Price vs Value: Is Cheaper Really The Better?

(Photo by venkane)

Let me start with a quiz – which do you think is a better deal?

Let’s say you are interested in learning how to draw. You find two art classes for adults. One is at the local Parks and Recreation Center. The class is ongoing, and you can join any month. It is $30 per month plus $15 for the model. Another is at the local Art College – it is a non-credit continuing education class. So you need to wait until the next semester. One semester class (approximately 4 months) is $500 plus $160 for the model. Both class meets once a week for three hours.

This quiz is based on my real life experience from a few years ago. At the time, I was a complete beginner, and $500 course at the college just felt too much. Plus I wanted to try out quickly. (Very typical of me. . .) So I signed up with the Parks and Rec class. And it was fine. The instructor was a local artist, and he taught me the basics. The atmosphere of the class was easy and non-critical, which was good for beginners.

After a while, however, I reached my plateau. We were doing the same thing week after week, just different poses. The casual atmosphere was not particularly stimulating, either. So I decided to take the course at the college. Believe me, that tuition was a lot of money for me. My thinking was, well, I just do this for this fall semester to see what it is like – if it’s one time, I can afford this, I can do this instead of taking a vacation. . .

Wow. The class was different. The instructor (grad student at the college) set the objective of the class each week. The course was well planned and organized, and I could see my progress. Also, the students were more hungry and serious (They paid the high tuition, you know), and this was encouraging for me. The models were better, too – this was nude figure drawing class, which is terrific to learn the human body structure, and the models had professional attitude.

If I stayed at the Parks and Rec class, paying the $30 per month fee, I would have paid the same amount of money I paid to the college in 17 months. But after the 17 months, would I have learned the same level of drawing skill there? I doubt it. Even if I could, isn’t it better if could learn it more quickly, like I did at the college? My time is valuable.

My conclusion: The higher priced course is a better deal for its value.

The cheaper class did its job in the beginning. I could not just jump to the college class when I started. But when I was ready, the higher priced college course was actually more economical for me, because it delivered more value in shorter time. To this day, I am glad I got that art class for myself.

Of course, the choice depends on your situation and needs. If you actually want to spend more time on an ongoing basis in the class, the Parks and Rec class is better. In this case, it is delivering a different kind of value, a relaxed class setting.

What we need to think about price and value as entrepreneurs.

We need to think about price vs value in two directions: in buying and selling.

When we buy, either for ourselves or for our business, we need to think about the value we are seeking. Remember that the lower price is not always the better choice as the above example shows. What value are you getting, and does that satisfy your need? Is the $150 per hour attorney really cheaper than $250 per hour attorney? How much work can each do in one hour, and what is the quality of their work? Or sundry items such as business cards. You can get business cards really cheap, using a preset template and thin (under 90lb) paper. But does it deliver the value your business needs? Or is the poor print and paper quality undermining the credibility of your business?

When we sell our products and services, we need to set the price. For many new entrepreneurs, this is a difficult process. It is difficult because we are not yet clear about the value of our offering. We do our benchmarking study, and then factor in the uniqueness of our products and services. Yet, with all the preparation, I think there is a level of uncertainty we just have to take as entrepreneurs when it comes to pricing. The best advice I heard is that, if it sells at that price while some prospects complain about the price, then it is priced just about right. (I can’t remember where I read this advice – I read too much – if you know the source, please let me know so that I can give proper credit to the original. I have the feeling, however, that it is the kind of advice that is going around by the word of mouth among business owners. . .) Don’t be too shy in pricing. Your products and services are valuable.

There is an exception to this rule. While fair pricing is important, it is also a good idea to offer value for free or at low price so that people can try it out before they commit to buy. When done right, this should bring in more sales. I also believe in giving back. Giving is not just about sending money to charity – the best giving you can make may be offering part of your products and services. This is why I write this blog and offer lots of information and inspiration for free to anyone in the world with internet access.

There are more about price and value, such as competition. I will get back to this later. For now, here are my two suggestions:

1. When you buy, don’t judge products and services by their prices. Always check their value and your need.
2. When you sell, don’t be afraid to put a good price on your products and services.

How do you make your purchasing decisions in terms of price vs value?
How do you determine the price of your products and services as a business owner?

Thanks to Carnival of Money Stories for including this post.

Professional Networking: It’s Not Just Who You Know

(Photo by Gail S)

What you know and do really matters. And who you know. And more.

Much has been said about the importance of networking in business, but I am yet to see a comprehensive account how each piece fits into the big picture. I also know, from experience, some challenges we face especially when connecting online, and would like to share my perspective.

Who knows you matters more than who you know.

The two are not the same. The most fundamental form of communication is the mutual two-way communication between two individuals who knows each other. I like the comfort and trust of this kind of communication. But things get more complicated in modern life. There are people I know but don’t know me. For example, I read a lot and learn from the writers, who don’t know me. It is a good learning experience for me, but in terms of my business development, they don’t help – how could they, they don’t know me. Conversely, there are people who know me but I don’t know, such as my silent readers. I’d love to make a good impression to them, firstly as basic manner, and secondly because there are so much they can do to help me, such as providing feedback, talking about my blog and business to their friends and possibly sending me referrals, or even becoming my clients themselves. So, who knows me matters far more than who I know when it comes to business development. And this leads to the second point. . .

Reaching out to who you know is the critical step.

This is the step that changes the one-way communication to the fundamental, often mutually beneficial two-way communication. It’s a critical and difficult step. It’s difficult because, while I know them in the one-way generalized communication, I don’t really know the person, so I’m not sure how to relate to them. In the two-way communication, we adjust the way we relate to the specific person we are communicating with based on our knowledge about them, but in the first contact, we don’t have much knowledge pool. Especially when the communication takes place online, I don’t even get the immediate feedback from their words and body language, so it is even more difficult. (After all, I don’t even know if the person is reading my email, or if my email is ending up in their spam box.) So I rely on the two basic rules of inter-personal communication: be myself and be courteous. Yet, it raises questions like. . .

Is it okay to ask for a favor in the first contact?

When we reach out, we usually have a reason. The reason why we are breaking out of our comfort zone and making this difficult first contact. But is is okay to ask right away?

I can’t speak for others, but for me, if it is a small favor I can do myself, asked in a civil way, I don’t mind it. We live in a fast paced society, and I am a pretty open person, so I don’t need a long prelude of friendship. For instance, if someone emails me asking for feedback about his or her new blog, I’d be happy to take a look and write back, and I’ve done this many times by now. I do want to know, however, who they are and how they know me. In other words, we do need to build a relationship first, even a quick one, before getting to the asking part.

For a bigger favor that involves others, such as referral and link love, I take more caution because if I recommend something or someone I don’t know well, I am undermining my own reputation. I once received an email from a complete stranger titled “link exchange request”. The email consisted of two sentences, saying she has put my blog on her blogroll so I should do the same for her. This is a wrong way of asking because she didn’t take even a minute to build relationship with me. I felt like I was used as a tool, like link providing vending machine. I still took the time to check out her blog, and wrote back I couldn’t do so because her blog didn’t have a contact info. But I have to say I really don’t like being TOLD what to do, unless I’m doing something harmful.

But really, online or off, I don’t mind doing some act of kindness even to a stranger, provided the situation is right. Again, other people may be more cautious or private. So I wouldn’t take it personally if I reach out to someone and don’t hear back. Maybe he is busy. Or maybe my way of relating to her was not her favorite way of being contacted. I feel a bit down, but I have one more thing to do to complete the cycle of network. . .

What can I do to help others connect?

There are people I know who do a great job. There are also people I know who may benefit from my friends’ work. However, they don’t know each other. Wouldn’t it be wonderful if I could help them connect with each other?

The real power of who you know is this indirect perk you get when you help others network.

To do this well, you need to make it a habit to think about possible match-making. You already know quite a few people who can make unique contribution for others. Some more examples I can offer are: I recently worked with a graphic designer for my business cards. Elaine at Designer Passport did a beautiful job at a reasonable fee. In addition to the business card design, she turned it to logo (see below), and customized the header of this website. (See Yes in orange?) Also, I know some excellent coaches. If you are an active woman who want to achieve the next level, like running a full marathon, or if you are going through divorce and can use extra help to stay put, let me know.

There are four kinds of relationships.

The first is “I know you, you know me” and this is the most fruitful mutual relationship. The objective of networking is to upgrade other three kinds of relationships to this mutual relationship.

1. For “I know you, you don’t know me” relationship, my action plan is to reach out in a courteous manner.
2. For “I don’t know you, you know me” relationship, my effort goes to make it easy for you to reach me out, such as providing contact info and encouraging you to contact me.
3. For “I don’t know you, you don’t know me” relationship, my hope is the people who knows you and me would take the trouble of connecting me to you. I can encourage them do this by making it clear who I’d like to know and showing gratitude for the things they do for me.

Once you establish a good relationship, it is important to maintain it well. Don’t be like the stupid salesperson who is super nice until you sign up and never returns your call afterwards. I will write more about this later.

How do you like networking? Did this article help you to be more active in networking?

Related post: Learning To Love Networking

Thanks to Alex for including this post in Personal Development Carnival, to E3 for inclusion in Carnival of Success Principles, to Joe for inclusion in Working at Home Carnival.

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