Wednesday, July 22, 2009

Creating Value

Consumer mentality has changed. People are hanging onto their wallets, saving more than ever. The savings rate in the U.S. has climbed from less than zero in 2006 to nearly seven percent in May. So the good news is that people have more money. The bad news is that it's tougher to get them to part with it.

The trick is to present value. According to Jim Thompson, Wal-Mart Canada's senior vice president of operations and merchandise, "People have money -- it's that they are looking for value. We are hearing words like customers are almost feeling guilty... frugality is the new vogue. We want to make sure that they can justify buying that item."

Wal-Mart started its summer clearance early and saw sales for the store's discounted items rise 11%. It's not just the low end products and services. In Canada, when Wal-Mart's inflatable "Bubble Spa" was discounted from $649 to $499 the company nearly sold out.

A Bubble Spa is not exactly a necessity. It shows that people will spend money, if they believe the value is there. As a small business marketer, your challenge is to create value.

Hugh Joyce at James River Air Conditioning in Richmond, VA cut the company's diagnostic to $29 in the off season to generate more calls from his customer base. The discount resulted in more than 350 calls. In the fall, James River will package their diagnostic procedure as "an energy-efficiency check on home cooling and heating systems," offering it for the same $29 price.

At Woodfin (Mechanicsville, VA), Rob Bailey eliminated overtime for Saturday service. "Saturday is just another workday. Our prices are the same on Saturday as they are on the other days of the week," said Bailey.

You don't have to limit yourself to price cuts. You can add to your offering by increasing your warranty or guarantee or by bundling other products and services.

For example, plumbers can give away a water alarm with every service call. HVAC contractors can give away outlet insulators or a package of replacement filters. Pool contractors can offer an inflatable pool toy. Electricians can throw in a dimmer switch.

For service, keep the offer low cost and easy to install. For equipment replacements and project work, consider upping the value accordingly.

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