The perception is that our customers’ preferences are changing
when, in reality, we’re offering enhancements to retain their business. We
do it without asking for more money. Customers graciously accept these
offers. Why not? It doesnt cost them anything.
Its not our customers’ preferences that are changing constantly. Its
our desire to maintain a competitive advantage that drives us to contin-
uously offer new benefits. When we look back on how our offerings have
changed over time, we mistakenly ascribe the changes to shifting cus-
tomer preferences.
The key to avoiding this dilemma is to attach a price tag to any
new benefit you offer. If your customers are willing to pay extra to get
that benefit, they value it. If not, keep looking until you find something
they do value. That brings us to our third question: do customers expect
the price to change?
When Customer Preferences Change,
Do Customers Expect the Price to Change?
The quick answer is “Yes.” How can I be so sure? Think back to a time
when you were the customer making a special request. I’m willing to bet
that your request included the phrase, I’m willing to pay extra.”
Customers understand that there are costs and risks associated
with providing something outside your normal offering. They under-
stand it, they respect it and, if its important enough to them, theyll pay
for it. If its not important enough for them to part with their money, it
shouldnt be important to you.
As you can see, the constantly shifting sands of customer prefer-
ences” are of our own making. Now that we have an approach for de-
termining what customers value, lets figure out how much they’re will-
ing to pay for what they value.
What Customers Value
For your convenience, I’ve listed the nine value propositions we discussed
Elementary School Math: Quantifying Value 53
This is not an all-inclusive list. There may be aspects of your of-
ferings that arent included. That wont be a problem. The approach used
in identifying what customers value and how much value they place on
that attribute can easily be adapted to your offerings.
My experience has been that most offerings include anywhere from
two to four of the aforementioned value attributes. That makes calcu-
lating value a daunting task. When you consider the number of prod-
ucts/services you provide, calculating value becomes a seemingly impos-
sible task. Lets see if we can simplify the process for you.
Well begin by looking at each value attribute to see if they have
anything in common. Specifically, we’re going to look at what bene-
fit each attribute affords. Table 3-1 shows the results of this
By viewing the nine value propositions through the lens of the
benefits each provides, we discover that there are only three benefits
and, consequently, only three calculations needed to monetize the
value of your offerings. Those benefits are image, innovation, and time
The process becomes even simpler when we realize that there is
typically one attribute that converts prospects to customers. In the case
of a convenience store, its time savings. You might like the fact that the
store is clean, has esthetically appealing signage, and a friendly staff, but
theyre bonuses. The real reason you’re willing to pay premium prices at
a convenience store is that it saves you time.
What about your doctor? What is it about your doctor that you
value? Most of us would like to think we chose our doctor on the basis
of his or her medical knowledge. The reality is that those of us outside
the medical community dont have a clue how to evaluate a doctor’s abil-
ity. We choose a doctor based on:
convenience (time savings).
a friends recommendation (dependability = time savings).
image (my doctor is the top thoracic surgeon in the country).
54 Pricing for Profit
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