What makes your business worth the price?
As an entrepreneur, ask yourself, “What makes my product or service worth what I’m asking my customers to pay?”
I read recently about Howard Schultz, the CEO and Chairman of Starbucks, stepping down from his role to develop what he’s calling “the $12 cup of coffee,” or a premium coffee offering.
Really? A $12 cup of coffee?! What makes a $12 cup of coffee better than a $2 cup of coffee?
People had the same question about Starbucks’ $5 lattes until Starbucks made premium coffee drinks easily accessible to the public. Now, spending $5 or more on a coffee drink is normal for 75% of the U.S. ready to drink coffee market. I won’t be surprised if Americans become accustomed to buying a $12 cup of coffee before too long.
How is Starbucks able to sell a $12 cup of coffee? One word – premium. Mr. Schultz has proven he can be trusted with providing the market with a premium product and experience.
You can compete on price or quality, but it’s hard to compete on both. So how do you win and wow customers if you’re the more expensive option in a market? Offer a premium service that adds more value to your customers than they ever expected.
Offering a premium product comes at a price to you – overhead costs, marketing, and more. It may come at a cost to your customers—they have to choose whether they want to keep buying from you and paying more, go to someone else who’s cheaper while risking a lesser quality product or service. Is it worth it to you and your customers?
Here are three things to consider when offering a premium product or service:
1. Don’t lose sight of why you’re doing this work.
Don’t lose sight of why you are doing your work. Starbucks’ mission isn’t to sell billions of dollars worth of coffee. It is, “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
It’s tempting to panic in the face of competition, especially if you were one of the first to market and others are entering the market at a lower price. It’s equally as tempting to change what you’re doing to appeal to or accommodate a lower price, but I challenge you not to do that.
Do what you do, and do it with passion. Be transparent about your company’s mission and weave it into everything you do, internally and externally. Invite your customers to come alongside you as you make the world a better place through your business, and provide a wow-making service to your customers that adds immense value to their lives in the meantime. Your customers will notice. And that’s part of what will keep them coming back to you.
2. Find your customer’s pain point and stick to it.
When you can sit down with a customer and say, “It appears that this is giving you trouble,” or “This is the pressure point where it looks like you might need help,” you become a problem solver for them, and you become invaluable.
READ MORE: Why is Japanese customer service so amazing?
My team was recently working with a software company that we’ve been using for several years. We needed their help with an integration and after about ten emails back and forth, they still only wanted to correspond by email instead of having a short phone call where the problem could have been solved in minutes. This showed us as customers that the company was only interested in providing the bare minimum service needed to get us to the next email instead of actually helping us solve our problem. They failed to address our pain point as customers.
Are you putting people or processes first? Cheap companies put processes before people. Premium companies put people before processes. To be a premium company, find your customer’s pain point and help them solve it as painlessly as possible.
3. Customer loyalty may run deeper than you think.
A recent survey found Apple’s iPhone to have twice the customer loyalty rate as the next highest brand. It’s the same reason Starbucks—at the forefront of the rise in popularity of the coffeehouse—did so well: they offer a product to people who are willing to pay a little extra for something that brings a positive experience to their life.
In the book The Human Brand, authors Malone and Fiske argue that warmth and competence are the characteristics that create a winning brand in the end. Apple and Starbucks could both be described as warm and competent as they’re both known for their excellent customer service and premium products. So even though both Apple and Starbucks are the more expensive option in their markets of smartphones and coffee, they beat out the competition by providing an exceptional experience for their customers.
The reality of sales is that there will always be competition. But if you can keep the foundation of why you do what you do in focus and strategize thoughtfully, the sting of cutthroat competition is lessened. When you face a competitor in your field, don’t quit or chase them. Find your premium offering and wow your customers in an unexpected way.