The Perceived Value of Services
Updated: Mar 25, 2019
While on a run earlier this week I had the fortune of listening to an incredible podcast which really got me thinking about all kinds of businesses, what they stand for, and what makes companies successful.
The conversation centered on a fascinating report recently featured in the Harvard Business Review. In summary, the article looks at human psychology, consumer behavior and the factors that are involved in the decision to buy a product or service. Marketers typically look to increase profits by increasing price-points, but what impact does this have on the number of customers? Does it pay-off and result in a rosier financial picture or are the price increase gains eroded away by lost customer volume?
According to the report, it is possible to both increase your price, and maintain and even grow your customer base. As you will see in the article, the authors focus on a pyramid of needs. These are broken down into 4 categories:
1. Functional - save time, increase connections, reduce risk. A good example here would be The Container Store who provide you with ways to organize and declutter
2. Emotional - Wellness, rewards, nostalgia - Credit card points/ rewards
3. Life-changing - Motivational, belonging - Fitbit, Twitter
4. Social impact - Self-transcendence - Toms, Warby Parker, Buy 1 Give 1 programs
This is a really interesting idea which got me thinking about brands that I support and how many of my needs are met by their product or service. Apple and Starbucks were two of the most successful corporations in terms of the number of needs that they met. Southwest Airlines and Tom's also scored highly for obvious reasons.
As a marketer it also prompted me to analyze what we offer at Royal Services, and how many of our clients' needs we meet with the service that we provide. This pyramid is a great checklist that we are using internally as we continue to evolve, and look to provide the best value project management services to our clients. In a SWOT analysis that we performed, we found that 8 out of our top 10 competitors only met needs in the functional segment. One met one need in the emotional section, and ourselves and one other were able to hit a couple of the "Life-changing" elements due to our focus on problem solving, delivering exceptional service, acting as an extension of our client's team, and focusing on making our internal partner the hero of their business.
Think about stores or companies that you support, and how many of your needs they meet. If you are a business owner you could also evaluate your own business and look for ways in which you can meet more of your customers' needs. This will put you in a position where you should be able to increase revenue and profits through both price increases, and new customer acquisition and retention.
Please share your thoughts in the comments section below. We are excited to hear the brands that you evaluated and what they scored!
Be sure to read the article if you can find a spare 15 minutes in your hectic schedule. I promise you it will be worth it!