We are in world where things have gone from 'cheap' to 'free'... to a logical step of us being paid (while a company pays for the adverts) to get you to try their stuff. All a bit upside down to me.See Chris Anderson's book 'Free'.
'Try Before You Buy' is one thing. But giving stuff away is not the raison d'etre of your business.
What’s the new 'free'?
This is possibly the wrong question. I do think we should be thinking about the opposite of free.
The complete opposite… is expensive...
Some clients are willing to pay ridiculously high prices for 'incredible quality' (please note the inverted commas!)…
Food For Thought
In a Gordon Ramsay restaurant you pay 'top dollar' because of WHO has (theoretically) cooked the steak - the same steak from the same butcher is charged out at a premium price because it has been through the Gordon Ramsay kitchen.
So, how much better would the steak be if 'he' cooked it rather than someone at the restaurant next door? Not a lot!!!
You are paying for WHO cooked it (and the whole wrapper, experience etc) and not for the thing on your plate. Could you do the same - make people pay a premium price for YOU (rather than the product/service)?
Do you offer a gold/premium product/price for exclusive service as opposed to a silver or bronze or paper quality?
A client who is a printer now offers three price points:
- standard (five days)
- fast (three days) and
- emergency 999 service (12 hours).
While the same personnel, machinery etc are used at all price points, the price ratio between standard and emergency is roughly fivefold. In this instance you pay for SPEED and GUARANTEED DELIVERY. We recently needed 150 workbooks (the stock had been flood damaged) printed and ready for use in Newcastle by 09:00 the next morning. We were happy to pay 'over the odds'.
Rather then figuring out how to do stuff cheaper, what happens when you move in the opposite direction? Can you offer the 'platinum' service or do you just assume that everyone is buying on price (because let me assure you, they are not).
When you buy a car, concert tickets, a safari holiday, a romantic meal, most forms of advice... then many people want to pay for the 'best' or the 'best experience' or 'best package' and not the best value.
Often we delude ourselves that it is all about the price. Wrong.
RELEVANT LINKS
Why $0.00 Is The Future of Business - Chris Anderson
14 comments:
Robert
We are a health/fitness training/education company and our model is as you suggest:
'Bronze' Level 1 - massive free web resource site to acquire email address - demonstrates the tip of the iceberg
'Silver' Level 2 - monthly subscription club at low level to sort the serious from the free lovers
'Gold' Level 3 - premium priced exclusive product
Our problem is agreeing where we make the money. Is the effort to go on developing Level 2 (700 subs at 5 pounds a month each of easy money). Or should we focus on Level 3 (10 course memebrs at 350 per month) but really hard work to win?
Terry
At last some business context.
Customers don't extra pay for Gordon Ramsay to cook the steak, and the steak doesn't come from the same butchers as next door's restaurant.
Customers pay for provenance, and culinary expertise in making sure a steak is not simply a steak, but is a memorable experience. Customers are paying because Ramsay will always over deliver on quality and service.
The customer doesn't pay for "you" the customer pays for the added value you give the product.
If you're adding anything to the product that your customer isn't openly willing to pay for, (service, quality, provenance, innovation, delivery, experience) you're not adding any value, and shouldn't be doing it.
The only exception being if such an addition puts you head and shoulders above any competition who's trying to/willing to kill your business, and it'll give you an opportunity to get rid of them. It has to be within your capabilities and economically sound.
Christian
Our experience as accountants is that putting prices up has changed the client perception of our service. We have moved from being seen as a commodity to being seen as a valued service by those who have stayed and truly value our service.
We have gone for a gold-gold-gold strategy
Simon C
Accountant
We're structuctal engineers (50 staff) and have applied the Gold/Silver/Bronze approach.
Key things were understanding where we make the money in the different zones and to recognise that the focus shifts with customer needs etc.
To make the lower levels work properly there needs to be a highly systematised production process so that you can deliver value to the client at the lower price.
Another issue is maintaining the practice values at all levels.
WM - Structural Engineers
I run a small group of gastropubs and boutique hotels. Our issue is about how to maintain the same standards in the different quality venues.
Robert kindly explained that the answer was to recognise what was consistent throughout our chain and how the different offerings could vary.
So, our 2*, 3*, 4*, and 5* offerings all deliver organic and locally sourced food, an obsession with customer service etc but the offering is delivered appropriate to the price point and quality point of the various busineses.
Understanding and maintaining the brand and the brand values for all and for the different offerings has proven a challenge; having staff work in differing kitchens has emphasised common goals and differentiating factors. Out bar or standard is set at E for Excellent so we have rewritten our concept of service to run a
- stunning pub
- remarkable gastropub
- unique boutique private hotel/rooms
- unbelievable luxury private hotel with dining room.
By setting our standards so high and by understanding what must run through all our businesses we have been able to focus on what we all have in common as well as what makes each unit different.
The result: a consistent brand run on the gold, silver, bronze principles.
Duncan F
We get what we pay for.
Most of us are fed up with the cheap options (cheap insurance or flights or braodband suppliers) and will pay a premium for a decent service.
I do not shop at Aldi (thank you!), I do not want a free laptop (Carphone warehouse), I do not want to be treated like a number (the Prisoner).
Bonnie
PS Although I must thank the Daily Mail and Daily Telegraph for their great free CD and DVD promotions.
PPS anyone who reads the Daily Mail or Telegraph should have large quantites of electricity applied to their brain to make them see the a more balanced view of the world - it is not all benefit scroungers, single parents and drug addicts stealing and having the good life while you pay taxes on their behalf!
PPPS Have I got no principles?
PPPS Has everyone got their price?
Bonnie
RE Cheap flights etc
The curious thing is that Ryanair are doing rather well at the moment (despite what we all think about them).
So while the more discerning people may prefer not to use them, there are more than enough people who do.
Robert
Irrationally is the way we spend our money. I have the best accountant I can afford. And tax consultant,and physician and portrait photographer. I have the best music system I can afford. I have the best car I can afford. The best in my opinion and by my criteria. Any of these products or services could be bought cheaper.
I have a cheap lawnmower - they never last more than one season. I have a cheap tumble dryer and washing machine - they only ever last two years. I get the cheapest train tickets by buying them in advance. I buy cheap measuring tapes, secateurs, fountain pens, recgargeable batteries, memory keys, socks etc cos they always get lost. I buy the cheapest petrol.
I choose when to go luxury class and when to go cheap class but it is not very consistent.
Tim
When I saw Robert he tols an interesting story about his Versace suit.
Tim
It was a Boss suit I think.
Tim C
How to beat the recession: Why you need to put up prices, pay slower and sack staff http://www.businesszone.co.uk/topic/finances/how-beat-recession-why-you-need-put-prices-pay-slower-and-sack-staff
Bonnie
RE Cheap flights etc
The curious thing is that Ryanair are doing rather well at the moment (despite what we all think about them).
So while the more discerning people may prefer not to use them, there are more than enough people who do.
Robert
I run a small group of gastropubs and boutique hotels. Our issue is about how to maintain the same standards in the different quality venues.
Robert kindly explained that the answer was to recognise what was consistent throughout our chain and how the different offerings could vary.
So, our 2*, 3*, 4*, and 5* offerings all deliver organic and locally sourced food, an obsession with customer service etc but the offering is delivered appropriate to the price point and quality point of the various busineses.
Understanding and maintaining the brand and the brand values for all and for the different offerings has proven a challenge; having staff work in differing kitchens has emphasised common goals and differentiating factors. Out bar or standard is set at E for Excellent so we have rewritten our concept of service to run a
- stunning pub
- remarkable gastropub
- unique boutique private hotel/rooms
- unbelievable luxury private hotel with dining room.
By setting our standards so high and by understanding what must run through all our businesses we have been able to focus on what we all have in common as well as what makes each unit different.
The result: a consistent brand run on the gold, silver, bronze principles.
Duncan F
People do not buy what you sell. they buy what THEY buy. But many (or at least some) people want to buy the high price platimum offering and will walk away if you can not offer it.
Chris Anderson originally came from Bath I believe
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