What is the value of a product? How is its value determined?
Part of what determines the value of a product is how much time, money and effort went into producing it. The cost of raw materials, labor costs, etc. There is a fair amount of expense involved in manufacturing, say, an automobile, certainly more than a Frisbee.
There is also the question of how much education is needed to provide the service or product. An open heart surgeon requires more education than a general dentist. So the service delivered is more “valuable”.
The need or necessity of the service or product is part of it. Is it just for fun, or does ones life depend on it?
Then there is the usefulness of the product. What can it be used for? Does the product enable you to produce more and make more money? Can it be resold for a profit?
Supply and demand are all part of this as well. If there is a huge supply the value drops, and if it is a very hard thing to find, the price skyrockets. In some industries, like diamonds for instance, an artificial “lack of supply” is created to increase overall value.
Right now we are going to explore the idea of perceived value. The subject of perception of value is a fascinating one. There are examples of companies creating a false perception of value for products that don’t even exist, or products that are destructive to their users.
But today we are going to briefly explore the idea of perception of value as it applies to customer service and expanding a business.
The idea is simple: first we assume that you start with a service or product that DOES have real value and that people want. Some examples are: auto repair, hair styling, restaurants, college or university training or real estate.
If we take a specific type of business and compare all of such businesses in a local area we might not find that much different between them in regards to their final product. We know that some are better than others, and that there are a few really lousy ones, but in many cases there is not that much difference in the final product itself.
Take dentistry. I know I am risking a lot of angry letters from some dental practitioners, but is there a big difference in overall dental skill between one dentist and the next one down the street? Probably not. Of course there are some quacks here and there but the level of technical skill I would bet is pretty close.
But the perception of value of one dental practice compared to another may be huge. This is largely a function of location, appearance, PR and customer service. A practice with a so-so dentist may charge (and the clients happily pay!) considerably more for services because of perception of value, then another dentist in the same city who is a great dentist yet whose practice suffers from a lack of perceived value.
The value of a product or service is, to a great extent, a matter of perception. We have an idea that the name brand product is better than its generic counterpart. Is it? Have you ever looked at the list of ingredients of a brand name product and its generic counterpart in the grocery store?
Of course in many instances there are substantial differences in value between products. Let’s compare a Yugo with a Mercedes. Or a filet mignon versus chicken fried steak.
Sometimes a perception of value is based solely on advertising. There may be absolutely no real value at all, just hype. Some of the newer weight loss drugs come to mind. There was one that sold for around $200 per bottle. ‘Why is it so expensive?’ was the question in the TV ad. ‘Because it works!’ was the answer. A dubious promise at best!
Despite the fact that there are some cheaters and con men out there, there is a fundamental rule regarding this: The higher perception of value, the more the customer will happily pay for the product or service.
People will pay more for food in one restaurant if they have better service. Another restaurant may have better food but fewer customers. The wait staff, the location, the building, the restrooms, the ambiance, these things have everything to do with the perception of value of a restaurant.
These same things apply to a doctor’s office, an auto mechanic, a hairstylist.
Location alone can determine perception of value; just the street a business can have a huge affect on perception of value.
The appearance means a lot. The building, parking area and entrance way mean everything. Many customers judge businesses based on their public restrooms. The toilet was dirty therefore he or she must be a lousy surgeon.
And of course possibly the most important point is the friendliness and helpfulness of the staff. How the phone is answered, how new people are greeted, what happens when there are questions about accounts? These are the main determining points
So the big question is: how can I increase my customer’s perception of value of my products or services?
Another way to do this is to work out how you can improve the overall customer experience. There are limitless ideas on what can be done. Any and every point of customer contact needs to be scrutinized. From the web site and marketing materials to the building, inside and out, to accounting and shipping; the basic question that needs to be asked is: What can be done to make the experience memorable?
You can get ideas from visiting competitor’s stores or web sites, you can get great ideas from shopping at any and all different sorts of businesses. There are often customer service training programs held for say, medical offices where they meet at a 5 star hotel to see how THEY deliver top notch service and then work out how to do those things at their practices.
Basically it takes looking with a totally fresh view at each part of the customer interaction. List out EVERY part or step of the customer experience and then see how each is now. Then ask what can be done to make each small part a memorable experience for the customer. And you will be well on your way to increasing your customers perception of value!
