Price versus value

When I owned a heating and air conditioning company I had a sign on the wall in the lobby that read

  • We offer the lowest prices in town.
  • We offer the best service in town.
  • We sell the best products in the HVAC business.
  • Now…you may pick any two of the three.

Obviously we were trying to convey the message that there is a difference between price and value in what we offered our customers.

In every business there are customers who are going to make their buying decisions solely on the basis of cost. They may not realize there is a difference in quality among similar products. Such folks may think that because both are cars that there is no difference between a Mercedes and a Yugo. These individuals can sometimes be educated about the differences and will see the value in buying the better quality item.

I gave our salesmen a handout that explained why the products and service we provided were top quality.  I did this because our prices were often higher than our competitors. Some of our competitors could sell a piece of equipment for less than the wholesale cost of the equipment we sold because our equipment was much better quality. But, if the customer didn’t know the difference he or she would be apt to buy based on price alone. Taking the time to educate our customers gave us a much better chance of making the sale.

For some folks, they don’t want to be educated; they just want the lowest possible cost. These are individuals you usually don’t want to have as customers. It’s difficult to make money on people with this mindset. They are not apt to remain loyal customers but will leave you for the first competitor that offers them something for a nickel less than you do. When I first went into that business another dealer told me to always do business with people who could afford to do business with you. That’s great advice for anyone who owns a business.

When you offer quality products and service you are providing value to your customers that some of your competitors cannot. There are costs to superior products and service that you are justified in passing on to your customers. If I need a new shirt I can go to Wal-Mart or I can go to Nordstroms. Which shirt is going to cost more? Why should anyone be willing to pay the extra to purchase the shirt at Nordstroms? It’s because the quality of the shirt is going to be better and the service will be far superior. When I am in either store both are generally very busy. Why? Because some people are buying for the lowest possible cost while others are looking for better quality and superior service. You have to decide which business model you want. But, if you want to offer the better quality and service you have to be able to educate your customers on the difference between price versus value.

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