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Today’s Note: Are Your Customers Delighted?

February 19, 2012

Today’s Note focuses on a post titled “How To Charge Higher Prices And Thrive” on FastCompany.com.  This interesting post introduces itself this way

Harvey’s Hardware is a legend in my town of Needham, Mass. In business since 1953, Harvey’s sells what most people consider to be commodity items–nuts, bolts, lawnmowers, shovels, and so on. And yet, Harvey’s revenue per square foot is almost four times higher than the typical hardware store. [all italics added by me]

The author, Neil Baron, tells us that the essence of this story is something called “benefit experience.” Baron explains:

The secret is that Harvey’s provides a compelling combination of benefit experiences to its target customers.

First proposed in the 1980s by Michael Lanning and Lynn Philips, benefit experiences are the sum of the specific and measurable events that happen in your customers’ lives as a result of doing business with you.

Then Baron really zeroes in on the issue: “Most B2B companies focus on their product features and discounted pricing, and not the benefit experiences their products and services deliver. As a result, they miss the opportunity to price their products based on the value of the benefit experiences they provide to their customers. Discounting becomes their primary sales strategy, and they have to price their products like a commodity.”

Business experts often tell us that there are two distinct kinds of businesses: ones that can earn enviable margins by successfully selling premium pricing, and ones that can sell value by controlling costs. Harvey’s is a fascinating business case of a business earning superior pricing by focusing on the personal benefit their clients receive, rather than the economic cost of the goods they are selling.

This is a very interesting article, and it is well presented in short form. I strongly recommend this piece for anyone with an interest in business or retail topics.

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