The point is if you are “remarkable” in Seth Godin’s words, you will succeed. But if you are simply caught up in price wars, you won’t be going anywhere – fast.

For example, lets say that in San Francisco a Hippie-themed gas station were to open up to attract yuppies. The whole place could be tye-dyed, have posters up that say “Impeach Nixon”, have 60’s classics liek Sgt Peppers playing loud, and perhaps some insense burning (OK, maybe that one is a bad idea!). And for icing on the cake — you could get 10% off your gas if you a filling up a VW Bus.

Would people be willing to pay fifty-cents more for the gas? I think that a certain portion of people are filling to pay for experiences, even for what is generally considered to be a commodity. In this case, you get gas + something extra that improves the quality of your life.

I think this is basically how Starbucks developed almost overnight into a cultural phenomenon. They fulfilled a human need that we have that is much greater than coffee alone.

@ Dave : I think the actual value of a product is also the value perceived by each individual customer. If a computer’s value ( price ) is 1500 dollars, depending on the system my perceived value for that computer would probably be right around there. But for my wife the perceived value would be way less than what it is actually worth. I agree with your point but I think it all depends on each individual customer. We just need to cater it to the market that we are focusing on.

I am glad you liked the slice vs. pie.

@ Anja : Ferrari. be nice to have one

A lot of what you talked about in this article is directly applicable to blogging as well! Being different, providing value, building a loyal customer base . . . these are all things that I, as a blogger, can easily relate too.

Loyalty to any business is directly linked to the cost of the goods. If another supplier provides something for cheaper and maintains the same quality, you can expect that customers will forge a new bond of loyalty with the cheaper brand. SO basically, what I’m trying to say is that there is no loyalty in this business! The only way to succeed is to offer high quality goods for cheaper than the competition!

I’d add here that “actual value” can’t be quantified … people buy products they never use, or that they leverage poorly. I’d say that “perceived value” – how you can frame it to the customer – that should really drive the price.

Good article. Liked the part about slice vs. whole pie.

@ Jason : True. But with the right combination ( value and price ) you can easily turn customers to switch brands and build loyalty towards you.

I believe that providing more VALUE is what matters. If you provide enough value to your customers, then they’ll willingly pay any reasonable difference between your price, or your competitor’s price.

Yes, some people just like “cheap,” but I would rather have loyal customers who value my products or services enough to pay more for them than have a bunch of people in my funnel who will jump ship as soon as something cheaper comes along.