Price is what you pay. Value is what you get.
If value, to you, exceeds the price you pay, you got a good deal.
For the seller in that same transaction, if value (the price you, the buyer, paid) exceeds the seller’s price (what it cost the seller to provide the item or service), the seller got a good deal, too.
Both the buyer and the seller are better off. Magic!
So what’s the practical application of this for you?
In order to capture more business, you either have to reduce your price (not my favorite) or increase the value you provide (my favorite).
Unless you’re selling a true, physical commodity, staplers or stethoscopes, for example, in which mass production leads to lower per-unit cost, competing on the basis of price is a fool’s game. Your competitor will simply lower its price by a few cents, a few dollars or a few thousand dollars, depending on the scale, and the downward spiral begins.
Instead, focus on how to increase the value you provide. While price is easy to see (Botox treatment, this week only, $199!) value is far more slippery, amorphous, individual, and particular. Heck, you’ve probably seen my picture on the videos on my website but there’s no way I’m going to buy Botox even if it were $99. A Ferrari, though, that’s another issue. “But why, when a Toyota would do?,” some might ask. Well, that’s what makes price and value interesting.
Accordingly, price and value can be used to attract and they can be used to repel. Repel? Absolutely! The plastic surgeon whose fee for some procedure is $4X is not competing with the plastic surgeon down the block whose price is $X. The value message sent by the low price attracts some, even many, but it repels those who evaluate value differently. Our first plastic surgeon doesn’t want those folks coming in the door. The second one welcomes them in.
If you’re running your own practice or business, or if you’re the leader of a group, you can use these principles multiple ways.
Although many believe that healthcare pricing, at least on the payor side, is relatively fixed, it’s not. Some providers and some facilities have created value, or the perception of value which is really the same thing (all value is perceptual), which leads to increased levels of reimbursement.
In the hospital-based world, some groups have lost contracts to groups which competed on the basis of lower or no facility fees, while other groups have maintained, or increased, the value proposition such that the hospital sees far lesser value in a competitor’s “free.”
And, for all groups, the value proposition, from prestige to the so-called “soft” factors such as group culture, can trump compensation in attracting sterling recruits.
To Oscar Wilde, a cynic was someone who knew the price of everything but the value of nothing. So don’t be a cynic: understand both price and value and how they are inextricably linked.