People Pay For Value – Their Value, Not Yours

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Why do so many products, services and brands grapple with such a very basic concept: people pay for value. But, it’s their perceived value and not the value you assign to it.

Newspapers aren’t dying. People are just buying them less and less because they’re not getting the same amount of value out of them as the used to. Same with in-home phone lines. Most people feel that they can get away with just having a mobile number. It’s like this with movies as well. Movies in the theatre now play on pay-per-view or are available on Blu-ray only a short while after their theatrical debut. Most homes now have big screens (and big sound), and so the experience of going to the theatre has been diminished by many. Nobody cares about owning a physical CD anymore, when you can get a high quality version of most music for your iPod (or whatever).

More media and more technology means more choices. In a world of more choices, the former 800-pound gorillas of their chosen industries now have to figure out how they are going to deliver real value. The kind of value that people are willing to pay for.

What have we really learned about value in the past few years?

  • People will pay for an individual song (and maybe an album), but they would like the choice.
  • People will pay for great writing – whether it’s in a magazine, newspaper, book or online. But, it has to be great (and not just your perception of great).
  • People will pay to see a movie – they just might not go to the theatre or to rent it from your physical store any more.
  • People will pay to be entertained.
  • People will pay to learn.
  • People will pay to be better connected.
  • People will pay for an exclusive experience.
  • People will pay for a premium experience.
  • People will pay for better access to customer service.
  • People will pay to avoid hassles.
  • People will pay to get things on their own time schedule (when they want it/how they want it).
  • People will pay for speed (whatever speed means in your industry).
  • People will pay for something that will give them more social clout.
  • People will pay for products that are virtual.
  • People will pay for information.
  • People will pay for more mobility.
  • People will pay for more flexibility.
  • People will pay for more comfort.

Weekend fun: re-imagine your business (as Tom Peters would say). How might your business change if you tweaked your business model and figured out ways to really increase the value of what you sell (but the value as perceived by your customers… not your ego or historical data).

What else do you think people pay a premium for?


  1. I think people (like myself) would pay a premium to feel the mojo from those who sell me their goods and services. My father is 85 and I am in a position to hang out with him early in the mornings at the local McDonald’s. He reads the paper, while I check my RSS feeds over my morning coffee.
    Every single morning this sweet young girl sees me coming and has my small McCafe with two creams waiting for me when I walk in the door. She’s got the mojo. I wish people who make tens or hundreds of thousands of dollars more than she does could learn from her. Her attitude is worth its weight in gold.

  2. Great post and Victor you make such a great point… I always will pay more for better service, will visit again, will bring more customers with me, will talk about the company all for just a small amount of service… The secret to business today is not an new product or concept the secret is taking a tired old idea and using a tired old strategy called service!

  3. I was going there with “premium experience” but you’re right… people will pay for great service too – especially from those who love to deliver it. Sounds like you found a winner. I hope McDonalds is listening.

  4. People will pay to have a positive face to face social experience with people they like (or will probably like). Some examples:
    -Conferences … especially TED. I don’t just go for the speakers, I go because I know that the people in attendance will blow my mind. Such an environment can build relationships that last forever and quite possibly change your life.
    -I don’t tend to go out to dinner just for the food. I go to be with people I enjoy … the meal is the excuse.
    -I don’t go to live music concerts by myself … I go with friends. Much more than just about the music.
    Organizations (conferences, restaurants, festivals ….) that get this are very successful because people will pay to have a great social experience.

  5. People rarely pay premium.
    Sooner or later, everything is literally free, best business values that gives “meaningful” satisfaction is an exception.
    Paying is similar with voting on a “meaning”.
    If we pay, then we vote, through our wallets.
    A statement of belief on a “meaning”.
    Sometimes we pay premium for nothing because something means so much.
    Sometimes people pay premium to suffer for future gain.
    Sometimes people pay for premium in curiosity.
    Analysts around the world are always confused on how frequent is the word “sometimes”.
    People will always pay for investment.
    Markets are like a circus, failed or not, if it’s fun then we pay.
    Good experts on art/science of buying
    (Lindstrom, Underhill or Gladwell) are not a full basis,because buying patterns are always erratic.
    So being a human instead of being a simple vending machine is much favorable.

  6. Some people will pay premium for results. If it will make you taller, shorter, thinner, bigger, smarter, rich, etc. you may be intrigued enough to buy in. This also applies to B2B related results. If a product or service will increase sales, streamline a process, raise awareness or reduce your carbon footprint; and you have a track record of successes in which ever area that I want to see results, how could I say no? The ROI seems well worth it.

  7. Like you Allen, I got to TED as well. I often tell those who want to know all about it that the speaking (which is as amazing as the TED videos look) is actually only 5% of the TED experience. As you stated, it’s about pressing the flesh, meeting in hallways, enjoying food together, etc… that makes the experience so refreshing. That was the muse behind “premium experience.”

  8. I think people can (and do) pay for not just one of those thoughts listed above, but sometimes a few.
    People pay a premium all of the time: look at the comments above regarding the TED conference. Think about a Starbucks coffee or even about the iPhone 4. Those are all premium priced products/services when compared to their competitors.
    Or did I mis-understand your comment (which is possible)?

  9. Mitch you always prove your street cred by discussing stuff I have been ranting about for a long time. Excellent post. Many industries were fixed. Its easy to be profitable when you have monopolies (newspapers) or oligarchies (music industry). Middle people often strangle the supply chain and inflate costs to everyone like a tax on a product. Back in the day only $1-2 per CD went to the artist. $12 went to a tax (packaging, shipping, stocking etc)
    My point is due to creative destruction via start ups and technology breakthroughs every industry and company has to identify what part of any service or product is the core value to the end user and find a way to deliver that value. Simple as that.
    To cover books really quickly. It is a good thing for Trees and the Environment that we one day view most print via electronic readers. But this will mean a loss of paper mills, logging jobs, trucking jobs, and printing plants and possibly even publishers. This makes a core lobby group against the movement to readers. But every group I mentioned adds zero value (except maybe publishers who discover talent, help promote etc) other than having right now the primary means of delivering what we pay for…the actual content (ie writing from an author)

  10. And as that shift occurs new businesses/jobs open up: database, programming, hardware, software, telecommunication, mobile, etc… As I stated in my book, we’re moving from shipping crates and paper to bits and bytes. OK, it might not be as dramatic as that, but it’s starting to feel that way. With each generation comes a new industrial revolution.

  11. Hi Mitch,
    I work in fundraising so I’d like to believe that people spend money if they think they’re going to make a difference in the world. Call me optimistic! I, myself, would also spend money to customize. Nothing really beats the illusion of choice- ie Harvey’s Farah Burger.
    There was an article in the Toronto Star recently about how the economic times has changed spending behavior. People are more willing to pay for an experience rather than just “stuff”. And researchers have been able to prove satisfaction lasts longer when you pay for a vacation or a family barbecue because you can reminisce about it.

  12. People enjoy telling stories. Reminiscing about a BBQ or about that time you waited 6 hours in line for an iPhone seems to be on a level playing field. I think people do feel good when they buy something and know that it’s making a difference in the world. I don’t think it supersedes people’s desire to feel important – and certain products and services provide this in a big way.

  13. Great thought provoking post Mitch. “VALUE” – A simple word but if a connection is facilitated with the buyer and a services provider a transaction will be made.
    Let’s think about our favourite restaurant.
    Do we check the prices or fully take in the entire experience we value and share with friends and family?
    We love the experience!
    Let’s keep sharing and allowing our customers to share exactly why and how they would like to be served. As service providers to our customers let’s all listen I think our customers want to share with us how they want to be serviced.
    Why do we want to complicate the decision process? Thanks Mitch.

  14. Defining your value and being able to adjust it as more disruption and competitors enter your industry is a sure way to create corporate complications. Simply following your customer’s decision process may only take you a part of the way there. In the end, being innovative will push you to focus on value (and how to add more of it).

  15. “But, it’s their perceived value and not the value you assign to it.” – Absolutely. What you think someone will find valuable may be completely different to what they actually would put a high price on.
    It’s so difficult to generalise this, as it can be specific to each person. It’s about appealing to the individual, and identifying what matters to her. It’s something we try and impress upon presenters – see this brief example of how value is used to make sales:
    Ultimately – selling value (at a premium rate) is entirely dependent on the target customer. If you’re pitching at a company, interview the prospect to discover her needs. If you’re selling to the public, conduct market research.
    And selling value in this way doesn’t have to mean changing services/products – it means marketing them in a different way. People may know what they want, or have a problem they need to be fixed – but they don’t always see the solution.

  16. To confuse things even more, check out the books, Predictably Irrational by Dan Ariely and Influence: The Psychology of Persuasion by Robert Cialdini. Both provide crazy insights into human behaviour and more. These books have many examples of how value can be created, manipulated, inflated and influenced.

  17. Hi Victor,
    Great post indeed. I’m just preparing a couple of courses for next semester and I’m integrating what you said in my documents : what is the value of what I’m doing for my customers ? What are they searching for ?
    So I’m pretty sure that this campaing will be better than ever since I design it from the customer’s point of vue,
    Thanks for this just in time suggestion,

  18. Hey Mitch. You’re overlooking an important data point. People may pay be willing to pay for superior content but in many cases, they’re not doing it.
    The most obvious argument of this is the music industry, which I know is near to both our hearts. This is an industry in serious trouble because the business model has completely broken down because of pirating. This is not an area where there is a lack of great content or rabid fans but the data show that when people have an opportunity to pay, or not pay, they go around the system. I believe that is a more realistic view of human nature than the altrusitic model you present here.
    The same thing is happening with books and other artistic endeavors.
    I think a caveat for for your thesis should be that people are willing to pay for superior and EXCLUSIVE content because if they can rip it off from their cable channel, that is eventually what will happen.
    Thanks for the thought-provoking post!

  19. I think people pirate and steal for different reasons than the ones you mentioned. There’s no way I am going to be able to debate your point in the comment section (do I smell another Podcast?), but I will say that with all of the people pirating, how is it possible then that iTunes has such a huge revenue model (not to mention Amazon, Wal-Mart, etc…) on digital content (music, movies, books)? Have you seen how much music Lady Gaga has sold? People do pay for superior content (look at some of the hottest concerts this summer). Check out the sales of the music for Glee (and this is after people “have” the content already).
    Great music (or superior content) does get purchased (check out The Atlantic or The New Yorker). Yes, music artists are being hurt by pirated music, but nonetheless those that are great (or perceived as great by their audience) are still selling and providing value. In fact, to further my point, many of these artists realized that perhaps music isn’t the value and that the value is in other things (merchandise, VIP meet & greets, live shows, etc…), so they followed the formula set above to change the game and add more value.

  20. Mitch, I think your point here is great, and is most relevant to the brands that are entrenched in market-inertia with their current offerings. Newspapers are a great example – time was, people just “defaulted” to the physical newspaper because that’s all there was. The consumer’s “value equation” for the product was equal to the inertia it generated. This is an important distinction because the external “marketing inertia” is likely equal to the brand’s INTERNAL “bureaucratic inertia.” Meaning, their entire organization is likely invested and constructed in a way to perpetuate and feed that marketing inertia. They become addicted to it and when a disruptive product or service comes along with an entirely new value equation, the bureaucratic inertia river these companies are swimming in keeps them from getting back to the land of consumer value! It’s almost easier to blow it up and start over than to recalibrate a company’s internal workings and mindsets that have been built over possibly decades.

  21. It’s hard to live innovation when you have a cornered market. It’s hard to innovate when you believe people only have you as a choice. When that changes… everything changes. The thing is that it doesn’t always come from competition – sometimes it comes from technology, etc…

  22. I think our culture has changed from passive consumers to active and this has changed our view of value. I like to consume almost everything now “ala carte.”

  23. Sad but true. It’s a problem I face working with small business clients that need premium service to get their business running properly, but they lack the premium budget.

  24. I think people will pay for Twitter followers or do other similar things to show others that they are worthy of being hired or taken seriously (falsely increasing their value to those who might hire them).
    I think its pathetic and sad.
    I’m still willing to go out on a date with my wife and pay to see a movie. And i’m willing to pay for it.
    I also think (as a business owner now) that people will be willing to pay for results. If i can deliver their goals, they will pay for it. If I only deliver empty promises then I should also expect the payments to soon be empty.

  25. Being paid on value versus time has been a long-standing debate (especially in the Marketing world). Many agencies talk about it, but there has not been a solid/proven model yet. At a higher level, I agree with you: where there is value, I will pay.

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