Value and Price Trade-offs (Lessons from Session)

Observations in real life can be useful if you take the time to look.

A Celtic music session I go to here in Calgary recently saw the pub we were holding it in close its doors permanently. Some new options have come up all the way from the far southeast quadrant to a more central southern location (or two).

People from the session live all over Calgary. As we have been exploring new locations, there has been considerable debate around both value (the quality and features of the session) and price (essentially location since there is no admission fee).

There is a classic trade-off for just about everyone… how far will you drive to attend.

What is interesting is that no matter that the value is; different people are willing pay a different price to attend.

Generally by location:

  • The inner city people are used to things of this nature being somewhat central so they want it to be 10-15 minutes away. Anything more than that is considered an inconvenience and too big a price to pay.

  • The people further south are used to driving a bit further and will consider anything central to deep south to be reasonable.

  • The people from the far northwest will only go as far as south central.

CalgaryMap

Some people are willing to drive further no matter where they live. This is the group that considers "if it's worth going to, it's worth it to pay a bigger price". There is a limit but it's much larger.

It doesn't seem to matter what price someone else has to pay… the low price tolerant people would prefer not to pay even the "average" price, even if that would be considered more fair (this plays to the "what's in it for me" theories on sales). There is no right or wrong in this… it's just is the way it is.

And there is a lot of debate about session quality and features… maximizing value. Not everyone has the same goals:

  • Some want tunes,
  • Some want singing,
  • Some want dancing, and
  • Some want a combination.

Quality and features change the value proposition for some, but not for everyone (as long as the basics are covered). People will defend their choices vigorously and minds are hard to change, especially if they are reinforced by others of the same opinion.

I think every business should look at how trade-offs occur for the value and price balance across your potential customer base and across as many dynamics as possible. If you are looking for micro-segments this is how you will find the most profitable ones.

Then consider how you get people in the same segment to reinforce each other's choices (for your product).

It might be good to consider a premium and standard version so you can cash in on both groups. If your business model can support it, maybe even a fully customized solution would maximize sales.

Ultimately you need to know your customer.

By | 2017-04-03T12:33:25+00:00 March 5th, 2009|Categories: Doug's Blog, Marketing, Sales|

About the Author:

Doug Wagner is an entrepreneur, President and Co-founder of Sunwapta Solutions. Sunwapta's mission is to help businesses transform from surviving to thriving, sustainable growth. From strategy to implementation, this means marketing, sales, managing your brand and delivering consistent value. Get more clients and keep them.