Recent research found that 60% of retailers view higher margins as a top priority. This may not be surprising for retailers, or perhaps any business, given how tight margins are in 2018, and the direct relationship between margins and profitability. The question remains, however, how do businesses increase their margins? One option is to cut costs and another is to increase prices. This is the last of five thoughts addressing the latter.
Seth Godin once said – ‘nobody recommends a mediocre restaurant’.
You might eat in a mediocre restaurant because it is convenient or cheap, but you will not recommend it, and you will be unlikely to rush back.
We all buy mediocre products from time to time, but we are attracted to better products and better service. A recent study in the United States found that 66% of consumers are not only attracted to excellent service, but they are prepared to pay more for it.
Research suggests that this is not just the case for restaurants, but it is so for most businesses. Further, it is as true for goods as it is for services, and as true of B2C as it is for B2B. Buyers want excellent service, rarely receive it, but will pay for it when it is offered.
Time and again, research has found that buyers are prepared to pay a premium for excellence. They may not pay for ‘better’ or even ‘best’ but they will pay for excellence.
The message is clear. If you want to charge a premium price – offer excellent service!
By the way, excellence is defined by the customer, not the business owner. The consumer defines excellence and what constitutes excellent service, so it is important to understand your target market and how they define excellence.
As it happens, I have personally addressed this issue in focus group research. The findings can be quite illuminating. The components of excellence are not always what business owners and marketing managers believe them to be.
It is important to ask the consumer as, ultimately, it is the consumer who defines excellence and it is the consumer who decides what premium they are prepared to pay for that excellence.
In 2018 – use service to attract a premium price.
Every year – put the facts ahead of intuition and guesswork.
Sources of core statistics – Attitude Advisory, Wiser, MYOB, Entrepreneur, Huffpost, Help Scout, INC, Marketing Week, Insight Squared, CXL, WM, Psychology Today, Linked IN, MBA