In my previous article about Value Proposition, I mentioned that my next piece would tackle the relationship between Positioning and Pricing, and here it is.
I mentioned that value proposition is the most critical thing that you can do for your business. It can be summarised with: Define clearly what you do and whom you do it for”, now I will add, and then your pricing has got to be suitable for it.
So, if you want to claim to be the best in the business at what you do so that customers would come to you, then you must consider pricing carefully. If you are going to say you are premium, charge premium prices. Because nobody believes somebody says, “I am premium but cheap”. It is really simple. Clear proposition offers you pre-eminence in your market.
People expect to pay top dollar for top value. If you can offer top value and you can substantiate it, then charge top dollar for it. You have to. If you can’t prove it, you’re like just anybody else, and in that case, you would better pick up something that you can claim to be brilliant at where you can substantiate it.
So how to create, quantify, and increase the value of your product?
Yet, I guess you all know that aside from being a 2Y3X Growth Consultant, I am also a Motorcycle Riding Instructor, and I always try to create an analogy between both worlds of Motorcycling and Business.
So, let us start from here. What impacts the value of your motorcycle? Have you ever asked yourself this question?
We all love our bikes, but, for whatever reason, very few are faithful to theirs’ forever. Most of us like changing it and will sell our motorcycles at times, and when that time comes, we always like to get the best resale price we can.
Most of us have an approximate idea of what our bike is worth. Think back to what we paid for it and knock off a few hundred quid for each year we have owned it. Simple, huh? So, most of us are shocked when looking for a part-exchange price, and we get an offer from the dealer that is considerably less. Or even worse, do you recall those dealers saying, “we buy any of your motorbikes”, and then their valuations appear to have a decimal point in the wrong place.
But what are the factors that influence someone wanting to buy a motorbike? Here are 12 factors to consider when it comes to the resale value of your pride and joy:
1. Condition
It goes without saying that bikes in good condition will command a premium over average or poor ones. Bikes that look unloved are less desirable, and savvy buyers will bargain over every little detail.
2. Service history
This is increasingly valuable with older bikes – a timely serviced bike suggests a very different proposition to one with no service history.
3. Accessories
Even though many buyers prefer bikes in their original situation, some carefully chosen accessories can make your bike more desirable.
4. Timing
Motorcycling is seasonal, so it makes sense to take that into account.
5. Advertising images and description
Most people are going to judge your bike by the pictures and words you use to advertise it.
Do not lie but take nice pictures with the best possible light and be descriptive in the text.
6. Supply and demand
Before selling your bike, check the internet to find out prices of other similar bikes that are up for sale, and make sure you understand their specs and conditions.
7. Originality
Although many riders like to modify their motorcycles, buyers generally want their bikes to be as close as possible to factory specification, especially as they approach classic and vintage ones.
8. Mileage
Most buyers will judge a bike’s condition based on its mileage.
9. Age
In the first few years of a bike’s life, age is critical because that is when the price falls fastest.
10. The revival factor
Nostalgia sells, and motorcycles are no different. We all remember our first bikes or the ones we lusted after as teens, and as we get older and have more income, it is natural for riders to seek out their first loves.
11. Rarity
Continuing on the theme of supply and demand, the rarity factor often plays in the used bike market, especially for limited edition choices.
12. New models
The introduction of a new model can impact the value of your motorcycle, especially for the new ones.
The above factors can be split between ones you cannot influence, such as Supply and Demand, Originality, Mileage, Age, The Revival factor, Rarity, New models. And others that are within your control, such as Condition, Service History, Accessories, Timing and Advertising images and description.
Yet one thing is sure; the cost of your motorcycle does not drive its selling price; it is about the total value perceived by the buyer, which is influenced by the twelve factors listed above. The same applies to your product. Your pricing should be about the total perceived value and positioning play a significant role in quantifying that value.
The value guru Todd C. Snelgrove, Founder of “The experts in Value” and Co-Editor of “Value First Then Price”, spent a lifetime analysing and developing the relationship between value and pricing. He states that:
“Quantifying your value, so customers are willing and able to pay for it!”
“How does one get paid for value created? The question has been asked by every premium player in every market of the world. Given that the financial benefits of value creation and pricing are well known, why do so many companies fail to achieve the desired results after they’ve done the work to create something of value?
For those that do invest and create customer value, it’s time to do the work to get paid for it!
PV ≥ COST = ACTION
I have begun to look at this as a formula. If the perceived value (PV) of a good or service is greater than or equal to the cost of buying it, then an action such as a purchase should occur. “
Todd C. Snelgrove
In a nutshell, whether it is your motorcycle or your product or service, the selling price is directly dependent on the perceived value from the buyer. While there will always be factors related to market dynamics that you cannot influence, there are many others within your control to increase the value; thus, the price, given you can quantify and substantiate that.
Reach out to me through jihad.houwayek@linkadvisory.com if you would like to learn more about value-based selling and how 2Y3X programmes can help you price your products and services the right way.
Jihad Al Houwayek
