What's the difference between price and value?

You probably saw the headlines when a Le Creuset sale at their Andover warehouse caused traffic chaos and four hour queues. (My sister-in-law said, “only in Hampshire!”) Apparently there were some amazing bargains to be had. I wonder how many people in the queue were gift-shopping to make those gifts seem extra generous in these challenging times?

It also got me thinking about the perennial question: what’s the difference between price and value? Perhaps more importantly, how can we convince our customers of our value, so they don’t make decisions based on just our prices?

An example…

Let’s take Le Creuset as our example – and bear with me on this. Their archetypal and best-selling product is the casserole dish, made from solid cast iron and enamelled to make them more durable. Prices start from £209 for the smallest 18cm diameter dish to £399 for the largest 30cm dish (that’s full price). My Mum has a traditional orange Le Creuset that is older than I am and still going strong. I reckon, size-wise, it’s somewhere in the middle. Let’s say the 24cm version, which now retails at £305. It was a wedding present and prices in the 1960s were clearly not what they are today but, averaged over the 57 years she’s been making excellent use of it, it would cost just £5 per year at today’s price.

For comparison, online, I can find the same sized casserole dishes at selected retailers. Robert Dyas have a cast iron one for £27.99 (sale price). Wilko have an aluminium version for £22.99. Those dishes would have to last you over five and over four years, respectively, to achieve the same ‘cost per year’ type value. And do we think they would last that long? I’m willing to concede they might but it feels like more of a risk.

This gets to the nub of the difference. Le Creuset might be more expensive than other manufacturers but the perceived value is that they are a quality product and will last for longer. They are – literally – cast iron. Fortunately for Le Creuset, they have had a long time to establish that reputation. (They were established in 1925 so look out for their big Centenary sale next year!) The rest of us haven’t had quite that long in business so is there a way to ‘short cut’ that?

Three tips to creating value:

1. Do what you say you will

Firstly, you have to have a product or service that does what you say it will do. Le Creuset don’t claim that their cookware will make everything you cook taste great, they claim to provide quality, durable pots and dishes – and they certainly seem to. Some people will buy anything if it’s expensive enough but they’ll be quick to complain if it doesn’t meet their expectations. And defining a quality product or service does require expectation setting and managing. To sell on quality not just price, be absolutely clear what it is you provide and what the benefits will be to your customers. (Just how to define that is perhaps a subject for a future blog…!)

2. Believe in yourself

Secondly, you have to believe your own pitch. I think many of us – especially solo business owners – suffer with a bit of ‘imposter syndrome’ and have a tendency to downplay the benefits we offer. We worry that a competitor is cheaper than we are, without really looking at whether the benefits that competitor offers are comparable with ours. Have the confidence to value what you do for what it is worth to others and stick to it. (That’s not to say Black Friday deals or pro bono worked aren’t allowed but be aware of what you’re giving away).

3. Be consistent

Finally, ensure that your quality and your belief are carried through in all of your messages. I have a client (who will remain nameless!) who insists on charging Fortnum & Mason prices but wants all his marketing to look like Woolworths’. (No offence to Woolies – I miss them – but I’m sure you see my point; there’s a disconnect between the product and presence.) I was once told that BMW encouraged all it’s showroom managers to inspect every aspect of their premises to ensure they were up to quality: “Does this gents loo look worthy of a BMW?”. We do all judge on appearances and first impressions. Check that what you are presenting to your public looks as good as you want it to; your website, your social media posts, your premises, your printed material, all of it. Look as ‘classy’ as you price.

In conclusion…

There will, of course, always be people who will buy based on price, perhaps for very good reason. (If you don’t know of the Sam Vimes ‘Boots’ theory of socio-economic unfairness, you may be entertained by the footnote below.) The risk with price-based purchasing decisions is that your clients value you less, you perhaps miss an opportunity to build a relationship with them and they are more likely to jump ship if another supplier comes along who is cheaper than you are. It depends on whether you want to build repeat business if that matters to you.

I suspect that most people charge what they feel is a market-sensitive price for their products or services. Perhaps now is the time to reflect on whether that really reflects the benefits you offer – and whether your public face reflects those benefits too.

A footnote about boots (pun intended):

If you haven’t read any of the late, great Terry Pratchett’s works, you are missing out on some very funny books and some wry social observations. One such is the Sam Vimes theory of socio-economic unfairness. In summary, as follows:

As a member of the Nightwatch, Sam isn’t paid much and he complains that it’s more expensive to be poor. He uses replacing his boots to explain this. Cheap boots might cost just £20 but they will need replacing every year. Good boots might cost £100 and last for decades, effectively a good investment. But if “you don’t have the money to buy boots that will last”, he says, it will cost you much more in the long run. (I’m sure, if they had Le Creuset in Discworld, he’d have used casserole dishes to illustrate his point instead!).

What’s the difference between price and value?