Higher Value Offerings

Do you evaluate options to change the product and service mix towards higher-value-offerings?
A. No, we don’t.
B. We are always trying to increase margins, but have no specific targets.
C. We occasionally review changing the product and service mix towards higher-value-offerings.
D. We regularly evaluate changing the product and service mix towards higher-value-offerings.
E. We continuously evaluate options to change the product and service mix towards higher-value-offerings.
[Score:  A=0, B=1, C=2, D=3 and E=4]

 

Why is this question important?

Some businesses may win business away from competitors by offering lower prices – thus following a ‘low-cost strategy’.

On the other hand a company may ‘de-emphasise’ low-price offerings and shift its product and service mix more towards premium priced products and services, while still providing ‘value’ to the customer.  Such companies must stress the depth and quality of their relationship with customers and the completeness of the solution they offer to the customer.  One is reminded of the expression – “the customer must get everything the customer wants, and the customer must pay for everything the customer gets”.

Upselling is easy if you think of your main business as helping customers. Think about the problems your customers come to you with. What does it really take to solve their problems?

Chances are, your customer needs a lot more than the simple inexpensive solution they often first consider. By grouping together several different products and services, you can give the customer a more advanced package that goes much further toward creating a satisfying solution.

Three ways to build up-selling into the purchase:

  • Bundle several related products or services together. Drop the price below what the total would be if the customer bought all the products separately. When a customer inquires about a single item, point out they can get that item plus a great deal more by purchasing your bundle.
  • If your product or service works much better with a complimenting item, be sure to tell customers about it.  It is surprising how many products and services go hand in glove. It’s hard to have one without needing the other.
  • If a little worked, a lot will work even better. As soon as you learn a customer is having success with your product or service, offer them a good deal on more of it.

Shift the perspective to the customer.

  • Don’t ask “What can you sell customers?”, rather “What job does our customer need to get done?” and “What are our customers’ expectations and how can we help them get there?”
  • Don’t ask “How can we acquire customers efficiently?”, rather “How can we best met their requirement?”
  • Don’t ask “What relationships should we have with customers?”, rather “What do our customers expect?”
  • Don’t ask “How can we make money?”, rather “What value are customers willing to pay for?”

For these companies who wish to move up the value-chain, communicating the quality of their products or the uniqueness of their services is a much more difficult task than advertising low price.  Marketing messages become much more complicated.   As a result the language must be clearer because the message is more complicated.  Also, bear in mind, image and brand are now involved.  A poor company image or brand will not convey higher quality nor will it secure a higher price no matter how good the product or service may be.

Your company, no matter what the product or industry, must demonstrate that it is capable of clear communication, can ensure quality merchandise, consistent on-time delivery, and all the other ingredients necessary for a reliable long-term relationship.

In addition your company must highlight the key elements and capabilities which separate it from the competition – at least enough to warrant a slightly higher price or motivate someone to choose your company over another.

Manage Value, not Price.

Customer Value Management (CVM) is managing each customer relationship with the goal of achieving maximum lifetime profit from the entire customer base. Customer value management enables companies to take full advantage of customer loyalty by increasing retention, reducing risk, and spreading acquisition costs over a longer and more profitable period.

Although customer value management seeks to increase the aggregate value of the customer base, this is accomplished customer by customer.  Not every individual customer will be profitable, but each must be managed to maximize overall profit.

CVM shifts the focus from managing products or marketing campaigns to managing the profitability of each individual customer over the entire life of the relationship.

Making this shift requires developing the one-to-one marketing capabilities to do it.  Companies that do so can expect increased profits, not only in the short term, but right on into the future.

Some typical myths in Value Creation

The customer is looking for satisfaction. Highest value is achieved when the customer is fully satisfied with their purchase.

More is often considered value

“Buy one get one free” offers, often leading to an instant sales push. However there is a risk the customer may feel that they had been over-paying for the product all along and they now view the product as over-priced. As a result they may switch to a different product at the same price.

Price is value

Numerous businesses recognise lower prices as offering more value. However, lower priced products frequently end up second best to a higher priced product with similar features. Apple products as a very good example.

More Features or add-ons are value

Businesses bundle a product or service with extra features thereby offering a higher value.

Value creation is central, but it must integrate customer satisfaction at all levels. This will improve customer retention levels, and it is far more cost effective to service and retain existing customers compared with the cost of acquiring new customers which is generally much higher.