People who purchase services see value in different things – many are non-monetary.  In this article we’ll explore the concept of value and give you ideas of how you can create value in the eyes of your clients.

How much is a can of Coke worth?  In Australia, it could cost you around $2 if you buy it cold from a store.  If you buy a can as part of a box of 24 from a supermarket, the cost per can might be as low as 60c.  On the other hand, if you’re at a sporting event or a concert, the same can may cost closer to $3.

Why does the same object vary in price by so much?

It’s all about the value that the customer sees in the product.

If I’m organised and plan to buy cans in bulk, I’ll be more price sensitive, because part of what I’m trying to do is save money. The value in that instance is to be able to buy in bulk.  If I’m out and incredibly thirsty and decide a can of Coke is what I’m after, I’ll pay more.  I’ll gladly pay extra for the convenience.

Value is an amazing concept.  People will gladly pay more for something that is of value to them.  The big problem is working out what it is that they find valuable.  You may actually be surprised.

If you sell a service, in many cases the service consists of knowledge.  You may write that knowledge down in the form of a book, you may verbalise it in an audio program, the knowledge may be used to prepare financial statements (accountant) or argue a point of law (lawyer).  In any case, your clients will happily pay for the information you have, if they see the value in it.

A few weeks ago I met with a client, aged 60 who is saving for retirement.  In the course of our conversation I learnt how much he was contributing to his retirement plan.  In Australia, there are limits that apply to how much you can save into your superannuation fund (like a 401k).  This man was on track to exceed the maximum allowable amount by over 50%.  Had I not picked this up and advised him to stop, he would have had to pay penalty tax on the excessive component.  This could have cost him around $20,000 extra.

What is that advice worth to him?  If you calculated my fees based on time, it would be worth only around $400.  If you calculated it based on value, conceptually, it could be worth up to $20,000.

Here’s another example to get you thinking.

A few years ago in the MBA I studied an accounting subject.  We were learning about how to ascertain the cost of producing goods.  They gave us the example of a manufacturing company who discovers a new way to make a gasket that goes into its machines.  This new design of gasket costs only 30% of the cost of the old one, and lasts up to 3 times longer.  The question was – how much do you sell it for?  We were given details of the company’s labour costs, and their desired profit margins.

Almost everyone suggested selling it for less than the cost of the existing one.  They all worked on the assumption that the company wanted to keep the same profit margin. 

I took the opposite view and suggested they could charge more than the existing gasket.  I figured if it lasted three times longer than the existing one, the buyer of the product could happily pay up to three times more.  They wouldn’t care about how much it actually cost the company to manufacture the gasket – they cared about the fact it would last three times longer – that’s where they saw the value.

Think for a minute about the service you sell – what to customers find valuable?

The easiest way to find the answer is to ask your customers and potential customers.  I know financial planners who have surveyed their clients and discovered the things the clients really valued were far different to what they thought they would value.

Clients are looking for things like peace of mind, trust, ease of doing business, experience etc.  Planners are thinking of things like good returns, products, quarterly statements etc.  Why would a client value a planner sending them quarterly statements of their investments when they can get that information every day off the web?

Many clients see a high level of value in planners monitoring their investments – letting them know if a fund manager is underperforming and recommending something new.  This is something most planners do, but few actually tell their clients they’re doing it.

I’m fascinated by the range of e-books and programs available for sale on the internet.  There are resources available for almost every topic.  Again, it’s a question of value.  How much will I pay for a book that enables me to make an extra $10,000 pa?  Is it worth $100?  $10?  $1,000?

Then answer is that it depends on the value I place on it.

Your role as a marketer is to help clients discover the value in the product or service you sell.  In our financial planning business, we talk a lot about our skills and experience – our clients see value in this.

There’s value in specialisation.  If you’re a lawyer who specialises in personal accident cases, a client who has a need in that particular area of law will place greater value on your knowledge.

If you’ve got a track record in a particular field, clients will place greater value on your knowledge or product.

Challenge yourself.  Ask some clients about the things they see value in.  Are there things you aren’t currently doing that they would see value in?  Are there things you currently do, but your clients see little of no value in?

Have a complete re-think and make your decisions based on fact, not just on what you think the truth is.

And next time you’re calculating a price for a client, think about the value you’re creating, and price according to that, rather than by your usual method.