The Perception of Value - A Story
There was once an estate agent who sold a house for a man in five days.
No sooner had the photographs been taken and the particulars printed, a couple with one child walked into the agency, made an offer for the full asking price and the deal was done.
The seller wasn’t happy. Why should he pay 1.5% of the value of his home - £399,000 - £5,985.00, when the estate agent had spent less than a full week, and far less in actual hours to sell his home.
The man was so incensed he took the estate agent to court. The judge was plain speaking and asked the man if the agent had done what was required of the contract, “Did they do what you had engaged them to do, sell your home?” “Yes”, replied the man.
The judge continued “and was anything else they did for you unsatisfactory in any way?”
“No”, replied the man.
“Therefore, you are to pay the agency their fee as they have done what you contracted them to do. The fact they did it quickly is neither here nor there, and for many people selling their house quickly, one might argue would warrant a higher fee, therefore you are to pay the fee, I thank you.”
The gavel descended and the case was closed.
A staggering 80% of us here in the UK work in services. According to the census analysis carried out by the ONS – Office of National Statistics, the percentage of workers in the service sector rose from 33% in 1841 to 80% in 2011.
Chances are that you too are delivering a service, or are part of a business that doesn’t make or produce something in the manufactured sense.
If you charge for your time you will always have to justify why you are worth £X per hour, week, month or year. What you need to do is charge for your results and the value that your service brings to your customer. Making this clear is your challenge, both in your marketing and sales conversations.
As Brexit consumer spending is squeezed you need to show you are worth what you charge.
Here are some steps ensure you make value clear.
1. Define your buyer’s objective in advance. In the case of our story, if the estate agent had handled expectations up front and let him know that the house might sell in days or in months he may not have been taken to court.
2. Give examples and case studies whenever possible. If the agent had said that the data available to him would suggest that a home of the man’s type would typically sell in 9-14 weeks, perhaps the man may have been delighted at the increased speed in sale.
3. Run a workshop. Get your teams to understand what makes your service valuable and plan and prepare for conversations where your price will come under far closer scrutiny. “We’re worth every penny because…”
4. Everyone has a perception of value and it may be different to yours. You may have a television with 4k and surround sound that cost you a pretty penny! To you it is great value and has enhanced your televisual and cinematic experiences to an all-time high. To someone else it may be expensive and outrageously excessive. And yet, they may buy shoes for many hundreds of pounds when you haven’t bought a pair for over £45, ever!
5. Handle perceptions of value in advance. Understand as much as possible how to measure the service you will deliver against their expectations of it. Make the value of the results they will get even clearer and get them to work out the value of the return on investment.
The man who sold his house in five days completed the purchase on his home six weeks later. He took up the job offer in New York three months earlier than anticipated.
As he moved in to his rented apartment on July 1st rather than what he had expected - October, the estate agent handed him the keys saying, “I bet you’re over the moon to have your first summer in the big apple rather than arrive in Autumn as you thought it would be. You can’t put a price on that heh?!”