One of the very few blanket statements we can confidently make about customers of almost any company is that they’re all looking to receive value from their purchase or investment. For anyone starting up a new graduate business, failing to deliver a sense of value to customers early on means you’re very unlikely to have a sustainable model on your hands, regardless of what service or product it is you’re selling.
Despite this being a pretty unequivocal (not to mention obvious) statement, the concept of value itself can sometimes seem a tricky thing to pin down from the business side. In large part, this is because it’s a highly subjective quality in many regards, and we know that perception of value will differ from customer to customer.
Moreover, it can and does change dramatically over time, influenced by countless market forces including fashion, branding, and availability. As a throwaway example, just look at the way lobster has gradually shifted from being a 17th-century prison canteen staple to a universal signifier of expensive high-end dining, and dragged perceptions of value for our lobster buck right along with it.
When thinking about starting a graduate business, then, how do you go about baking such a nebulous concept as ‘value’ into the heart of your new model?
Well, first and foremost, you’ll need to be very clear on the core differences between price, cost, and value. Again, this may sound straightforward enough, but could you neatly express it in a couple of sentences? If not, it’s possible that you’re somewhat muddled in your thinking about each of these key factors in the overall value equation – and your business approach may suffer as a result.
In simple terms, price is a fixed number, and is perceived similarly from all angles. Cost, though closely related to price, is more about impact, and can be perceived differently by buyers and sellers. Value requires a wider context to be defined; it’s only partly dependent on the other two, and can only truly be assessed by the end user. Or, to boil it down to its most fundamental form, value is the only one of the three that isn’t expressible as a number.
Remember, too, that the relationship between price, cost, and value doesn’t remain constant as the figures change. Indeed, their movements relative to one another aren’t even unidirectional; beyond a certain point, lowering prices can negatively affect the overall perception of value, and vice versa. In recent years, Apple products have become a commonly cited example of this exact phenomenon in action – the iPhone really didn’t push existing smartphone technology forward when it launched, but it’s marketing, build quality and high price point combined to create a culture of perceived value that, a decade later, loyal customers worldwide are still in thrall to.
Perceived value is really the crux of it all, as that’s essentially what defines the amount customers are willing to pay. Because perceived value is so closely linked to credibility, generating it can seem tricky for new graduate businesses, as they don’t initially have much of a foundation to build it on. However, there are numerous ways to help to create it.
Free trials, for example, are an excellent way for new companies to show that they stand firmly behind their product, and customers will implicitly pick up on this. (It also effectively removes the initial confidence barrier that prevents many potential new customers from giving credit card details to a company they’ve never dealt with before.) Openly publishing customer reviews, testimonials and feedback is another smart way to display and impart similar feelings of confidence. You might also consider trying to partner in relevant areas with a brand that has already established a credible reputation among a similar target client base.
While all of the above can be effective ways for new businesses to generate a sense of perceived value, they’ll quickly prove useless if not followed up with practices that consolidate it. Consistent delivery of a quality product or service is, of course, the first step, but it’s also wise to consider the importance of time in the value equation. It can’t be overstated how vital it is for customers to feel that a new company makes time for them – after all, time is arguably the one commodity we take even more personally than money.
Excellent customer service is one obvious way to deliver here, but remember that the time customers don’t spend with you is just as crucial: ensuring your product is convenient can, therefore, pay dividend, but be aware of the relationship between availability and perceived value. It’s widely held that having to work harder to get something makes it feel more valuable, but – particularly in this age of convenience-driven shopping around online – reducing accessibility or availability is seen a very high-risk strategy for new businesses.
Exclusivity for returning customers can be an effective way to build a loyal community around a shared sense of perceived value, but new clients will seldom cherish a product for its scarcity or complexity alone. That’s why we all see ‘limited time offer’ or ‘while stocks last’ used far more often than ‘only [x number] available’.
Because value is ultimately about use, the relationship between how a customer uses a product or service and how they pay for it can also have an impact on the perception of value. In an article on price-setting practices, the Harvard Business Review noted that gym membership fees were typically more likely to be renewed after a year if they’d been paid monthly, rather than up front.
In this specific example, that’s because those smaller, more regular payments provided users with a regular reminder that the service was costing them. They, therefore, felt more compelled to keep using it (and of course saw better results) than people who’d taken a bigger financial hit as a one-off – the sting of the up-front payment faded over time, and the motivation to keep using the service faded with it. For a new business venture, it may be worth considering this phenomenon from both angles, and deciding which model might be most helpful in generating a sense of perceived value around the type product or service you’re offering.
Above all, be mindful that first impressions really do count, and that while some aspects of how customers perceive value aren’t necessarily under the control of the company, the vast majority are. By paying close attention to those factors that most commonly impact on the perception of value, a new graduate business or startup can earn itself an incredibly valuable early lead on an ever-widening field of competition.
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