Further Considering Cost versus Value

A fundamental part of marketing, persuading someone to purchase or acquire something, is convincing them that the value is higher than the cost. At the risk of stating the obvious: The value has to be high enough that someone is willing to give up what it takes to acquire, and/or the cost has to be low enough that someone is willing to give up what it takes to acquire. We considered this separately in terms of opportunity cost. It is also worth considering in other terms.

Another key way to increase the value is to increase the relevance. We know that the greater the value of something, the more willing someone will be to go to great lengths or to pay greater sums to acquire it.

Consider a few examples:

• Home: Larger homes are usually more expensive than smaller homes.

• Retail: Higher quality merchandise commands a greater price point than low quality fare, typically because it will last longer.

• Food: Some food is more expensive or takes more work to prepare.

• Vacations: Vacations are generally more expensive than individual events (like concerts or movies).

• Trips: Longer trips are generally more expensive and time-consuming than quicker trips like day trips.

Consider how increasing relevance can directly and immediately increase the value of these things:

• Home: Location location location! Even very small homes can command a premium if they are located where you want to be, close to work or downtown or some other desirable spot.

• Retail: The more niche your interests are, the more you are willing to pay for that perfect toy or novelty because it’s just so perfect. (No joke: Our family now has a 3-foot rubber chicken that will “scream” for “up to 45 seconds,” precisely because it is so novel and original that we just had to have it... I’ve only ever seen this in exactly one place!)

• Food: If you are in the mood for a certain food (burgers, or cake, or even brussels sprouts!), or if someone makes what you want to eat better than anyone else, you will pay more than you “have” to in order to get exactly what you want.

• Vacations: The dream vacation you are planning with your family or significant other will be a lot more indulgent than the trip you take alone.

• Trips: You will be more eager to travel to a place that it will take more work and cost to get to, precisely because you can do it so much less frequently than the local spots, even the local spots you love to frequent.

We also know that we can lower the cost by lowering the stakes of acquisition. Consider the impact of this on the same examples:

• Home: While larger homes are usually more expensive than smaller homes, selecting a home that you intend to live in for only a short period of time and then “flip” in some way is a lot less demanding of an investment. You will find immediately that you are not making the same emotional investment knowing that you will not be there for long. The stakes are lower.

• Retail: Higher quality merchandise or retail commands a greater price point than low quality fare because it will last longer...but the cost or barrier to acquisition goes down as the stakes get lower, for instance as your planned usage diminishes (maybe a one-time use, or a novelty gift not intended to have a lasting impact).

• Food: Better food (whatever your definition) will be more expensive or take more work to prepare, however consider the relative comparison value generally of meals: Breakfast is a much more casual and low-key investment (both in terms of time spent and cost) than a fancy dinner... in other words, lower stakes.

• Vacations: While vacations are generally more expensive than individual events, a weekend getaway doesn’t have to be nearly as perfect or dreamy as the summer vacation for which the stakes are inevitably going to be higher.

• Trips: Longer trips are generally more expensive and time-consuming than quick day trips, but it is immediately obvious that the shorter the trip (i.e., the lower the stakes), the easier it is to commit to a trip, or to commit to the total cost (beyond just the monetary cost).

By way of summary, apply this concept to the classic economic example of the availability of an umbrella when it is raining. We love to talk about how a street vendor who visibly and unapologetically raises the price of umbrellas when it rains incites our moral outrage, but logically we are hard-pressed to argue against this action due to the Law of Supply and Demand. If we do get caught in the rain and find ourselves needing consolation about the purchase we do not want to make, we can apply this exact approach:

• Increase the relevance: Get the umbrella that best meets your needs. Maybe it is the style, maybe it is the size, maybe it is the fact that you can store your new bonus umbrella in the car or somewhere that you will be more easily able to use it in a future unanticipated emergency like this.

• Lower the stakes: Recognize that you are not acquiring the umbrella of your dreams, or even one that will last a long time, you just have an immediate need to stay relatively dry.

Both of these are reflections of the increased value (it is raining so you need an umbrella now) and decreased cost (the cost of an umbrella overall is lower than the cost of getting wet), but from a different perspective that shifts the way we frame our offerings for our target market.