Revenue management: Selling value over price

Customers want the best price they can get in any economy, but that statement holds particularly true in a downturn. Looking at many industries today, one may be left to believe that offering a low price is required to be successful. That works well if you can stand on the fact that you are the lowest-cost provider and that you are willing to go to the lengths necessary to remain in that position. Selling on cost is an uncomplicated form of marketing. It doesn’t require much thought or effort and it’s quick to market, but it’s typically not sustainable, nor do most of us strive to be the low-cost leader. Anyone can lower their price. We’ve probably all done it in one form or another in order to win business or gain market share, but it simply doesn’t work well as a long-term strategy.

Time and time again we have been shown the dangers and effects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you’ve been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.

Unfenced discounts may also give your customer the impression that your product is inferior. Long-term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?

Basing your success on price alone ignores the fact that people don’t make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.

Learning how to establish and communicate your value proposition—your differentiator—is key to earning and keeping your customers. If your customers can’t perceive the value that you provide, then it probably doesn’t exist.

If you are competing on price alone, you likely will never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that’s great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.

We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front end, price becomes less of an issue on the back end.

Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you’re unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn’t any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, but using a value proposition such as service or the beds in your rooms is much more difficult to achieve.

Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can’t find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.

Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, Web site, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on sites such as TripAdvisor, Twitter and Facebook. These social media sites serve as excellent platforms on which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.

Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision? What does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.

When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.