One of the intractable problems of economics is that first-time buyers bring a lot of uncertainty about the value they will receive to a transaction. An excellent example of this is to compare the sale price of new electronic items on eBay with those at an online retailer like Amazon.com – inevitably, the individual sellers on eBay will be selling the same products at some discount to the prices on Amazon. This happens because most online buyers have some experience buying from Amazon – and no experience buying from a specific eBay seller (of which there are thousands).
Your company faces this same “value uncertainty discount” when selling to a new customer for the first time Your customer, never having experienced doing business with you, does not know much, if anything, about what that experience will be like. Will you be accommodating or difficult? Will you be generous or nickel-and-dime the customer? If there are issues, how easily and quickly will you handle them? In many markets, these are not trivial questions. Indeed, for customers in some markets, the answers to these questions are more important than some of the basic features of your products or services.
Imagine you are a customer who is looking to switch suppliers – or establish a new supplier – for a given product or service. If you have no way of establishing confidence about the utility of the relationship with a given vendor, you are very likely to discount it entirely. This can lead to very commodity-oriented buying behaviors, which isn’t really in anyone’s long-term best interest. The smart customer, then, starts looking for signals that you might offer more than the basic product or service.
Here are a few clues that people commonly look at when trying to establish value:
Referrals from other customers – perhaps the most credible clue
Price (higher price signals more quality/service)
Quality and responsiveness of sales support
Appearance of “packaging” – including sales literature, and possibly even your plant and office
There are more – but this list should give you some ideas about how you may signal higher value to prospective customers. Clearly, it is the function of your marketing to address how you will signal this value – and it one of the primary tasks of strategic planning is to assure that other elements of your business, such as finance and operations, reinforce that value in execution.
How do you signal value to your customers in your marketplace? More importantly, is this signal any different or more credible than your competitors? Strategic planning is an excellent time to consider how to set yourself apart from the competition in this way – and having your human resources, IT, customer service, operations and product line support this vision is a wonderful way to increase the strategic muscle and staying power of your business.