Why Micro Business Owners Undervalue Their Worth & What To Do About It

distressed girl

The small canteen was normally empty at this time of day.

I sat at the table and started eating my lunch. It wasn’t long before the door opened and in walked one of the owners of building where I rented an office.

He got a drink and sat down in front of me.

We’d not spoken much before and I was struggling to think of what to say to break the ice when he took off his watch and put it on the table in front of me.

“How much is that watch worth?” he asked.

He smiled as I picked it up, turned it around, tried to see what make it was – even held it up to the light in some attempt at kidding myself that I actually knew anything about watches – which I didn’t.

So I innocently asked, “how much did you pay for it?”.  He smiled, put the watch back on his wrist and said something that I remembered ever since:

What I paid for it is immaterial – its value is what you’d be prepared to pay for it.

 

The Difference Between Price and Value

The point of the lesson is that price and value are two completely different things. You can’t judge value by only looking at price.

For instance, from time to time when I have a meeting a few hours away I’ll use a toll road.  Taking the toll road means:

  • I don’t get delayed as the road is always quieter
  • the journey is considerably less stressful, so I arrive in a better frame of mind
  • often I arrive so much earlier that I have time to return calls and emails, time that I would have spent in traffic

So the value to me from using the toll road is much greater than the £5 price of the ticket.

The easy mistake to make in your micro business is to compete on price, rather than value.

Competing on price is a bad idea, because it’s a race to the bottom.  There will always be someone else with deeper pockets who can afford to drop the price lower or for longer than you can.  In a competition based purely on price no one really wins, because if you have to drop your price below your break even point to win business, it’s not worth having the business in the first place, you’re going to make a loss – and in doing so you’re undervaluing your products and services.

Instead you need to market your value. Here are four steps to help.

 

1. Target the right customers . . .

We’ve already established that value is evaluated in the eyes of the buyer, therefore targeting the right buyers is very important.

Let me give you an example.

One of my personal goals for this year was to really improve my fitness, so I started running.  I bought the cheapest pair of running shoes that I could find, £20 in the sale – my thinking was if I didn’t get on very well then I hadn’t wasted much money.  However, I’m really enjoying it, and I’ve grown to appreciate that if you run regularly a good pair of running shoes are an important investment, they help with the running and can help you avoid some of the common running injuries.  So, now I’m considering getting a much better pair, that will cost between £60-£100.

I started out as a bad target customer for a running shop, I just wanted the cheapest shoes possible to get me going, I was buying purely on price.  But now, I appreciate the value involved, and I’m a good target customer for a specialist running shop.

You need to target your products and services at the right type of customers, those who will appreciate the value you offer.

If you find yourself having to “sell” it’s likely a sign that you’re talking to someone who doesn’t fully appreciate the value that you offer.

2. Never compromise your message . . .

A crucial step in never undervaluing your products and services is to never compromise your message.

Let me ask you a question.  When was the last time you saw an advert from Apple on the TV, in a Newspaper or online that offered a massive discount?

Exactly, never.

Apple has a very consistent marketing strategy, they occasionally offer small discounts on special days like Black Friday, but in general the price of an Apple device is the same price, regardless where  or when you buy it, online or offline.

Your marketing strategy needs to be the same.  Decide what the price of your product or service is, based on the value that you provide, and then stick to it.

Discount is like toothpaste – once it’s out of the tube you won’t get it back in again!

Don’t start discounting as soon as someone tries to squeeze you on price – as a general rule, the first time a prospective customer asks if you’ll give a discount, take the opportunity to restate the value of what you offer, if they ask again, start really considering if they are your target customer because selling a product or service to someone who doesn’t appreciate the value will often cause problems, and can lead to refunds.

When you do explain your value, always remember our next point:

 

3. Lead with your benefits . . .

Here is one of the golden rules of sales and marketing, regardless of product, service or industry:

Sell benefits not features

Off the top of my head I couldn’t tell you the screen resolution of the latest iPad, but I know from the adverts that films and photos look amazing on it. That’s because Apple don’t lead their marketing with features, they lead on benefits.

Features make your products and services comparable with other businesses.  Imagine for a moment a web hosting company, if the company markets on the basis that their packages have XGb of disk space and XGb of monthly usage you can compare their list of features with any other similar host and decide on price.  However, if their marketing is focused on the fact that they specialise in WordPress, or that they personally care for your website, night and day, so you don’t have to think about it and can get on with running your business – that’s a benefit, and that’s much harder to compare against, and takes them out of the price comparison business.

Are you clear on the benefit of your products and services? If not take a piece of paper and make three columns down the page.  On the left is features (for the iPhone we might say large memory capacity) and then in the middle column write “which means” and then in the last column translate this feature into a benefit – so for the iPhone it could be to “take your entire music collection with you, anywhere, in your pocket”.  Do you see the difference, the benefit helps the target buyer appreciate the value.  If you don’t get a good benefit, keep asking “which means” until you do.

 

4. Create an experience . . .

The final point in ensuring you focus on your value, is offering your customers an entire experience.

One of the beauties about being a micro business is that you can provide a higher level of service to your customers.  The likelihood is that you have less customers than larger businesses in the same industry or market – use this to your advantage.  Get to know your customers, build strong relationships, positively encourage feedback and look for ways that you can wow your customers.

What little elements of value can you add to your products and services that don’t cost you a lot, but really set you apart from others. A free newsletter, only for customers with additional tips on getting the most out of your products and services, a private group on Facebook or Google+ where customers can meet and help each other.

With an experience, a little often goes a long way.  I remember a few years ago talking to someone who had bought a new car, when he went to collect it with his wife the sales person had put a really nice bunch of flowers on the back seat because he heard that the new owners wife was coming to collect the car with her husband.  It wasn’t an expensive gesture, but it really made her day.

In many cases the experience will be remembered far after the price has been forgotten.

 

micro business actionToday’s Micro Action

Spend some time considering the difference in price and value. Are you targeting customers who will appreciate your value? Are you offering a consistent message, focused on benefits and not features? Could you offer more of an experience to enhance the value of what you provide? Look through the points above and note down areas where you could do more to promote the value of what you provide, then plan actions so you make it happen.

Robert Peters

Robert Peters is a small business advisor, coach and consultant. Through his Fresh Eyes Consultancy he helps micro business owners grow sustainable and profitable businesses. Sign up for a free copy of his guide on how to avoid the feast and famine cycle and take the stress out of micro business sales.

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Comments

  1. Cracking post as ever Mr Peters.
    Track your numbers, Know your market, Craft the right message and promote it using the right media.
    If all micro business owners followed your blog pos they would be in a much more profitable position.
    Paul Cox recently posted..How The 80 20 Rule Can Highlight The Time You Waste And Profit Your Lose In Your Business.My Profile

    • Thanks for the comment and feedback Paul!

      Great point on tracking your numbers, it’s really important to check your progress and your value regularly. Keeping on top of your numbers ensures that you maintain the value you offer to every client as you get busier and also notice when your profits change, so you can quickly do something about it – I’ve seen so many businesses who don’t realise that they’re effectively losing money, just because they didn’t have a regular eye on the right numbers.
      Robert Peters recently posted..3 Reasons Google Doesn’t Love Your WebsiteMy Profile

  2. Spot on – when I started out I was so focused on benchmarking myself against the competition and not appearing ‘expensive’ – the older me has switched that to a much more value-based approach (easier I think when your potential clients have £m turnover) and if a potential client doesn’t see the value, I take that as a good sign to walk away, and fast.

  3. A really thought-provoking post that resonated with me, as I do struggle with the pricing issue, but I have realised that my services do provide value for money, and I just need to keep strong and continue to put that across to my ideal customer!

    • Thanks for the comment Catherine, I’m glad the post was helpful.

      Confidence is so important in marketing and standing by your value. If you know yourself that you offer value, don’t let anyone else tell you different and really target your perfect customer because working with them will really make it fit together. Also, don’t be afraid to develop the profile of your perfect customer, sometimes it’s not who you first think it is, I changed my own profile three times before I knew exactly who to look out for, each time because I’d worked with who I thought it was and seen that it wasn’t quite right. When you do get that profile right you can explain it to others who can lookout for the right people for you.
      Robert Peters recently posted..The Jeremy Clarkson Guide to Your Perfect CustomerMy Profile

  4. With regards to price and value, when it comes to handmade products, it can be hard for some customers to part with their money to buy for e.g. a handmade cushion with personalised stitching and appliqued pictures that cost about £20. They can often just see the cushion as JUST a home accessory rather than seeing the value of a beautifully hand crafted, unique and not mass produced product.

    • Targeted marketing. Your market does know the value, and it’s probably a waste of time marketing to the others. I bought my apron from a small business: ‘hand’machine sewn, it’s lovely, and while I could have got a cheap one, it wouldn’t have lasted the years and given me the pleasure mine does.
      Rosie Slosek recently posted..A home made brownie for every clientMy Profile

  5. Quite a strange coincidence really, today we have been discussing the idea of ‘value’ and benefit of our service. I can say it’s quite comforting having come out of the meeting room to research some details that I find such a well written article which highlights exactly what I needed!

    My thanks to the author! keep doing what you’re doing!

  6. Thanks for a well-researched, thought-provoking article. I think many small business owners undervalue themselves and their services/products because they lack the confidence. The price is right to the right customer so I agree that finding your target market should be a priority. I also like that you underscored giving customers a a great experience that they may not be getting from bigger players in the market.

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