Step 1: Understand what drives value for your customers
What is value? What does it mean?
Value is what customers really want from your product or service. So to be clear, it’s not always what you think it is. Therefore, the first step is to research your customers, talk to them, and watch their actions – start learning what is important to them and what is not. To complicate things a little more you will have a variety of customers with different needs – make sure you understand this too. And importantly make sure you are focusing your efforts on your most valuable customers – this is covered off in more detail in step 5.
Work out how to serve your clients and customers best, in a way that provides value and alignment for your business.
Step 2: Understand your value proposition
As mentioned in step 1, your value is what customers really want from you. Your value proposition is a statement that explains how your product or service solves your customer’s problems, delivers specific benefits and tells your customer WHY they should buy from you and not a competitor.
The value proposition consists of:
- Headline. What is the end-benefit you’re offering, in 1 short sentence?
- Sub-headline or a 2-3 sentence paragraph. A specific explanation of what you do/offer, for whom and why is it useful.
- 3 bullet points. List the key benefits or features.
- Visual. Images communicate much faster than words. Show the product, the hero shot or an image reinforcing your main message.
Step 3: Identify the customers and segments where you can create more value relative to competitors
This is essentially about how you are positioned alongside your competitors. This is where you need to focus your attention on how you are different, becoming known for a certain ‘something.’ But you also need to consider step 1 here. What your clients actually want from your product or service, so don’t go off creating your point of difference in isolation to everything else.
To help you hunker down on this process, consider that you will probably deliver in one of these categories:
- Operational excellence – generally more volume at lower cost
- Product leadership – quality and the best product – think of Apple
- Customer intimacy – Customised solutions and great personalised service
You can provide the best offering, the cheapest offering, or the most comprehensive offering, but you can’t provide all three.
Step 4: Create a win-win price
There are so many articles on pricing, because all businesses question pricing strategies – if you hadn’t priced so high would you have sold more? Should I be higher or lower than my competitor? In pricing there will always be uncertainty, but really it boils down to one thing – finding a price that makes you a profit and keeps your customer happy! Refer back to step 1 – understand what your customers value, learn as much about your customers to help you with your pricing, and where your product fits in their life. For example my millennial son doesn’t balk at the high price tag for the latest smartphone.
Pricing your product involves the economics of your business and the psychology of your customers. Employing simple market research and on-going review will help you find your price.
Step 5: Focus investments on your most valuable customers.
Focus your sales and marketing dollars towards the customers that you know you can best serve and provide the greatest value in return. By following the steps above, through the process of learning about your customer’s behaviour and the value you bring them, you will also understand the value they bring your business.
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