I found two brands Ruffles Potato Chips and Lays Wavy Potato Chips. To me, they’re the same chip--the quality is the same, the flavor is the same--for all intense and purposes they might as well be the exact same chip. So, because, in my mind, the product is the same and either will adequately satisfy my potato chip craving I look less at which brand I choose and focus on price--which one is cheaper?
In this case the Ruffles were about $0.40 more than the Lays, so I went with the Lays. The idea of differentiating on price alone for a product that is in demand is essentially a commodity.
Perception is often reality, to the customer
My potato chip story illustrates the consumer mindset when purchasing a product or service--the consumer perception of your product is the only perception that really matters, not yours. But, what’s interesting is with the way you communicate your brand messaging and position your brand, products and services you can help guide customers toward the perception you would like them to have. The way you communicate your brand and educate consumers about your products and services can have the effect of justifying the pricing you set, even if it’s higher than your competitor’s. This is possible when your customers no longer see your products or services as a commodity that they could get elsewhere with the same amount of satisfaction for less.
In the potato chip story, had Ruffles provided more compelling messaging that raised its value in my perception of their brand and product, I may have shelled out the extra $0.40 for their chips.
Think about your own business
Do you offer products/services that can adequately satisfy a customer’s needs just as easily as your competition? Is price really the only difference between your product and your competitor’s in the eyes of your target customer? If so, you need to think about building more value into your offering and communicate that value to your potential customers so you can line up what you want their perception to be with what their actual perception is.
How do build more value?
One way, is to write out a list of features and benefits of your product/service compared to the features and benefits of your top competitor’s. From there, look for similarities and differences. Highlight the differences. If the differences are positive, giving you an advantage over your competition, find a way to emphasize that in your marketing messages. It’s also a good idea to cross reference your list with a poll from your current customers asking them why they chose to do business with you over the competition. By completing those two exercises you should be able to uncover a few differences that can be competitive advantages for you/your business.it.