Commodity vs Value Based Pricing for Your Services

It’s an interesting conundrum.

We are told that we must provide amazing customer service if we want to get and hold on to customers, but it’s not always true.

Don’t believe me? Think about how many hours you spend waiting for customer service for your Internet or cell phone company.  There is always a recording playing telling you how important your call is and that they value your business. I bet you spend hundreds of dollars every month with them.  Was it their customer service that won your business? Is their customer service what keeps it?  

Malls are big business.

Where I live there are 2 large malls within a five-minute drive of each other.

The Short Hills Mall and The Livingston Mall.

They are plenty of similarities between them. They have plenty of stores in common. You can buy clothing, products, books and all sorts of things at either mall.

The Livingston mall is a fine mall.  The Short Hills Mall, however, is a “destination mall.”  People travel from all over the country to New Jersey to go there. In addition to what I consider to be “normal” stores, there is every high-end store you can imagine.

I was at the Short Hills mall recently. I went to The Loft for a pair of jeans. They didn’t have my size in stock.  They called their Livingston store to see if it was available. They had a pair; I just needed to go pick them up

The next day I went to the Livingston Mall to pick up my jeans.

I went into the dressing room to make sure they fit. It wasn’t a bad dressing room, but it wasn’t the same as the Short Hills mall. The doors don’t align as well and there were clothes left hanging on the hooks. The store had a picked over feel to it. The sales people were fine but not overly attentive.

The merchandise and prices were the same and both stores were equally convenient to my home. I was left to wonder, who did I want to interact with? Which environment did I prefer? And most importantly, where would I spend my money?

Your cable, phone, Internet, insurance, and power companies can get away with lousy customer service because they look at what they are selling as a commodity.

They sell based on price. They know you need their service and, while they may advertise differently, don’t really distinguish their product based on value.

If you don’t want to sell based on price you must distinguish yourself from other similar providers by providing something more, including exceptional customer service. This is also what holds the key to being able to charge higher prices.

An architect I worked with told me that the blueprints he provides for his clients are simply a commodity, blueprints are expected. The reason clients come back to him and refer business to him is his exceptional service, personalized attention, experience, knowledge and creativity.

The Short Hills Mall does what my client the architect does. They take the sale of a commodity (a pair of jeans or blueprints) and differentiate the way they are delivered to increase their value.

Even though I know I can get many of the same products just a few miles away and maybe even save a few dollars, I go to the Short Hills Mall for the service I get. For the way the sales people treat me. For the clean dressing rooms and immaculate stores.

You have a choice as a service provider.

You can treat your products and services as a commodity. Price things competitively and undercut other providers and then you don’t have to worry about providing exceptional customer service.

Or you can sell your product based on value. Treat your clients the way you enjoy being treated so that they want to come back to you and not feel like they are forced to.

As is clearly evidenced in the marketplace today you can make money either way, the question for you is, where do you want to be?
What do you think? Share your thoughts in the comments section below.