In defense of price

I recently read an article in the Wall Street Journal about Home Depot and how they planned to close all seven of their remaining big box stores in China after years and years of losses.  The article went on to quote that Mattel, Inc. was shutting down its Barbie flagship store and Best Buy closed its nine China outlets.  Why?

All three companies failed to grasp the fact that the Chinese culture wasn't the same as the American culture when it came to accepting a "do-it-yourself" home improvement store, dolls for its children, and high-tech electronics.  The Chinese culture, respectively, wants "do-it-for-me" home improvement, books for its children and washing machines for its homes.  The Chinese population is more apartment based, so Home Depot wasn't selling a lot of lumber; Chinese parents want their kids reading books and learning, rather than playing with toys like dolls; and household appliances by and large are more important to them than MP3 players.  What one person values isn't necessarily what the other person values...

Where can we learn from this as service providers?  We have to ACTIVELY listen to our customers/clients and find out what they want and what they value.  Do you remember one of my first blog posts about value, and how the client determines the value?  Value is determined at the client-level, not ours.  So, it would stand to reason that we must listen to the client to determine WHAT THEY VALUE.  I read a quote in Inc. Magazine the other day which stated "People don't want to buy a quarter-inch drill.  They want a quarter-inch hole." This leads to the real point of my blog....

When we assess prices for our engagements, we do a strong analysis of the value proposition.  We want to offer more value to you, our clients, but this increase in value will cost more money as you receive it.  How do we do this?

• We are constantly learning new technologies, new ways of doing things, which will make your lives easier and in the end make us more effective for you. Can we speed up your cash flow by introducing you to Bill.com?  You bet, because we have tried it and it works when implemented correctly. More efficiency is a bonus, but not our end-game.
• We stay in touch with you...we don't want you to be "data rich and meaning poor."  Therefore, we try very hard to make sure you know what's going on and why.  We inform you of changes to the tax law, as we should, but we also introduce new ideas to those of you that engage us to do so...ideas about running your business better, assessing your profitability, examining your cash flow, and looking at your business alongside others in our area of the country for bench-marking.  That's valuable stuff!  Telling a business owner what the business can and cannot deduct is nice (data), but telling you how to structure your business to get more benefit from that deduction, or increase your revenue based on our experiences and our insight is where the real value is delivered (meaning).
• We push ourselves to refine our systems internally so that working with us is the easiest thing you do all day. It is our goal to produce a predictable result for you.  When we fail, we assess what happened and make changes....constantly.
• We poll you and ask you what you want.  It's amazing how similar the answers are. Then we make a way to provide it.

In the end, we strive to provide much more value in exchange for any price increase, and when we fail to do so, you hold our feet to the fire.  One of my best and worst days in the past year was the day I met with a long-time client and friend, and was informed that we hadn't performed as well in her eyes over the prior six months as we had done in the prior six years of her working with us.  She felt like a number and not a valued client.  I felt like dirt, but we learned from it.  I even sent her a thank-you note for having the conversation with me.  She could have just left, citing irreconcilable differences.  But she cared enough about our relationship to let me know that something was wrong and give me the chance to correct it.  Now, we are set to meet in late October to determine how we can deliver more value to her.

We LOVE providing value to you guys.  It's what gets us out of bed in the morning.  We have learned so much this past year, and we look forward to another year of working with you.  But, don't ever let the occasion pass by to let us know if we're not living up to what you expected.  There could have been a misunderstanding regarding what we were engaged to do (our fault for not well-defining the scope) or we could have just fallen down on the job (human error, but also our fault).  In the end, we need to know.  Thank you for being loyal clients and for letting us work alongside you.  Here's to a great 2013!