value

Perception of value

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The repair guy comes to fix the washing machine. The machine is quickly fixed in 25 minutes and the charge is $175.

What?! $175 for only 25 minutes of work?! That’s an outrage!

The repair guy comes to fix the washing machine. The machine is eventually fixed after tinkering with it for 4 hours and the charge is $175.

What? $175 for 4 hours of work? That’s not too bad.

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A photographer charges $13,000 to do 24 portraits.

What?! $13,000 for just 24 pictures?! That’s an outrage!

A photographer charges $13,000 for five days of photography, transporting a full studio setup to the location five times, four days of retouching dozens of photos, assistant fees for five days, equipment expenses, other overhead expenses, full copyright transfer and 24 timeless portraits.

What? Only $540 per portrait? That’s not too bad.

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A customer’s willingness to pay is based upon their perception of value (aka “the customer is always right”).

For better or worse, this perception comes more from the customer’s recognition of the effort involved in producing a product or service rather than from the benefit to be gained. It’s difficult for many people to “see” something that’s intangible or, at least, something that’s not immediate.

Customers generally won’t pay for efforts they don’t recognize or understand. Of course, the hard part is getting the customer to recognize the effort involved. An educated customer is always the best customer.

 

The Paradox of Price

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Okay, a little Monday afternoon math and no calculators are required.

Consumers want the most value for their money. Value can be defined by the benefits provided by a product or service, divided by the cost of that product or service:

Value = Benefits / Cost

This over-simplified equation shows that for a given set of benefits, as the cost decreases, the value to the customer increases. It might seem that maximum value would be reached if the cost is zero. But if you remember your grade school math, you cannot divide by zero.

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Restaurants and Photographers

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What do restaurants and photographers have in common?

When it comes to choosing a restaurant, or a photographer, a consumer in a larger city usually has many hundreds of choices. In the eyes of the customer, most restaurants, and most photographers, are more or less the same.

Why choose one restaurant, or photographer, over another? Convenient location? A positive previous experience? Price? Good word-of-mouth? Maybe the web site looked nice?

Restaurants rely on their menu to entice customers. They usually post menus online and near their front entrance. But compare how restaurants present their menu.
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The Four-letter F-word

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Search for the most powerful words used in marketing and the most cited word is the four-letter F-word, Free. The word Free gets customer attention but is it really effective in making sales?

The F-word is so overused these days, that we almost automatically tune it out. We know nothing is really free, there’s always a catch. Free will get attention, but it’s never taken seriously.

It’s important for a business to remember that your customers are not looking for Free. Rather, they’re looking for good value for their money.
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Pick Any Two

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Remember the consumer saying: “Good, fast, cheap. Pick any two.”

A similar saying is: “High quality, low price, good customer service. Pick any two.”

Of course, we want all three. But that elusive combination doesn’t seem to exist.

When a customer tells a photographer that their photo fees are too expensive, the photographer should then ask: “Okay, I can can give you a lower price but what do you want to give up, quality or service?”

Customers who only shop price are customers that a photographer can live without. These people don’t value a photographer’s work.

Bargain hunters don’t understand that a cheaper price only guarantees them of getting less for less.

What a photography assignment might cost is always less than what it will cost from not having that photography done at all.

Many businesses don’t realize that most commercial photography doesn’t really cost anything. If $1500 worth of photography helps generate $20,000 worth of business, then there was no cost for the photography. The photography was a business investment where the company put money into itself.

 

Riding along a new path

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If a customer needs a package to be delivered from point A to point B, they don’t care whether the courier* is talented enough to ride an odd-looking bicycle or not. The only value to the customer is the ability to deliver the package on time. The customer won’t pay more for a fancy set of wheels or any extra cycling skills because these have no value to the customer.

No matter how talented a photographer thinks they are or how many awards they may have won, it’s the customer who determines the value of the photography. The customer’s perception is the photographer’s reality. Unwanted value isn’t any value at all.
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By The Value

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Of course the list of prices in the previous post, By The Pound, is meaningless. No one sells a house by the pound, no one buys a car by the pound.

A house is priced on the subjective value of its location, the quality of design and workmanship that went into the house and the cost to build.

A car is priced on the subjective value of its brand, the quality of design and workmanship that went into the car and the cost to build.

Yet some people expect photographers to price their services by the hour or by the picture rather than by the value of the photography plus the quality of workmanship and the cost of production.

When some businesses search for a corporate photographer, why do they shop price first, value second? The only products sold by weight or volume are commodities like fruit, vegetables and gasoline. Almost everything else is sold by value.

A can of Campbell’s vegetable soup is 99¢ while the “no name” brand of vegetable soup is 60¢. Which soup would you buy?

After tasting the thin, watery, no name soup, you’d either go back to the higher-priced soup because it has more value, (i.e. better taste and more enjoyable), or you’d lower your standards and stay with the cheaper product to save money.

It’s the same deal with photography. A business has to decide whether to lower its standards and use cheap photography, or go with higher-priced professional photography because of its higher value.

 

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