They're not buying on price, they're buying on ...

Value.

I could stop there.

It pretty much encapsulates many consumers motivation to buy - in the modern business environment. It’s all about value, or the perception of it.

Consumers are more educated and more informed than ever. Need I remind that we’re in the information age?

Customers have the tools (the internet has had a profound effect on the way consumers perceive value now, let alone your business) to verify companies claims and seek out superior alternatives (greater perceived value). Thus, consumers tend to be value maximisers.

Consumers estimate which offer will deliver the most perceived value for the particular circumstances and then act upon it. This has lead to the notion of Customer Perceived Value.
It’s the difference between what the customer gets and what he or she gives for different possible choices. The customer gets benefits and assumes costs. You can increase the value of your offering by some combination of raising functional or emotional benefits and/or reducing one or more of the various types of costs. Either way you’re enhancing real or perceived value.
You then have a value proposition - a value proposition is the sum of all the benefits of what you provide for a price. That’s what consumers are buying. In its simplest form - they’re evaluating what they’re going to get for what you’re charging.

“The interesting thing is when we design and architect a server, we don't design it for Windows or Linux, we design it for both. We don't really care, as long as we're selling the one the customer wants.”

Michael Dell – founder of Dell Computers

Consumers have varying degrees of loyalty to specific brands, stores and businesses. The key to generating high customer loyalty is to deliver high customer value.

Note: you can’t buy loyalty. As I often state “no one comes back for a bad cup of coffee” (irrespective of how good the loyalty program). Fundamentally, you have to have an accepted level of product/service conformance that delivers an expected value level. Only then will a consumer consider the greater perceived loyalty – the total value proposition. Eg: you will no doubt have expectations about your cup of coffee – it will taste of coffee, be hot, etc. If these levels of conformance aren’t met, then you are disappointed – you haven’t got your expected value. And you won’t go back. The enhanced value proposition may be a small biscuit on the side.

I have implemented a number of loyalty programs to enhance customer perceived value, but these programs have only been introduced after appropriate research has been conducted and fit with the marketing planning and strategies of the business. Initiation of such programs should not be an arbitrary decision.

“When I started out in business, I spent a great deal of time researching every detail that might be pertinent to the deal I was interested in making. I still do the same today. People often comment on how quickly I operate, but the reason I can move quickly is that I’ve done the background work first, which no one usually sees. I prepare myself thoroughly, and then when it is time to move ahead, I am ready to sprint.”

Donald Trump – Mr Trump to you and me

Many companies state with creative unique selling propositions, tag lines, slogans, branding and other marketing tools of what they will deliver to the market. This creates an expectation of value and is a key element of positioning the business in the eyes of the consumer. The consumer now has a value expectation. Unfortunately, if the business doesn’t provide that level of stated value (or exceed it), then guess what? You’re going to lose customers.

You might get them in for the first time, but customer retention rates will plummet, zero loyalty, and high marketing promotional costs.

More time should be given to creating the value, or rather value proposition (that is relevant and welcomed by your target markets). It then becomes a lot easier to deliver value and finally communicate it.

When looking to communicate the value, you can then provide a significant value proposition based upon what you provide. It also means you can create perceived value. The perception thus created can be that the consumer is receiving significant value, but the actual cost to you is considerably less.

An example: I introduced a loyalty program with a retail client. You purchase 8 items of $40 or more (great way to drive up the average sale value) and receive a stamp on the card. After 8 times, you receive a choice of a pack of products to the perceived value of $40. The consumer sees the value at $40 (or even more in some cases), but through some restrictions of product choice, etc the actual cost is only the cost of the product. If you’ve got reasonable margin or the ability to negotiate terms with suppliers the true cost may only be $10. This program has a number of other secondary benefits as well –reduced marketing costs, reduced reliance on discounting as a sales incentive, reduced client attrition and of course increased margins (in particular net profit),

“When people talk about successful retailers and those that are not so successful, the customer determines at the end of the day who is successful and for what reason”.

Gerry Harvey – founder of Harvey Normans

Seek to create greater value, be it real and/or perceived. Customers don’t buy primarily on price, with increased value of your offering to a competitor, they will choose you.

Your level of your success is only limited by yourself

Best wishes, Vaughan