Q. Why isn’t anyone buying? A. Check the value (Part 2)

May 21, 2009

Last week, I started to address a two-post topic about first checking the value proposition of a product or service when no one is buying.  Generally, people are motivated to buy when they will capture value from a product or service.

VALUE = Consumer Perceived Benefits – Consumer Perceived Costs

I used the case of nohome.org to illustrate some factors that should be considered when trying to increase the consumer perceived benefits of the value proposition.  In this post, I will continue to use nohome.org as my case study to address the second part of value:  the consumer perceived costs.

The case of nohome.org:

Jerome Greene is the CEO of nohome.org, a service that offers ‘humanitarian web hosting’.  For every dollar earned, one dollar will be used to build homes for refugees entering Indiana each year.  nohome.org offers 3 plans, the lowest starting at $19.95 per month.  A week ago, Jerome asked the question:  Why isn’t anyone buying?

Part 2 of the analysis:

To help Jerome and nohome.org minimize the consumer perceived costs, I asked a couple more questions.

Question 1:  How does the price of $19.95 per month compare to the best web hosting alternatives out there?

I will be the first to admit that I don’t have a lot of experience with web hosting services, but in doing a quick search of other offerings, it seems that there are lower priced alternatives available.  These alternatives do not offer the humanitarian benefit that nohome.org provides, but they do set a reference point for consumers for web hosting without humanitarian benefits.  This reference point is important because it impacts the consumer perceived price.  With a little subtraction, consumers can figure out what nohome.org is suggesting the value of the added humanitarian benefit is.  If they don’t agree with this suggested value, then there is a problem.  Either the price is too high, or they don’t fully understand the added benefit.  Lowering price is always an action of last resort, so I suggest Jerome first revisit how he can amplify his benefit.  Alternatively, he might consider suggesting to consumers a different alternative that they use for their reference point.  I used godaddy.com as my reference point — but maybe that was not the right one.  Perhaps Jerome could tell consumers, “Compare nohome.org to XYZ” and suggest an alternative that will be a better reference point and lower the perceived price of nohome.org.

Before I move off this question, I would like to add that the issue of reference points might be a larger factor in the consumer perceived cost today than it was a few years ago.  It is my hypothesis that in the tough economic climate, consumers are making an extra effort to search for alternatives to find the best value, and so they have more reference points.  This may be further impacting the perceived price of nohome.org.  It might also be impacting how much a humanitarian benefit is worth to consumers.  So a price of $19.95 for services from nohome.org might have been acceptable for consumers three years ago, but it might not be at this point in time.

Question 2:  Is there a way to further minimize the risk cost of buying from nohome.org?

Perceived price is only one component to the total perceived cost to consumers.  The others are risk cost, transaction cost (cost to consumers of transacting), and production cost (the cost to consumers of producing the benefits).  I assume that the production and transaction costs for nohome.org are low (but Jerome should verify this).  However, I do think that the risk cost could be high.  If nohome.org is a relatively new brand and service, consumers might be questioning its reliability and performance.  This means that nohome.org might appear to be a riskier choice, and therefore have higher consumer perceived costs.  Jerome should try to find ways to increase nohome.org’s credibility to reduce risk.  He might consider doing this by posting a list of his current clients on his website.  He could include their testimonials.  He might also find a spokesperson or endorser.  Anything he can do to increase consumer confidence in his service and reduce risk will increase his overall value proposition.

In conclusion…

The question of “Why isn’t anyone buying” is a critical question that many of us have faced.  I don’t want to present this two-part blog as the complete answer as to how to fix this problem.  My goal with this series of posts is only to help identify some of the factors that might be contributing to the problem.  Think of these questions as seeds to help the value proposition grow as big as it can be.  If anyone has any other suggestions of factors to consider when it comes to the value proposition, please submit a comment!  I would love to hear it.

Q. Why isn’t anyone buying? A. Check the value (Part 1)

May 15, 2009

This week on the social networking site SmallerIndiana, the CEO of the organization nohome.org, Jerome Greene asked the questions: 

“You have a great new idea, everyone loves it, but no one else is buying it.  What’s the problem?  Is it your message?  Is it your website?”

Being someone who is passionate about marketing, I couldn’t help but offer my ‘two cents’ to him immediately.  But his questions got me thinking …. there are probably many people out there with similar questions.  So to help those facing a similar challenge, I thought I would try to address Jerome’s problem publicly  by suggesting he consider a few things over the course of a couple posts, and in doing so, hopefully spark some answers that can help others.

Before I go too far, let me just say that the ‘obstacle’ to people buying could be all sorts of things.  It could be the message.  It could be the website.  It could be the audience.  But before anyone decides to do a website overhaul, I suggest first checking the value proposition.

VALUE = Consumer Perceived Benefits – Consumer Perceived Costs 

In this post, I am going to talk about ways to maximize consumer perceived benefits using nohome.org as my case study.  The next post will discuss ways to minimize consumer perceived costs.

The case of nohome.org: 

nohome.org offers ‘humanitarian web hosting’.  For every dollar earned, one dollar will be used to build homes for refugees entering Indiana each year.  nohome.org offers 3 plans, the lowest starting at $19.95 per month.

The analysis:

To help Jerome and nohome.org maximize its benefits, I asked a series of questions.

Question 1:  What are the consumer benefits to purchasing web hosting from nohome.org?

Keep in mind that in general consumer perceived benefits include product performance, the service experience, the reputation and image the consumer gets by purchasing, and the relationship experience.

In nohome.org’s case, the benefits appear to be website hosting with a 30 day money back guarantee, no contract, 99.9% up time, and knowing that for every dollar earned, one dollar is used to build homes.  From my perspective, these benefits are primarily product performance and a little service oriented. 

Question 2:  Do consumers understand these benefits and do they perceive them as benefits?

In order for consumers to get the most value from a product or service, they have to understand all of the benefits they are receiving, and they have to perceive them as benefits.  Remember, value is all from the consumer’s perspective.  If the consumer doesn’t understand or perceive the offerings as benefits, the benefits need to be communicated differently or other offerings must be added that consumers do perceive as beneficial.  Jerome might want to consider conducting a consumer survey to make sure that consumers really understand the benefits they receive from nohome.org.

Question 3:  Is there a way for nohome.org to add more perceived benefits for its consumers without incurring more costs?

Given that most of nohome.org’s benefits are currently performance or service related, it seems like there may be some room for additional benefits to be added.  For instance, could nohome.org amplify its reputation/image benefit by giving customers a ‘badge’ on their site that demonstrates their humanitarian choice?  Could nohome.org provide a relationship benefit by building a special ‘community’ for its consumers who have a humanitarian interest in common?  Better yet, could it give its consumers some sort of ‘relationship’ with the refugees they are helping through a newsletter or an event?

Question 4:  Are the perceived benefits nohome.org offers differentiated?

I am assuming they are, but if they aren’t, Jerome might want to revisit #3 to think about other unique benefits nohome.org could provide. 

The other part of the equation

Hopefully these four questions spark some ideas to further enhance the perceived benefits of nohome.org and other products and services that are having trouble ‘making the sale’.  Of course the other area of opportunity for improving the value proposition is by minimizing perceived costs …. and that will be covered in the next post.