I was meeting a client this morning and he asked me a question. Why will people pay value “X” for my service, if they are getting the same service at value “Y”? I am sure this is a question which most of us have had at some time or the other, either as a buyer or a seller.
Let’s put things in perspective using a couple of examples.
The Pen
The primary purpose of using a pen is to write. A regular pen which you use at your workplace is under Rs.100, but a Cross or a Mont Blanc will cost you Rs.3,000 and Rs.20,000 respectively. So why do we have pens available at different price points and why do people aspire to have a Cross or a Mont Blanc? The answer is the brand value associated with it, aura of exclusivity and of course they write well.
Surge Pricing
You must have surely heard and even experienced surge pricing offered by Ola & Uber. Surge pricing is nothing but an outcome of demand vs supply. It applies to everything which is in limited supply.
Do you remember the time, when the local cabbie or auto wallah, would ask for that half meter extra, or Rs.50 extra for seemingly unfair reasons. We would always end up arguing or bargaining with them or look for other options based on the urgency of our need. Now with the cab-on-call app in our hands, has lent a shroud of respectability, to the same demands.
To sum up, people are willing to buy things at a higher price as long as they perceive a value in it. Who creates the value? It is you as a product or service provider responsible for creating that value which is deemed acceptable to your buyer or user.
So you need to choose, what do you want your product or service to be – a Mont Blanc, Uber or a regular pen, auto wallah.
Let me know your thoughts.
(Sajid is a consultant & advisor to SMEs & startups. He tweets @sajidkhetani)
This article was originally published here
