Friday, December 9, 2011

Cost vs. Value: What Are You Really Selling?

Cost is What You Pay. Value is What You Get.

 I teach several marketing courses at the University of Maryland and one of the important parts of each  semester's class is the discussion on value. The example I use is as follows: Why do people continue to purchase Mercedes-Benz cars? When compared to a lower priced option such as Honda or Toyota, the differences seem hard to see at first. Both cars can easily be driven at 60 mph; both use the same readily available fuel; both meet government safety regulations; both come equipped with leather seats, superb sound systems, GPS, and other accessories that make the driving experience enjoyable. So why do some people spend $60, $70, or $80 thousand dollars for a car that provides nearly the same functionality as one costing half the price? It is because of the value to the consumer that the Mercedes brand delivers. For some consumers, that value comes from the status of owning the brand; for others, it is the perception of reliability; some may feel that the ride is smoother and more comfortable; and for others it is the overall customer experience from the purchase through the car's maintenance at the dealership. What Mercedes has so successfully done is use value as a tool to position itself apart from its competition.

As an association executive, you, too, should look at how your products are positioned in the marketplace. Are you competing on price or on value? When faced with price resistance from a prospect, the easiest thing to do, perhaps, is to offer a lower price in order to get the sale. Once done, you have established the price that customer will expect to pay for all future purchases and in so doing, you have lowered the product's value. Under these circumstances, it is far better to discuss the value of the purchased media, rather than its price. What constitutes value for association products? Several things:

1) Buying power and influence of your association's membership. Explaining that your readers/event attendees are the key influencers of purchasing decisions made within their organizations is key. If your members control the money, then the value of reaching them is very high.

2) Quality not quantity of readers/attendees. I recently managed a trade show for a client and spoke to an exhibitor about his experience at the event. He said the traffic to his booth was awful. His location was not well-lit, and was near the back of the exhibit hall. But, he left with three very lucrative leads that make those problems seem insignificant. For him, the quantity of exhibit hall attendees was poor, but the quality was excellent and he has committed to exhibiting again next year.

3) Add value by rewarding your biggest clients. When a company is consistently supporting your association and its products, rewarding them for their loyalty adds value to their relationship with you. Mutli-product packaging and discounting is one way to do this, but others may include offering a free ad to a client one time per year, or giving them special recognition as a supporter either in your magazine or at your event acknowledges their importance to your association. We work with clients who have a "corporate partner" status and others who offer platinum, gold, or silver sponsorship status for their largest supporters. Recognition and access are what most industry suppliers want, and providing both to your biggest customers will go a long way to maintaining those important relationships.

Discuss some of these ideas and others with your sales staff. Ask them what they think will work best. Then, give some of them a test drive. You will become the "Mercedes" dealer of your market while letting the "Hondas" and "Toyotas" fight it out for the rest.

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