Do You Compete On Price Or Value?

Price is what you pay. Value is what you get.
Warren Buffett

And the perception of value is why you decide to buy. How much would you pay for an ordinary gray pebble? How much would you pay if I told you that pebble could perform tricks like ‘sit’ and ‘stay’ and included a manual for how to train your pet rock?

Seth Godin has a short, but insightful post today on price.

Maybe the reason it seems that price is all your customers care about is…

… that you haven’t given them anything else to care about.

What are you doing to increase the value perception of your products or services? How are you differentiating what you offer from what your competition offers? How is your site different from others in your industry? Does it look different? Does it have unique content? Why should someone choose your blog over another?

As technology and labor gets cheaper nearly everything can become a commodity. Pushing price leads you toward the commodity end of the market where little is differentiated and goods are traded based on price instead of the added value of quality and benefits. Competing on price leads you into a cycle where you have no option, but to compete on price.

Wal-Mart can compete based on price. Chances are you can’t. You can increase your chances for success by setting your price and increasing value. Even more, work to increase the perception of the value your products and services deliver. Show your market why you offer more value than your competition.

When there is nothing to differentiate you from your competition you become a commodity. When your content is the same as your competition it is commoditized. When your link profile looks the same as your competition it becomes commoditized. If you don’t want to be a commodity make sure there is something to differentiate yourself than everyone around you.

What are you doing now to differentiate your business? What are you giving customers to care about other than price? What are you doing on your blog to make it different from the others in your industry? What are you doing to make your blog remarkable?

That which costs little is less valued.
Miguel De Cervantes

Download a free sample from my book, Design Fundamentals.

3 comments

  1. Great point. I remember working for a company that sold exclusively on eBay. We sold based on the price we could give the customers on products that were normally expensive. I notice that we always had problems with customer relations and your article helps me to realize why even if it won’t do that company any good. We couldn’t afford to spend hours on customer service because our price was so low.

  2. Thanks Dave. It doesn’t surprise me that you had problems with some customers. I think people who buy solely on price and are always looking for the cheapest product also tend to be the people who complain the most. And unfortunately because your margins are so low you have don’t have the resources to to handle the complaints.

    Forrest it’s funny how people associate value with higher price even when it’s not true. If some told you they charged $10/hr for consulting and someone else told you they charged $250/hr for the same consulting you’d probably assume the $250/hr consultant was better.

    One of the nice things about pricing based on value is you don’t need as many customers since you should be making more profit per customer. That has the potential to save you on marketing costs too.

    I looked up the quote and most people aren’t attributing a source. One cited Benjamin Franklin so maybe that’s where it comes from.

  3. Photographers tend to believe that if you start out cheap ( they call that being “a bottom feeder” ) no one will value your work, and you’ll never be able to raise your prices. That seems to be the case in the corporate world; it’s rare to get more than a 5% raise at the same job.

    I try to compete on quality. Some people see this a value, and others don’t, think it’s overpriced. My hope is there are enough fish in the sea for them to weed themselves out.

    I forget who said this first, but “price is only an issue in the absence of value.”

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