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Price vs Value

We all know the saying:  You get what you pay for.  Yet, with such widespread knowledge of this saying, why are so many companies racing to the bottom with price?

“Price is what you pay, value is what you get” – Warren Buffett

The IT sector is no exception.  The barrier of entry to be an MSP is a Computer and Internet.

Food as a Service

There is a service in many major cities where you can get a box of ingredients delivered that allows you to make a pre-determined amount of meals during the week.  When I looked at the price, it was reasonable, but I could probably pay less if I did it all myself.

What I did not expect, was the value of such a service.  Prior to this box, my wife would agonize over what to make for supper.  She would look at the fridge and have to MacGyver a supper together with whatever was there, dropping by the store to pick up missing ingredients.

It was a headache.

Now, we have exactly the right amount of necessary ingredients, a recipe card, and a plan.

The value is that my wife no longer has to go through that anxiety.  That’s priceless!  That’s value!

Finding our value

We all have customers that value our product/services.  We may also have customers that complain about price.  They suck our time and energy.

The Pareto Principle (aka 80/20 Rule) applies customers in that typically, 20% of our customers will give us 80% of our income.

Do the exercise with your own customers.  Can you identify your top 20% of customers?

What do you do with the 80%?

As we travel across the country, our MasterMind groups noticed that when they “fire” some of the worst of the 80% customers, they freed themselves to focus on the 20%.

When you are able to focus on your top customers, you will naturally provide them with more value.

Charge more

If you are hesitant about increasing your price, here are a few things that colleagues have done with success.

“Business, like life, is all about how you make people feel.  It’s that simple, and it’s that hard.” – Danny Meyer

Grandfather your customers with your old rate for 12 months.  Advise them that on a certain date, the new prices will go into effect, but because you value their loyalty, you are giving them an extra amount on the old rate.

Onboard all new clients with the new rate.

This strategy will likely weed out those that don’t value your company.  The price nitpickers will complain, and you have identified a client you can let go.

A higher price will attract those that value quality over quantity.

In a Las Vegas MasterMind session, a web designer shared that he would bid on projects at roughly the same price as everyone else.  He had to fight to get contracts.  He then changed strategy and raised his rate by about 50%.  What was the result?

Potential clients would see all the bids that hovered around a certain price, but one would stand out.  “This company must be good to charge that!”

The higher price instantly brought more value, even as a first impression.

His business boomed.  He dropped many of his former clients to care for these value centric clients.

I can find someone to paint my house for $10/hour or I can hire a professional.  What is the value of a professional?  I know it will be the right color.  I know it will be done correctly the first time.  I know it will be done efficiently, and on time.  I don’t care about the price, I care about the value.

Self-Analysis

Look at the products and services your clients use the most.  Answer these questions:

  • How does my products/services stand out from competitors?
  • How can I add value to my products/services?
  • Am I solving all the problems our customers face with our solutions?
  • Do we reinforce the value of our offering?

If you can identify gaps in your offering, or ways to better deliver your services, you will ultimately increase your value.

Many of our members use the 2-day ChannelNext retreats to do a self-analysis on their company best practices.

Others make use of an online assessment at  http://www.bestmanageditcompanies.com/.  Not only does this help them identify areas where they can add value, it allows them to be selected as the country’s Top 50 Best Managed IT Companies!

Winning this prestigious award shows your customers that you stand out from your competitors and bring extra value.

Conclusion

If you can bring more value to your offering, you can increase your prices, increase revenues and get rid of clients that drain your resources.