Price vs. Value
Beachfront property. Courtside seats. Private screenings. Backstage access. We all want these things, but only a few can afford them. Each is based on the alluring value of scarcity and exclusivity. All are priced at a premium, and are a friendly reminder of the dynamics of supply and demand. Seth Godin explored a slightly different view of this in a post titled, “Proximity to pain,” where the basic premise was that the closer a person is to the point of need, the more you can charge. Many business models are built around the economics of solving pain. Others charge handsomely for delivering pleasurable experiences.
Last week, while vacationing in Savannah, my hotel offered an array of value-added services, such as the complimentary lime essence water, cookies in the lobby, and free soda refills my kids enjoyed at the pool. Aside from the southern hospitality, which seemed to pay attention to every detail, the hotel showered guests with subtle upgrade opportunities that were available, but at a premium price.
During check-in, I was presented with the option of a waterfront view room overlooking downtown Savannah for $20 more per night, a no-brainer considering the standard accommodation offered a glance of the parking garage. At the pool, in addition to the ample chaise lounges available at no charge (other than the urgency to get down early enough to secure a spot), guests can rent a cabana with dedicated personnel, water misters, more comfortable furniture, and the implied “rock star” status of being positioned behind the stanchions. Opportunistically, the cost of the cabana was more on Fridays and the weekend versus mid-week.
Whether your business focuses on resolving pain or delivering delight, you can always find new opportunities to give customers a better experience, whether they pay for it directly or not. Quoting Warren Buffet, “Price is what you pay. Value is what you get.” I could not agree more.
What are the value-added services and premium offerings in your business?