“That which costs little is less valued.” Miguel de Cervantes
In today’s world of hyper-connectedness and hyper-competition, it is really easy to yield to pressure and lower the prices for your products or services so that you can win the “super strategic” project or order. The problem with going down this road is that you now have set a new price expectation or ceiling on your prices. In effect, you have told the marketplace that your services or products are really not worth what you’ve been asking in the past.
A great example of this would be MP3 players versus iPhones or iPods. The first MP3 players sold at a premium because they were a new product with a new and growing market. But it wasn’t long before other electronics manufacturers saw the opportunity, created competing products and the price wars began. MP3 players had become a commodity.
However, Apple saw an opportunity to introduce a competing product into this space and, as usual, they did it in a way that won the hearts and minds of the masses. Counter intuitively, these masses were also willing to pay a premium price for this new Apple product.
How did Apple manage to pull this off?
They started with WHY. Their marketing and branding had nothing to do with technical specifications like size, weight, color, or gigabytes. These are all WHAT attributes and WHAT attributes drive commodity pricing behaviors. Apple differentiated their iPod by telling us WHY we needed it. Their simple message was that you need it because it puts “1000 songs in your pocket.”
Simon Sinek in his book Start with Why: How Great Leaders Inspire Everyone to Take Action is very clear on how you avoid becoming a commodity. You must always market WHY the world needs your company, product or service. You never market WHAT your business sells. WHAT is a commodity and WHY is a differentiator. WHAT tries to convince based on facts and specifications but WHY connects with the heart.
Here are just a few reasons to create a clear reason WHY for your product or service. A clear reason WHY;
- Connects with the hearts of people instead of logically trying to convince them
- Fuels the desire in the market for your product without getting specific about product details
- Drives behavior in your business to be in alignment with the WHY (a compelling purpose) which makes your employees more engaged and productive
- Does not limit your business to only producing the WHAT
- Allows you to price your product or service in alignment with the value created by the WHY. As long as you are delivering this value, price erosion is minimized
- Allows the people who align with the WHY a way to “tell the outside world who they are and what they believe.” (Simon Sinek)
Not many people have ever heard of MPMAN (the first ever MP3 player) or Diamond Rio or Sensory Science (other early MP3 competitors) but everyone knows about Apple and the iPod. To sell a product or service that is not commoditized and will have an enduring legacy you must tell the marketplace WHY we need it.
What is the compelling WHY for your business?
“All goods and services are differentiable.” Theodore Levitt
Be sure to sign up at www.thinkingbusinessblog.com for weekly blog updates delivered to your inbox