Creating Value: Focus on "Value" Not "Creating"

Monday, January 5, 2015

Many business owners make the same mistake over and over again. They think that there needs to be a correlation between higher prices and increased costs of production. It makes sense that a hard cover book should cost more than a soft cover one, because it costs more to produce. In many cases, the cost of a product of production is completely irrelevant. Companies can (and do) charge substantially more for product add-ons that incur zero additional costs to the producer.

Image courtesy of sailko

Let's take a look at a few examples:

Companies need to stop thinking in terms of "effort" and "cost" when considering pricing strategies. Pricing power comes from the ability to deliver value to their customers. How hard a company works to create that value is irrelevant.