True worth: why added value is more important than price

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Building a loyal customer base can be done without having to drive down prices; strong brand identity, excellent service and offering a memorable, personalised experience are just as likely to encourage repeat visits.

Unless you’re Tesco or Amazon, it’s extremely difficult to become successful by being the cheapest. It’s also a myth that to grow a company you need to focus on price. By thinking from a value-added perspective, rather than a price one, you are far more likely to create a thriving, profitable company in the long term.

There are four key ways to add value to your offering. First is to provide a bespoke service; second is to concentrate on experiences, not products; third is to focus on your people; and fourth is to maximise your brand, with an eye to generating loyalty. Persuading customers to come back to you is essential – the more loyalty you create, arguably the less important your price.

Tailor the offering

Consider the way travel agents were affected when the internet arrived: customers realised they could book holidays themselves, and much of the old role of travel agents became redundant. The answer was not to compete on price; that would have led to business failure. Instead, the solution was to offer added value, tailoring holidays to suit different types of traveller, emphasising the travel protection on offer, or making life simpler, quicker and easier for customers.

Something similar is happening with accountants, as customers realise they can prepare tax returns themselves and use software to do their accounts. “Number-crunching can now be done by computers. The accountant’s role therefore has to change,” says Leighton Reed, director of Broomfield & Alexander. “We need to add value to show customers that they still need an accountant.” The role of the accountant increasingly encompasses those of tax consultant, pensions adviser and business strategist.

Power of the brand

Why is a plain white T-shirt worth far less than one with a small logo of a crocodile above the breast pocket? Branding is the simplest way to add value to your product, and yet paradoxically it’s also the hardest – because successful branding has much to do with alchemy. Flying Tiger Copenhagen (Tiger), for example, cuts through many similar offerings on the high street. “We add value through the customer experience in store, which is an amalgamation of the customer service, the music, the ambience, the store layout and the range,” says Kate Methuen-Ley, Flying Tiger’s director, Wales and Bristol. “That range is a combination of products that you need, you want and some you never even knew existed.”

“It’s not the price on entry that is the decider in whether or not customers come back; it’s the experience – from the moment they walk in” Damian Evans, finance director, Go Air

Unusually, the company doesn’t trade online, so giving the customer a reason to visit above and beyond price is imperative. This is achieved by design-led campaigns that change each month, backed up by social media to keep the brand in people’s minds.

Sell experiences, not products

“The value add is in how the customer feels when they go home,” says Damian Evans, finance director of Go Air, a trampolining park currently expanding across the UK. “It’s not the price on entry that is the decider in whether or not customers come back; it’s the experience – from the moment they walk in.”

Evans’s approach extends to every detail. “Can they get on the trampolines quickly enough? Were the staff friendly? Is there enough to do? What about the person who’s come with them, or the parent supervising children – what’s the cafe like? Is it good-quality food? Was the service fast enough?”

Methuen-Ley adds: “In some of our stores, children come in as part of their birthday celebration, [for] a birthday shopping treat – their parents know they will get a great-value experience that doesn’t break the bank.”

Employees make the difference

Think of your favourite restaurant, department store or hotel. What makes you go there, as opposed to its competitors? The quality of the food, the look of the clothes and the ambience of the hotel might be two thirds of the choice; but what makes the difference is how the staff look after you. “As a small team of motivated people, we work very closely with one another,” says Rob Hall, founder of local food and drink app Wriggle. “Because of this, it’s hard to overemphasise the importance of a great team fit.”

Make life easier for the customer

Relationship-building strategist Ian Kingwill found it could cost between four and 10 times as much to acquire a new customer as it does to retain an existing one. If you take the inconvenience, hassle or time out of a customer’s dealings, it can create loyalty that will far outweigh the pressure to compete on price. Emma Waddingham, director of legal-services firm Emma Waddingham Consulting, says there are two ways to do this, especially for service providers. “First, create collaborations or joint ventures so you can offer an all-in package,” she says. “If you’re able to line up the supply chain so you can offer all parts of the service, that creates value that can be wrapped in the fee later on. Anything that puts the customer’s mind at ease and takes pressure off is worth pursuing.”

Secondly, talk to your customers and find out what they want. “The most important thing for your first customer might be to have messages responded to within an hour. But the second might be really impressed by having one point of contact, rather than speaking to several people as part of the process. If you find out what customers care about, it influences your service and that turns passive customers into advocates of your brand.”

Key take-outs

  • Put the customer at the centre: “Understand what they want and get feedback,” says Damian Evans. “We could have what we think is a great product, but if the customer doesn’t get a good experience – the value-added element – they won’t come back.”
  • Your staff are your greatest asset: Ensure they commit to the values of the brand, offer added value to customers with excellent service, and understand the needs and wants of customers.
  • Be different from the competition: “If you don’t have a distinct personality, you’re the same as everyone else,” says Kate Methuen-Ley. “For us, [our uniqueness is] making the shop a fun environment both to shop and work in. We coach our teams to think in a Tiger way. Have a personal touch; have empathy with why you’re there.”
  • Be confident: “If you are price-led, you are essentially stuck with that approach,” says Emma Waddingham. “A value-add approach gives you flexibility and enables you to be dynamic.”
Evans Entwistle partner Damian Evans was interviewed for this article in his capacity as Finance Director at Go Air, a UK leisure group. The article originally appeared in Royal Bank of Scotland’s Content Live by Mark Blayney Stuart, copyright RBS. 

 

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