We get a lot of queries from companies who say “our product/service/gizmo is so much better than the competition’s, but our customers don’t perceive it. How do we get them to see the value?”
It’s a great question. The “envelope” of possible prices stretches between your cost and the perceived differential value of your offering. (That’s almost always true; we won’t go into loss leaders here.) A lot of companies think they have great value, and they work very hard to create it, only to be told that by customers that it’s irrelevant.
One example is gasoline. Despite millions of dollars of advertising, no one really cares if Chevron comes with Techron while some other gasoline doesn’t. Part of the reason is that customers never see the gasoline, let alone any additives that may or may not improve performance or engine wear.
So the first step in getting customers to understand value is to show them whatever it is you want them to value. Intel did a great job creating a brand and a hefty price premium for something that had previously been a commodity– microprocessors inside computers. Corporate and home buyers saw the computers, but had no idea what was on the inside until Intel spent hundreds of millions of dollars convincing people that the CPU was the most important piece and putting little “Intel Inside” stickers on the outside of the case.
Nike offers another good example. When they introduced “Air” cushioning (it’s not actually air but a much denser gas with a higher molecular weight that is easier to contain under pressure for long periods) in the early 80s, it was a revolutionary concept. When they made the “Air” visible in 1987 by cutting little windows into the midsole to reveal the cushioning unit, everyone could see that this was great technology. Nike did a lot of other clever things, too, but this helped convince people that they should spend $100 on a running shoe.
Have a fancy sports car? You don’t want people to think you have regular non-sportscar breaks, do you? That’s why companies like Porsche make bright yellow and red break calipers.
(From FleetRates.com)
They are reinforcing via a simple color choice that this is a premium product.
Of course, some things are more amenable to being made visible than others. What do you do with materials that are, by definition, embedded in walls? Dupont puts their trademark Tyvek in giant letters on their housewrap. You can’t see it when the house is done, but during construction, everyone knows that the house or office building uses Tyvek.
The iPhone pretty much does what a Blackberry does, but it’s got a slicker, more intuitive interface. Apple makes sure you know this by airing TV commercials showing people doing things with a few flicks of a finger that would require more complex menu navigation on a Blackberry. Sure Apple has a great hype machine, but they also make sure potential buyers understand the advantages that justify premium prices. (Full disclosure: your author is a former anti-Mac person who loves his iPhone and whose next computer will be a Mac.)
What happens when you have a visible differentiator and you take it away? Starbucks did just that, using high technology to churn out coffee faster, but removing the aroma of ground beans. As Starbucks CEO Howard Shultz noted in a now-famous leaked memo, that this caused the coffee giant to “lose its soul.” Is it a coincidence that Starbucks is now closing stores? (Also possibly caused by other reasons– we’ll have a separate post on this issue soon.)
How can you help customers see the value? Anyone have any tough cases they’d like to take on in the comments? (Remember, the value has to exist!)