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Why Some Businesses Sell On Value, and Others Sell On Price

In my popular Business Trends article on Forbes, trend #5 stated “Customers Will Pay A Premium For Verified Results.” I’ve pulled together some not-so-obvious examples of how businesses are able to compete on value by demonstrating results for their customers, while other businesses still struggle to compete based on price.

An Example Of Value Through Service

During our home renovation this past year, we added a separate heating, ventilation, and air conditioning (HVAC) system for the top floor of our house. We agreed to a fixed-price fee with Roger Turman Heating and Air Conditioning. When I told my general contractor friend what I had paid, he said “You probably could have saved ten to fifteen percent.”

Fast forward to this past week, and the system was struggling in extreme heat. I phoned Roger and explained that the system was keeping things cool, but not perfect. Since Roger lives about an hour away from us, I told him it was not an emergency. Roger said, “I won’t sleep if I think something is wrong with your system. Can I come tonight?” At 7:30PM, he arrived. He suggested that maybe he overlooked something (meaning he took responsibility) and quickly solved the problem. He also rerouted the drain line, since post construction he could see that there was a better path for the drain. He stayed for more than an hour to confirm the results. He then called the next day to ensure that everything was still working perfectly.

When I told my general contractor buddy about the experience. He said “With that type of service, he’s worth the extra money. I’m calling him on my next project.” By going the extra mile on service, Roger established himself as a valued expert in his field. The irony is that Roger stands out simply by taking responsibility, and being responsive. Though it seems remarkable compared to many, is that really such a high bar to attain?

On The Other Hand

I contract regularly for commercial printing. I hired a local company who was creative with solid print quality. Unfortunately during our projects, the printer often missed deadlines without communicating, and seemed to let things fall through the cracks. In some cases, we’d have to ask multiple times just to get an invoice. Sometimes, the owner would say “We’re not charging you.” So, financially, they were a bargain.

On a recent project, we needed simple design changes made to our product – ones the owner said would take no time at all. When we finally received an invoice, we were charged eight hours for design. Our graphic designer had estimated it would take 3 hours to create the product from scratch. So why was the printer billing us for eight hours? We suspected there might have been a billing error. We politely inquired about the bill, factoring in other work that had not been charged. To our surprise, the owner flew off the handle. He went on to suggest we not work together anymore. Based on his tone and response, I agreed.

Know The Outcome You Seek

In a situation where things don’t go your way, you have two options: 1) Take the high road; or 2) Be nasty. Ask yourself, what outcome am I hoping to accomplish? With the printer, I decided to take the high road and pay the full invoice. Having received payment for 100% of everything he had ever invoiced, the printer decided not to send the design files he had charged me to create. Moreover, the design files serve no purpose to him whatsoever. Perhaps he regretted not billing for other work. He may have felt that undercharging in some areas entitled him to overcharge in others. Still, what is his goal?

Is there a chance that someone will ask me about his business practices? I’m reminded of my late mother’s advice, “You’ll attract more bees with honey than you will with vinegar.”

In retrospect, even on those areas where the printer did things for free, it was not a good value. Would you want to work with someone like that even if he or she was ten or twenty percent cheaper than another vendor?

Valuable Lessons

The most overlooked, yet obvious areas of differentiation for any business are service and ethics. Roger, the HVAC technician differentiated himself by being thorough, responsive, fair, and honorable. When I thanked him for coming out on short notice, he said “All of my business comes from word of mouth. My customers ARE my business.” Business success is a marathon, not a sprint.

Think about how many times you have an amazing experience just because someone did what they said they would do, communicated proactively, and operated with integrity.

If you follow those simple rules, you can stand out from the competition, earn the right to win business on value over price, and grow your business to extraordinary levels.

It’s Your Turn

When has someone earned the right to charge more just by doing what they said they would? When has customer service made you feel ripped off even when it initially seemed like a bargain?