I have yet to truly solve this problem. If I could, I probably would be extremely wealthy as businesses around the globe would wait patiently in turn for me to dispense my invaluable consulting advice. The problem: Truly understanding and getting people to pay the right price for the real value of the services we provide.
I’ll explain further with a couple of examples.
Years ago, during a temporary “break” in my now long-established publishing business, my wife and I sought out to establish a health information service (we called it, appropriately, Health Information Retrieval Service). This business operated in the early days of the Internet, when medical databases and research papers were not readily available to the general public but could be accessed primarily through academic research libraries. It turns out that we lived near the largest research library in Canada. We discovered that we could copy the documents in the library and distribute them freely by paying a modest licensing fee to a copyright clearance agency (now known as Access Copyright).
We could provide a comprehensive report with hundreds of pages of useful research both on conventional and alternative therapies virtually impossible to find elsewhere, and set a price of $200 for the product.
Each report needed to be individually produced — this was no “off the shelf” deal.
Our business received extensive publicity in the local and national media.
Over 10 months, we sold about 10 reports. Even though the information in the reports could really help and possibly provide life-saving information, we simply could not sell the service at a profitable price.
It turns out that about eight months after establishing the Health Information Retrieval business, I had the opportunity to restore my publishing business. With the sabbatical and more knowledge, we set out to change the way we sold advertising, focusing less on the distribution and value of our product than on the relationship the advertisers had with their clients and suppliers. I soon found it really easy to sell small, 1/10th page advertisements for at least $265.00, no questions asked. Many of our sales were (and still are) for an association publication which circulates just a few hundred copies.
So why would people pay hundreds of dollars for a small ad but not pay less for potentially life-saving information? As I suggested at the beginning of this posting, I don’t have a simple answer to that question — but will assert that effective marketing can often help (though not always solve) the price/value gap.
In the case of the Health Information Retrieval business, we were quite effective at marketing. Free widespread media publicity is usually a good sign that we are on to something right. (In a later example, free publicity helped me make a few thousand dollars in one week when I discovered how to fast-track the U.S. immigration system through an odd government-sanctioned visa lottery scheme.) But people simply wouldn’t pay for the health-related service.
I believe in part that the issue is how the market perceives or relates to our perception of value. In Canada, for example, health care is often seen as a right and something that should be free (though taxpayer subsidized, of course). Perhaps the sickest people could not afford the service and those with money didn’t think it wise to pay for the information even if it appeared validated by “good press”.
Conversely, business-to-business advertisers think nothing of spending a few hundred dollars especially if they perceive they will be keeping current clients happy while (maybe) attracting some new ones.
Lets see if we can apply these insights for your own business.
Many general and sub-contractors face the “low price wins the job” problem and constantly battle under-cutting competitors. They often survive in business (a) by keeping costs under control, always a good thing and (b) finding some loyal clients who will pay more because they trust the contractor or sub-trade. Successful contractors also find ways to attract clients who will pay more. For example, one sub-trade who specializes in crown moldings does extensive business with local home builders but has hived off a retail direct-to-consumer service for small jobs. He uses left-over materials (and time) to serve these clients, at a much more lucrative margin by advertising extensively in the (gulp) Yellow Pages. (I don’t recommend this for anyone, but it works for him.)
Most successful contractors who find a way to get a higher price achieve the best results by building their brand to the point that people will pay more. And that is what marketing is all about.
Ok, now, then how do I explain this paradox? I’m offering my Construction Marketing Ideas book and a one-hour Webinar on how to obtain free media publicity (based on plenty of live experience and reading) for $79.00 — less than a third the price of our smallest print publication ads. I sold one ticket yesterday to today’s Webinar but we sold more than a dozen ads — and some paid $800 or more! (The Webinar is free to anyone who has purchased advertising with us in the past year. The book is selling quite well through my own website and services such as Amazon.com.)
Which service has greater value? I suppose, as much as I hate to admit it, the marketplace has decided: It must be the advertising. So we’ll sell more of it. But I still scratch my head.
Really, I believe the book and Webinar with the free hour’s media relations consulting is much better value. Maybe you will prove me right by deciding to participate. You can learn more here.
