A premium service doesn’t always have to mean a premium price, but it is vital to understand the different value suppliers are adding when there’s a difference in the price point. We are all aware of the difference in cost between a Mercedes and a Volkswagen, but it can be trickier to discern the relative quality of suppliers selling apparently similar services.
As with most purchases, there are essentially only two key differentiators when buying a service; price and quality. In practice a ‘good buy’ means paying the lowest price for the minimum level of quality you want. It all sounds so easy doesn’t it? In order to do this, however, you need to know exactly what you want and then establish if a supplier can genuinely deliver it.
This is often where it gets difficult for a multitude of reasons, including low cost suppliers convincingly exaggerating the quality of their service, but also premium suppliers feeling the pressure to temporarily discount the cost of their service to get closer to perceived lower cost competitors, which is never a sustainable approach. This can make price points very similar for very different levels of service. The reality of course, is that low cost and premium offerings necessarily have different price points, are very different offerings and need to be accepted as such, if you genuinely want to get the best value.
From a supplier perspective, as a premium provider you obviously want to be in a competitive space and ensure price isn’t a hurdle for potential customers. However, it’s critical to really understand who your target audience is, present your value proposition clearly and to continue investing in quality to ensure reality matches your proposition. As a supplier attempting to achieve this it’s useful to consider a few things:
1) Are you really comparing yourself with your genuine competitors? Is the quality really comparable?
2) There is always a cost for quality – how are you getting it right and more importantly, keeping it right? Do you need to explore further investment?
3) Someone can always price cheaper, so know that competing on price is a race to the bottom and not good for the business or the customer
4) Not everyone wants or expects quality – if you accept that you’ll probably never do business with these potential customers or have the opportunity to explain why paying a little more for a superior experience might be a more worthwhile exercise
5) Many people are willing to pay a reasonable premium for genuine quality. These potential customers are your target market if you have a premium offering. You’re investing in delivering a premium product so it’s fair to expect a return on that investment. If you don’t, you won’t be able to continue delivering it
It really is important to remember that continuing to invest in quality will almost always mean that you will carry a cost that lower value proposition suppliers will be able to beat on price. This, in turn, means that you need to accept that some potential clients will never be your target audience. In the long term, however, competing on price is simply a race to the bottom and, as customer expectations of quality continue to constantly increase, the only sustainable approach is to differentiate on quality.
This is why a commitment to customer excellence tools such as Net Promoter Score (NPS) is imperative to a sustainable growth strategy in today’s market. It puts the customer at the heart of everything you do and equips you to tailor your customer experience to genuinely deliver a premium service, day in day out.
I’ll end by recalling some wise words I’ve referred to previously; those of social thinker John Ruskin, who said the following about the price versus value debate over 150 years ago; “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you a lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.
“The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”
A constant truth about value.
If you would be interested in learning more about how we can support you with your ground transportation solutions, then don’t hesitate to get in touch.