Are you subtracting value instead of adding it?

During recent customer service workshops, I’ve been struck by how often the issue of price rears its head, “hogs the limelight”, and gets in the way of effective service delivery. There’s no getting away from the impact of price at the point of sale. Price can be approached in many different ways depending on whether you are you in a volume based bottom end market, or in the top segment offering superior quality at a premium. But the long term impact of the price and discount issue is almost entirely in our own hands and not in the hands of our competitor or customer as we’re so often led to believe! Wherever you’re positioned, what I’m about to share with you can have a significant impact on your business. Let me explain:

First, people tend to focus on what is in the forefront of their minds – and that can easily become what they are being told to focus on. It doesn’t matter if it’s you or a competitor who is doing the telling. So if you focus your customer’s attention on price, that’s where it will be. If you’re able to undercut your opposition, and you want their attention to stay there, then focus on price. But if there are benefits to your service other than price, why not rather steer their attention to where you’d like it to be? Let me assure you - people will pay a premium, sometimes a substantial one - for value adds that matter to them.

So, what are some key factors that may impact a buying decision?

1. A track record of delivery on time, every time. How about early?
2. Friendly, informed (properly trained) staff to deal with – people who look you in the eye!
3. Efficient support and back up.
4. Attractive look and feel of your product.
5. Easy access to useful resources – website, offices, shop or service centre.
6. The ambience of your show facilities.
7. Regular customer service contact – for instance a dedicated person dealing with your account.
8. Little extra’s – a gift, a lift back to your office, a chocolate on your pillow, a rose for you or your partner as you leave the restaurant.

..and we haven’t even gone in to things like reliability, new product updates, and access to past records, consistency and so on.

Businesses spend large amounts of time and energy addressing an old issue which is here to stay – that of pricing and maintaining profitable margins. There are many ways of squeezing a margin, but once you have done all the squeezing you can, there’s no juice left in the orange to squeeze, and little place for any value add.

Discounting, therefore, is a survival mechanism and should really only be used to clear out old stock to make way for new lines. It is relevant to note that every time you have a sale, you effectively discredit the integrity of your list price.

So, how do we get our customers focus away from price and on to the many other important value adds that your offering brings with it?

Take a tough look at your business. An easy way to start is to survey your key customers and ascertain their main reasons for doing business with you! Then get your staff together and brainstorm any way they can think of to focus your client’s attention on their key hot buttons, away from price and on to the value adds that you currently have. Brainstorm any other potential value adds. Maybe even think of attractive (not necessarily expensive) enhancements to add to your current offerings. Do not discard any of the ideas initially, rather encourage participation. Then select the best 2 or 3 ideas and establish ways to implement them immediately. You can consider the other ideas later.

Example: The last car I bought, the salesman steered me away from the subject of a discount. He did, however, create a few value adds: a hard cover for my spare wheel and an attractive key ring with my keys on handover. These things cost a fraction of any discount I may have pushed for, but I left with the feeling that I’d scored, and he didn’t have to discount to achieve it. The salesman succeeded in adding value rather than subtracting it.

If a repeat customer is continually harassing you for tighter margins, rebates or discounts, you should be aware that you have not succeeded in establishing the loyalty of that client. Ask yourself why this customer is coming to you in the first place – there must be more of an attraction than just the probability of a competitive price? You establish loyalty by becoming, in the client’s mind, a “value adder”, or better still, a “business partner”. As your belief in the value of your total offering increases, so will your customer’s perception change too. As your focus moves away from price to things that really matter – like the benefits of your product and your service, so will your customer’s focus shift as well.

Customers understand that a low price is a high premium to pay for poor service, aggravation and an inferior product. They know, as do you, that there’s more to a purchasing decision than price. And I’m sure that, like me, you’d rather pay a little more but know that you’re buying quality, reliability and perhaps a little extra.

It seems like it’s all so clear to us when we give someone else advice – it’s just a bit tougher when it comes to advising ourselves! Try looking at your business from the outside as an observer. You may save a few bob on consulting fees, and realize that protecting your margins long-term is actually much simpler than you think!

Paul du Toit.