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How To Charge Higher Prices And Thrive

What can technology companies learn from a 50-year-old hardware store? Plenty, especially when it comes to benefit experiences, and their effect on pricing.


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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.

This is shocking considering that even though they sell commodity
products:

  • Harvey’s never has the lowest prices. 
  • Harvey’s
    never runs a sale.
  • Harvey’s never provides discounts or offers
    coupons. 
  • Harvey’s limits their advertising to the backs
    of Little Leaguers’ uniforms.

Why would people crowd into Harvey’s to buy something that
they could get for less at Home Depot or another big box store? 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.

The concept of a benefit experience is something that few
people talk about. Yet, the value your
customers receive from the benefit experiences you provide determines the
success of your business. This is true
whether you are running a hardware store or a technology company.

Here is an example of a recent benefit experience that I enjoyed
as a result of shopping at Harvey’s.

On a recent Sunday, I was preparing to watch a 1 p.m. New
England Patriots game with my children and father-in-law. Around 12:15 p.m., my mother-in-law announced
that she had finished making curtains for the dining room and they needed to be
hung immediately. While I love my mother-in-law and she has a heart of gold, when she gets something inside her head,
there is no arguing with her.

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Unfortunately, I did not have the right fixture for the
curtains. So I had several options (and saying no was not one of them). I could head to Home Depot and get the
lowest price. But if I did that, I would
likely not be back until halftime. Or
I could go to Harvey’s, pay more, but
have the curtains hung before the game started. At Harvey’s, with its knowledgeable,
loyal staff, and extensive inventory, I knew that I could get in and out quickly
with the right part.

I gladly went to
Harvey’s and paid the extra few dollars for a commodity.

But in reality, I was not simply buying a curtain fixture.

Harvey’s provided me the opportunity to watch the Patriots
game with my family and get my mother-in-law off my back. Enjoying this benefit experience was worth a
lot more to me than the few extra dollars I paid at Harvey’s.

A key to success at Harvey’s is that the owners have aligned the organization so that it can regularly deliver the benefit experiences that I
enjoyed. When you enter Harvey’s the
following happens:

  • A salesperson greets you at the door. 
  • They don’t ask you what you need, but rather ask
    you to describe the problem you are trying to solve.
  • The salesperson then walks around the store and
    gets your materials while you wait at the front (the inventory levels are sky
    high so that you don’t have to worry about an out-of-stock item).
  •  They explain how to solve your problem. 
  • If necessary, they will carry your purchases
    to your car. 

Delivering this benefit experience does not come cheap. The high level of customer service requires
Harvey’s to incur labor and inventory costs that are much greater than the
industry norms.

Harvey’s breaks several conventional rules of
retailing. They don’t strive to reduce
labor costs or increase inventory turns. They don’t push the customer to do most of the work. Harvey’s is the antithesis of
self-service. Nothing is labeled and the
aisles are cramped.

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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.

How can your company become more like Harvey’s?

Neil Baron can be reached at nbaron@baronstrategic.com/baronstrategic.com

[Image: Flickr user tiffanyday]

About the author

Neil Baron is an internationally recognized authority on selling and marketing innovative products, services and solutions sold to risk averse customers. He has served in a variety of senior marketing and management roles at companies such as IBM, Digital Equipment Corporation, Sybase, Art Technology Group, Brooks Automation and ATMI.

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