Price is an important variable in every shopper’s decision—but how important varies from product to product, category to category, and business to business.
At one end of the spectrum, there’s merchandise where price is the sole determinator in an item’s value for most customers. All sorts of products, like flip-flops, laundry detergent, and snack crackers are purchased based entirely on price point; most shoppers don’t prefer a certain brand, as long as they’re getting the best price for that item.
At the other end of the spectrum, there’s merchandise where price is no determinator in an item’s value—in other words, products that are “priceless.” Customers are willing to pay practically any price (to an extent) for this particular brand of product or service—think of things like bourbon, medicine, and that anniversary dinner.
And then there’s everything in between. For most specialty retailers, it’s in that in-between that your business model lies. You’re probably not selling much of that “price isn’t a factor” merchandise, and you’re also likely not a bargain basement—so how does price affect the value of the items in your business?
The truth is there’s no direct equation between price and value.
We know, it’s a weird proposition; “price” and “value” seem almost inherently tied. But when you’re in the masses of that middle ground in which the price doesn’t necessarily define the customer’s decision, you have to create value outside of it.
You differentiate your business from the competition not by offering the best price, but by offering the best experience. If your tactic is to offer a price below that of the competition, you’re only compromising your business. For one, how much of a difference does a few dollars make to the average customer? Not much. But more importantly, when you discount your inventory, you devalue it. You’re indicating to your customers that your merchandise isn’t worth the projected price, and that’s a dangerous standard to set. Customers will come to expect that discount and will begin to define the value of your items entirely on price, and that’s likely a game you won’t win longterm.
Instead, incorporate your business itself into the value proposition. Folks shop at Walmart for a deal, they shop at Louis Vuitton for the brand recognition, but they shop with everyone in between for the experience. The value your business provides comes in the form of relationships, authentic connection, and trust. Cultivating an incredible experience for a customer is priceless, and it increases the value of that interaction.
Once your customers care about and trust your brand, the price factor in their decision becomes increasingly negligible. As long as your product falls within the expected price range (or even a little above), they’ll accept it, because the perceived value of shopping with your business is higher than the price value.
We’re not saying price isn’t a factor in your customer’s decision, but what we are saying is that offering a price too low can be as dangerous as offering one too high. Instead of playing the numbers game and compromising the integrity of your business, increase the value of the experience you offer and build lasting relationships with your customers, in turn defining the value of the products you offer. The determining factor in an item’s value lies not in its price, but in your business itself.