Customer Buying Principle #2: Customers don’t understand value until you give them choices

Tuesday, September 2, 2014

A few weeks ago, we talked about the first customer-buying principle. Today, we’ll focus on the second principle.

Recently, my friend Jim was building a new house. Knowing my background in the heating and cooling industry, he came to me and asked what he needed to do to this new house to make his basement comfortable.

For those of you in markets that don’t have full basements, you need to know the basements are typically cool and damp. Jim wanted his basement just as comfortable as every other room in the house. I gave him some suggestions and told him what to ask his builder. A few weeks later, Jim came back and told me that his builder had given him a price of $8,000 for a heating and cooling system, and he wanted to know if I thought this was good price. I advised him to get a second price.

Comparison _ShoppingJim talked to a second contractor and got another price of $18,000. I asked Jim which option he chose, and he told me he went with the second, more expensive price. I said, “Jim that’s a $10,000 increase in price. Why would you spend $10,000 more for a system in your house?”  He responded, “You don’t understand, I’m putting a full apartment in the lower level of my house and my mother-in-law will be moving in with us.”

Well, that puts a different perspective on why he wanted this this area of his home comfortable. The second builder also discovered that Jim also has three teenage daughters, and he hasn’t had a hot shower in four years.

This brings us to the second customer buying principal — customers don’t know the value of many things and need to have something to compare it to. They simply don’t know if the price is fair or not. In Jim’s case, he didn’t know if $8,000 was a good price. But, once he got a second price, he found out that the first price was missing many of the options that he wanted in his home. Even though the second option was $10,000 more, there was more value in that system then there was in the lower-priced system.

Think of it this way: How often do your customers purchase your products or services over the course of a lifetime? Chances are it’s only a few times. As a result, they don’t know the value. They don’t know if it’s a good price or a bad price. They always need something to compare it to. If all you offer your customer is your lowest-price option, they’re going to want something to compare to. If all you offer your customers your best, most expensive option, they’re still going to want something to compare it to. Give your customer something to compare that way they can make up their mind as to which option has more value.

Watch for my next blog post it which will talk about the customer buying principle number three

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