Impact Pricing Blog

As I’ve said hundreds of times: a strong pricing strategy is all about creating, communicating, and capturing value. Another way of looking at this is we have to create value twice.

The first time: We first create value by building the right product, service, or offer that delivers value to a customer–it solves a problem, or makes them money. This is what we usually think of when we create value.

The second time: Value is created in the buyer’s mind. We could think of this as communicating value, but creating value in a buyer’s mind feels harder yet more accurate.

Here’s an example. We are in the very early stages of artificial intelligence and large language models. Most of us are not experts on this topic. We know a little, but there is so much going on we don’t even know what to study. 

There is a lot of communication about AI. I’ve read many articles, and I even participated in a webinar on it. But I don’t fully understand it. I pay for ChatGPT, but only so I can play with it more. It doesn’t do anything valuable for me … yet. 

It’s possible, even probable, that there is a hugely valuable use case for my business that I haven’t discovered. And that’s the point. OpenAI has created a product with a ton of value. They try to communicate their value but they haven’t created value in my mind yet. 

When they create enough value in my mind, I will buy something. But the value created in my mind will be different from the value created in yours. We will care about different issues. 

AI is a great example because many of us are in the same situation. We know it’s awesome, but don’t know how it matters to us. However, this concept of creating value in the mind of the buyer applies to many purchases, especially large ones. 

Here’s another personal example. I like to ride bikes, and many years ago I took a lot of spinning classes and even taught spinning for a while. I have a spinning bike in my house that I would ride while watching TV. The other day I was in a hotel that had a Peloton bike and I was able to create an account and take a class. I’ve known about Peloton for years, but never wanted one. I loved that class. I took two more classes before I checked out of the hotel. Then, I bought a Peloton. 

What happened? I knew all about the Peloton, but it wasn’t until I tried it that I remembered how fun it was to take classes. The Peloton program that lets people try a class in hotel fitness centers is brilliant. They are creating value in their potential buyers’ minds—they certainly did in mine. 

Buyers trade money for value. Simply communicating value isn’t enough. We need to create value in the buyer’s mind. Maybe you think it’s the same thing, but it feels different to me. 

Value is created twice. First in your product, and second in your buyer’s mind. 

Share your comments on the LinkedIn post.

Now, go make an impact!