“Price is what you pay. Value is what you get.”
– Warren Buffett

In these economically challenged times when customers are watching every penny, smart business leaders step back and look at their products or services through the eyes of the consumer. Part of this assessment is to determine what value their products or services bring to the consumer.

For example, let’s say you manufacture and sell shovels. If your customers can get similar shovels at any number of stores in the area, then the primary decision factor for the customer is price, which makes the product a commodity. Some stores, such as Wal-Mart, can compete by offering the lowest possible price. Most businesses cannot afford to sell on price alone. They cannot buy at the same low price as Wal-Mart and they don’t have the supply chain that Wal-Mart has. They must figure another way to differentiate themselves, to make their products or services more appealing to the customer. They must add value.

Anything that is important to your customer adds value to your products and services, including:

• Having what the consumer wants – A broad range of products may offer the convenience of “one-stop” shopping. Customers may be willing to pay a little more if they can get everything they need in a single order.

• Providing friendly, knowledgeable service – Experienced salespeople who can help customers select the best product for their needs and guide them through installation and set up add value, especially for complex products and services.

• Convenient hours and customer-friendly policies – Customers will pay more if your product or service is available when they need it and you offer a quick and easy purchasing experience.

Here’s an example of how one business uses the power of differentiation and added value. We recently had a relatively small construction job done at our home. Most of those firms bidding the work simply came over, looked around, gave us a price and left. The winning bidder, Glenn, although a bit higher, built a relationship with us, asking lots of questions, giving us ideas that we had not thought of and generally helping us think through the project with more clarity. His engaging ways and valued added contribution made him a hands down choice for the job. His competitors on the other hand treated the job as if it were just another job, versus the opportunity to develop a customer for life.

It should come as no surprise that Glenn’s company continues to grow, offers his employees a stable work environment and has many repeat customers and gets referred to people by the local building supply companies.

Here’s an example of what happens when you don’t add value. I’ve been doing business with an insurance company for a number of years. Every month a significant amount of money gets taken out of my account to insure my auto, my home and my property. Occasionally something happens, such as a car accident, and some money comes back my way. But the agent has never made any attempt to add significant value for me. He has not attempted to build a meaningful relationship or added any value beyond basic competency. He does not call or send me any newsletters to help me save money, increase my knowledge or just to stay in touch. He has effectively reduced his product to a commodity. There’s no reason for me to stay with the agent, no reason to be loyal when a lower priced vendor asks for my business or another agent bothers to reach out and show me he cares.

Imagine if my insurance agent adopted a goal to build a value-added relationship with me… If he stayed in touch, got to know me, kept me informed of new services and helped me save money, I would never be tempted to switch insurance companies on price alone and I would be much more inclined to enthusiastically refer him to others in my business and personal networks.

Every business leader must figure out how to increase the value that their customers receive and continually strive to add more value. That’s what builds customer loyalty and encourages customers to refer new business.

Differentiation begins with asking yourself, what do we offer that is different from our competitors in the eyes of the customer? This is the value added and it needs to be spelled out as a promise to the customer and a rallying cry to all employees in your business.

Does your company work diligently to increase the value proposition that in the mind of the customer differentiates you from your competitors? If not, then you have to ask yourself why customers would continue to use you if someone cheaper or faster came along tomorrow. It’s a matter of survival for every organization that depends on its customers.