Are you attracting Wal Mart prospects, Macy s prospects, or Nordstrom prospects? Let me explain what I mean. Wal Mart sells white, button up dress shirts. So does Macy s. So does Nordstrom. Why would you pay $79 for the Nordstrom shirt when you could get the Macy s shirt for $34 or the Wal Mart shirt for $17? If everyone shopped based on price, Nordstrom and Macy s would not exist. Understanding who will pay more for quality will help you attract prospects who are not price shoppers.
The most obvious reason people are willing to pay more for something is that they really are getting something of greater Actual Value. For example, you may have to pay more for a toaster at Macy s than one at Wal Mart. Perhaps the knobs of the more expensive toaster are made of steel and the knobs on the less expensive toaster are made of less durable plastic. In other words, you get what you pay for.
The second reason people are willing to pay more for something is that they are getting something of greater Perceived Value. A friend owned a store in a beach town on Lake Michigan. He had a collection of paintings that were not selling. Going into the last weekend of the tourist season, he decided to discount them, sell them at a loss, and at least get rid of them. So, he told the clerk to slash the price of the pictures from $50 to $20 and then the owner left for a couple days. When he returned, the pictures were gone and the owner was relieved. But, there was a problem when he checked the receipts. He found out that the clerk had added a 0 and made the price $200. When he raised the price of the pictures, they started selling. Why? Because at $50 (or $20) the pictures were considered cheap, but at $200 they were perceived to be quality art.
So, when are people NOT willing to pay more? Consumers will not pay more when products are a commodity...when the products are considered to be identical. Assume your gas tank is getting low and you approach an intersection. On one corner is a gas station selling 87 octane gas for $2.89 and on the other corner is a station selling the same gas for $3.04. Which one do you choose?
Nordstrom and Macy s do not compete on products considered to be commodities. They have created Actual Value and/or Perceived Value advantages over Wal Mart.
Now let s compare the shoppers at Nordstrom and Macy s with a Wal Mart shopper. The Nordstrom shopper wants the best (Actual or Perceived) regardless of the price. Money is no object. The Wal Mart shopper wants the cheapest, regardless of actual or perceived value. The Macy s shopper is in the middle. They are willing to spend a little more, if they believe they will get more value. They often justify purchase decisions with the saying you get what you pay for.
How does this relate to your business? Are you looking for price shoppers who seek the cheapest solution? Would you prefer consumers seeking the best Perceived Value, regardless of cost? Or, do you want to work with those in the middle?
Whether you are aware of it or not, how you promote your business and talk to prospects will determine which of these prospects you are attracting. To have an effective marketing strategy, you must know which type of prospect you want to attract. If you are looking to avoid the price shoppers you must clearly show the prospects that your product or service is not a commodity. Unless your product is always cheaper than your competitor, you must find a way to create higher Perceived or Actual Value. But, that is a topic for another article.
Author Resource:
Steve Lawson is the Principal of Steve Lawson Consulting and the Founder of The Prospection Network. Since the early 1990s, he has been training independent professionals to grow their business while spending little to no money. http://www.ProspectionNetwork.com
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