How can you maximize profits when everyone is racing to the bottom of the pricing scale? Consider the value you can offer beyond quality, service, and price.
So how do we apply this to our situation? The answer lies in how we see our product in use. It is a value proposition. Traditionally quality, service, and price were the three value propositions. Today we need to define new value well beyond these three. This is where you have a real opportunity. Your competitors will not get it. The idea is to find elements that add value to the overall transaction but do not add cost. Currently everyone is focused on price. Our job is to keep that price at rock bottom—but to then show a mid-level and upper-level program with substantial value added. An example of these price points for a T-shirt program might be something like this: low end $4.00, mid level $7.00, and high end $12.00. Want to set these kinds of price points? Take a look at the following list and see what you can layer on the middle and high end:
• associated products and services that could be bundled (bagging, tagging, relabeling, water-based green ink)
• delivery (packaging, tracking, expediting, special handling)
• order turnaround (in hours or days, faster is better)
• job-scheduling flexibility
• production availability
• customer and technical support
• satisfaction guarantees (expectations clearly defined in advance, risk reversal)
• your resources and contacts for out-sourced services and products
• convenience of your location
• any product life or performance warrantee (clearly defined)
• your established standard operating procedures (SOPs)
• billing or credit terms (this is huge today with the tight credit market)
• definition of quality (everyone claims
to have it, define what it means)
• perceived value and status element
• power of association (with any other events, people, and companies—especially valuable if they are big names)
• trading on your reputation (who you are in the area or industry)
• reputation of the clients you have (you want to be the only place to go)
• ownership experience (think Mercedes vs. college beater car)
• total business experience (environment, people, professionalism, involve- ment, cooperation, friction free, and so forth)
• client education (keeping them in the loop and informed on trends and styles as to what’s new and better)
So here we have 20 potential value points that you can monetize. You will come up with even more when you sit down and define your experience. My personal list is approaching 30 items now. Some of these do not cost you anything, but they have clear value to the client. The more you can make the business transaction an experience, the more you can charge. Look at what Disney did for theme parks and Cirque du Soleil did for the circus. You can do the same if you just give it some thought.
You can clearly see it’s easy to define and include an extensive list of items that separate you from the bottom feeders. If you offer the stripped down, super-cheap version, but then include the two higher offerings, you’ll find most of your customers will settle into the middle offering and 20% or so will go for the high end.
The effect on your profit will be enormous. If you were to break even on the low end, selecting the mid level would deliver a profit of at least 30% on sales, and the profit on the high end could be as much as 67% of sales. As more and more of your customers migrate to the mid and upper levels, your ability to offer a superior quality total experience and exceptional service also rises. Before you know it, you’ll have the reputation of being exceptional, and new customers will seek you out not for price, but for all the other defined value you bring.
Mark A. Coudray is president of Coudray Graphic Technologies, San Luis Obispo, CA. He has served as a director of the Specialty Graphic Imaging Assocation Int'l and as chairman of the Academy of Screen Printing Technology. Coudray has authored more than 250 papers and articles, and he received the SGIA's Swormstedt Award in 1992 and 1994.
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