The 5 C’s of Value
In my previous post I discussed that pricing is a marketing strategy. In this post I discuss the need to look at the value being delivered to the customer.
So let’s look at the 5 C’s of value:
1. Comprehend the value being delivered to the customer.
2. Create value for customers.
3. Communicate the value you create.
4. Convince customers they must pay for value.
5. Capture value with strategic pricing based on value, not costs and effort.
So many businesses look at the services and products that they offer from their perspective. But to be able to determine the appropriate price, you need to firstly comprehend the value to the customer. Why are they buying that service, what problem is it solving, what pleasure is it obtaining or pain is it avoiding and then what is that worth to them?
In business, we need to be able to create the value. We need to be able to create this value so that we are actually delivering the value to the customer. We could create value by the experience in dealing with you. It could be by the result of using or delivering the product or service. Value must be created.
The customers don’t always comprehend exactly the value that is being delivered to them and accordingly an important part of any service strategy of a business is educating the clients of the value being delivered. Often time the customer may think of an aspect of the value but have not thought through every aspect of the value. Alternatively it may be that they have not quantified the real value being delivered. Never assume – educate your customers on the value being delivered.
The fourth aspect of convincing people that they must pay for value is also very much tied up with the education of the customers. Now remember that not all customers are going to want to pay full value. Those customers, you don’t want to deal with. We only want the good customers who are willing to pay for the value. There are plenty of these paying customers once they have been educated because these are the ones that we can earn a profit from and have a far more enjoyable business.
Finally, once we have understood the value equation, we then can determine the pricing strategy.
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