIGN | BUILD an Extraordinary company.