Companies Must Learn to Brag
Reprinted from the Harvard Business Review website.
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A few years ago I gave a speech to a national association of printers. I was discussing the standard pricing technique of allowing customers to choose how much to pay by offering good, better, and best versions of a product.
In the middle of my speech an audience member raised his hand. "That's what we do with business cards," he said, explaining that the thicker the stock of a business card, the higher the quality and price. I offhandedly mentioned that I'd never known that thicker cards were better, and moved on with my speech.
Afterwards, an audience member approached me with a gentle admonishment. "You seem like a smart and sophisticated guy," he said. "I'm shocked that you didn't know that a business card on thick stock conveys a high quality image, which is especially important at a first meeting." Now my business cards are really thick, and people often positively comment on it.
While the anecdote may make me look like a rube, I see it differently: it's an example of an industry that's done a lousy job of communicating the value of the products it's selling. Indeed, one of the biggest surprises in my career as a pricing consultant is the awkward silence that usually follows when I ask senior managers "Why should customers purchase your products and services?" Whether I'm at a small startup or in the boardroom of a Fortune 500 company, most managers fumble on this fundamental question. This is disappointing. If employees don't understand the value of the products that they sell, neither will potential customers.
My point is straightforward: for customers to pay the highest price for your product, they have to understand why it's worth its price. The key to effectively communicating your price is to justify it by bragging about the unique value that your product provides customers.
Your product doesn't have to be the "best" to brag to customers. Consider the Fung Wah bus service between Boston to New York. The bus company has had a few safety problems, but understanding that discounts can compensate for not being the best, Fung Wah brags about the unique value that it offers: $15 one-way fares. Its value proposition is clear: "Competing bus services charge over 200% more. We don't offer all of the fancy amenities of our competitors, but we'll get you to your destination cheaply." With up to 24 departures daily, Fung Wah buses are packed with customers who have decided that it offers them the best value.
Every company must create a value statement that clearly communicates the value of their products and services relative to the competition. This is not a time to be modest. List every positive attribute: "We have a five-star customer ranking on Amazon." "Consumer Reports rated ours the best." "Our product is eco-friendly." And so on. Just as important, help customers understand how they will benefit from these features, just as the printer emphasized the value of a thicker card stock to me.
If your product doesn't have as many bells and whistles as the competition, be upfront about it, then focus on your discount price: "Sure, our product doesn't have the fancy amenities offered by the competition, but are those attributes really worth the hefty premium they are charging?"
Geico, for instance, does a great job of bragging about the value of its insurance products. Starting with its price related motto of "15 minutes could save you 15 percent or more," it takes the necessary extra step to highlight its value by also communicating its association with Warren Buffett (whose Berkshire Hathaway is Geico's parent company), emphasizing its financial stability (high ratings by Moodys, S&P) and providing assurance that others purchase its services (it's the third largest private passenger auto insurer with more than 10 million customers). Talking up those attributes has helped make it one of the fastest growing auto insurers in the United States.
Morton's, the premium quality (and priced) steakhouse, has its wait staff greet customers with a short presentation dedicated to communicating the value of its products. By dazzling customers with its live lobsters, oversized prime grade steaks, and emphasizing key value-enhancing details such as the "colossal" size of its shrimp, it's easier for diners to stomach paying as much as $54 for steak entrees and $10 for side dishes such as steak fries. (Here's a video of Morton's pitch.)
Does your company help its customers understand the unique value of its products? If not, it's time to start bragging, which is the only real path to higher growth and margins.
