One of the big mistakes I made in the early years, and one of the biggest mistakes a lot of entrepreneurs make, is looking at your product or service offering only in the realm of competing with other similar product offerings.
I was looking at adult diapers and comparing it to all other sources of adult diapers. The customers were comparing it to other uses of money.
When we think we are selling over-the counter vitamins, the consumer is actually saying, “I’ve got $30 to spend. I can spend it on vitamins, I can spend it on a movie, I can spend it on going out to dinner, I can spend it on a book, I can spend it on a doctor’s visit or I can spend it on ice cream.”
The Value Equation
For them, the value equation is determined by “comparing what you’re selling to all alternate uses of their time, energy and money.” This one single understanding changed my life as a marketer, because I began to understand the real motivations that cause people to buy or not buy.
Three Things People use
At this point, what you need to internalize is that there are three things that people use to decide whether or not they’re going to buy your product or service.
- What is the price/cost in time, money, and energy for me to buy the product?
- What are the services and extra benefits I get from buying the product from choice A versus choice B versus choice C?
- How badly do I want or need this product, and can I afford to use my limited amount of money to buy this product versus all other options I have for spending that money?
Creating Value for Your Customers
The essence of creating value for your customers is learning how to modify your price and service offering to compete in the marketplace or competitive offerings within your target market. In addition, learning how to craft your marketing efforts to enhance the perceived value of the product compared to all other uses of their money is critical.
Perceived Value Component
As a business person, the only thing under your direct control is price and service offering. The perceived value component is internal to the person or organization making the decision to buy. If you want to be effective as a business person, I suggest that you spend a lot more time up front understanding the purchase motivation for your potential customer before you waste time on the price and service.
Great Bosses understand how these three elements interact. BossHoles always seem to leave it out of the discussion.
Since 1977 the author, Dr. Greg L. Alston has owned and operated a variety of businesses, worked for hundreds of bosses and supervised thousands of employees. His no nonsense approach and clear informal teaching style will teach you how to Coach others, Command respect, and Create an environment in which your team can thrive.
Leadership is not a personality trait, it is a way of acting. Great leaders build great teams. Great teams achieve great things. The call to leadership is a call to action and this action begins when you buy the book, subscribe to the blog or view the YouTube Channel. Use Greg’s free tools to Rate Your Boss or Rate Yourself as a Boss.