What is price?

Price is the definition put to the value of a product. Or put differently, price is often the factor that will govern the quality of a product. Even if it is only the perceived quality.

But, let’s think about it a little differently. Over the years, things have been becoming more and more expensive. Twenty years ago, I used to buy Chappies Bubblegum from the corner café for one cent each. Today, I would not be surprised if it costs seventy cents to a Rand for one of those. Not that the quality has gone up – it is still the same chewing gum, wrapped in exactly the same packaging, most probably with the same little bits of information inside the wrapper as twenty years ago – but rather, something else has come down.

If we were to take a currency as a product, for instance the price of one Dollar to a Rand, it is rather easy to understand that the currency as a commodity can gain or lose value. But what about the value of a currency to a product? The term inflation gets thrown around rather a lot, but what does it mean? A description of inflation usually resorts to saying “an overall rising or upward movement of prices of goods and services in an economy”. But on my example of the Chappie, that product did not increase in value over the last twenty years. It is still exactly the same thing.

The only conclusion that can be drawn is that goods and services usually stay the same – yes, there are innovations, making certain products obsoleet, but generally a loaf of bread was the same a hundred years ago as it is today – it is the currency that lost its value.

Why does currency then loose its value? What is the reason that things become more expensive? Is it the supply and demand issue? So to say that as more notes get printed, the supply obviously rises and as a result the demand for it causes it to loose value? Or might it be that greed in the market pushes prices up so that investors can get more out of their investments, but as a result the cycle will cause everything to go up in price and that will cause the investors to have more money that they can purchase less with? Where will that stop?

There is another problem with this argument: Inflation seems to handle different products differently. Twenty years ago, I could buy a Chappie for 1 cent, now it costs a Rand. That is an increase of 100 times its value over twenty years. Twenty years ago, my dad bought a top-of-the-range 5 series BMW for R120,000. This year he can buy a top-top-of-the-range 5 series BMW for R850,000. That is an increase of only 7 times its value over twenty years. So, who’s getting richer?

Another strange question would be if you happened to have 850,000 chappies lying around in a warehouse, would your BMW dealer accept that as payment for you new BMW? But bartering is another topic that can be discussed at a later stage.

The point is things do not appear to be adding up. Money as a means to define value would appear to be skewed. Comparing apples with pairs is one thing, but comparing a ton of corn with a new television screen is a total different. Still, both cost the same.

This argument would lead me to think that the perceived value of a product, when valued using the definition of price is totally governed by the attitudes, tastes and perceptions of your customers. And this is the crux: to me as individual a ton of corn is about as useful as a dog chasing a car and getting run over in the process. But I might have a client that wants that ton of corn to make maize with, and I need to find that client, and persuade him to buy it from me so that I can get enough money to replace the dog and wash the blood off my car, maybe even repair a dent or two.

That perception of value, value-add, and price then obviously comes down to the end-consumer. If they don’t want it, or want to pay the price that you ask for it, your product is worthless. And the onus lies with you to then either choose the right products to sell, or to make your product appear appealing enough that your client will be prepared to buy it instead of something else.

Now this then brings me to a total different point: If anything and everything can be valued using money, who then is your competition? I mean, if your client needs to decide to buy a little car, a home makeover or a holyday in the Bahamas, and you just happen to be selling a D-SLR camera with all the lenses that can be imagined
to make any guy-off-the-street appear to be the world’s best photographer, and your client just happens to like all four the options mentioned in this paragraph, your greatest competition will not only be all the other places that sell photography equipment, but rather each and every travel agent, interior designer and motorcar dealer in your city and that advertises on the internet and that accepts Rands.

So, how then do you make yourself the number-one priority for your prospecting client? How do you stand out above all the other people – your direct competitors, and all the rest of the people bidding for a bit of your client’s money? And the plain and simple obvious answer is… How the hell would I know?

The other answer is perceived value. Add as much value to your offering that your client would be stupid not to make your product the priority of his purchases. And how do you do that? You know more about your products or services than anyone else except your direct competitors. Your job is therefore to make your offering the best, and to let your clients know why your offering is better than anyone else’s. And then to hope, pray, and be confident that somehow, somewhere, someone will be wise enough to buy your camera instead of the holiday. In my opinion the only way to do that is to provide a client with a product that will give him return on investment.

If something can be bought for a certain price and sold for a better price, or used to make money, either on its own, or added to what the client already have. That will provide ROI. The camera may do that by giving the client an opportunity to make money with the photos that he takes. But so too can the Bahamas holyday, if the travel agent can add a little business opportunity to that package so that when the client arrives there, he may be greeted by someone that might be trading in his industry.

Whatever the example may be, value can be added in an interesting way. And that can create better sales for you.

I am in the interior design industry. We make people’s houses and offices beautiful. In this industry there is a lot of competition. Not only from other designers and implementers that might be less qualified and creative, and therefore cheaper, but also from that company that sells the new Hummer H3 with the Harley Davidson added to make the deal sweeter. The Hummer might cost the same as my project, so now the client needs to choose.

So how would I do it? Late in 2007, I took on a project in Houghton Estates, in Johannesburg. It was a brand new house, built on a 1100m² piece of land. The house itself was about 680m²; quite a big house. The client approached me to paint the house with a specific product that has been totally overrated in their marketing campaigns, and I therefore set out to give him better options.

I did a new design of the entire house, bringing concepts and products in that this client had never even heard of before. By the time that we had the design finalised, the project was about double the price of their initial budget, but they were rather keen on all the new ideas and concepts, and we set out to do the project. It was a rather difficult project as some of these design ideas have not been done anywhere else, but we finally finished it; and it looked stunning!

Then came the interesting part: At the beginning of 2008, a house in the Houghton Estates area of this size, and on a piece of land of similar size, sold for around R6 million. These clients had spent about R3 million to build their house and about another R1 million for us to do the interior. So in total, they spent about R4 million to finish the house.

At that stage, a real estate company started showing interest in trying to sell this house, and my client decided to let them go ahead, just to see what kind of offers they will get. By March 2008, an offer of R16 million was put on the table! That is a profit of R12 million for the house. And the reason? The person making the offer had never seen anything like that house. Absolutely loved every bit of it. And it is true; that house must be experienced in order to really understand how amaising the place is.

The point that I am trying to make is that price is an indication of quality and obviously taste, and value is the concept that you bring to your client. If you cannot add enough value to your product or service, be it in creativity, investment opportunity, ROI, or any other way that will make you exceptional and stand out above the rest so that your client will decide to buy your product instead of the Hummer H3 with the nice Harley ‘value add’, you will have the whole world – not just your competition – to compete with, and anyone that adds a little free gift to any purchase will fall in front of you in the line.

Your house is most probably going to be your biggest tangible asset and investment. You use it to live and enjoy in, you also need to keep it interesting so that when you get to a point that you want to sell, you can get a better price for it than your neighbour, and sell it quicker.

Your office is the image that you give forward to your clients about yourself. The return will be immense if you can create a better perception of yourself simply by making your surroundings better. There is nothing like good taste and style to create first impressions. And does not matter what anybody say, that impression can make or break a deal.

The overwhelming effect of choice

I hate going to shopping centres. My girlfriend loves it. She can spend hours window shopping, looking at little teddy bears that she think is cute, browsing for the latest in dishwashing powders, staring at the shelf with cups on unable to decide which set is going to go best with the cow-print kettle that she brought back from a shopping spree in one of the numerous charity shops that she visited in the UK, and which I subsequently banned into one of the kitchen cupboards never to be used.

When I go to the shops, I know what I want. I have adequate research put into it over the internet. I walk in, pick it up, pay for it, and leave. I do not easily stop along the way to look at the new Webber braai utensils or the Car magazine. The subscriptions I like to read, I order, and those get dropped off at my post box. Call me boring, but I am not a big fan of wasting time.

And the worst for me is to shop for clothes. I loath it. I feel uncomfortable standing in the shop and looking at the new pink jersey that they want to rub off on me as being manly. I do not know what would look good on me, I do not want to experiment with it, I do not want to go into little cloakrooms where the smiling attendant (security) lady hands me a number that indicates how many pieces of cloth I am carrying into this restricted area in which I must change clothes more times in two minutes than what I usually change in a week.

So I would normally walk into one of those dreadful places where all the men look like zombies not really sure what they are doing there themselves, try to look at some pieces of clothes, try to remember what my size is, getting overwhelmed, then agitated, and then I leave without buying anything.

And inevitably, the clothes that I do have, wear out, start to look shabby, and start screaming at me to be replaced. But usually I do not adhere to the plight of my clothes, and I keep looking shabby.

So on my last birthday my girlfriend decided enough was enough, went to the place that she loves (the shopping centre) and came back with presents for me. Clothes!

At first I thought that I have never seen so many pieces of new clothes on my bed before. But then I started wearing them, and guess what; I love these new clothes! It’s stylish, it’s new, I do not look like a hobo anymore, and my girlfriend says that I look sexy; what a joy to have new clothes.

After a while I decided to try again. I went to the shops, walked into one of the clothing stores, got overwhelmed, and left, knowing that I am not cured. Shopping for clothes just aint for me!

“But,” thought I “I still want to look good, I still want to know what would suit me, I still want to look totally adapt for my profession, I still want to be presentable. So, maybe I should get an image consultant.” I don’t know if there is anyone that supplies that kind of service, but if there is, it would be rather nice to have someone that can assist me with that kind of thing.

Then, a couple of weeks later, (I had long ago already forgotten about the ‘image consultant’ thought) I walk into a prospecting client’s house. A huge house. A house with so much potential to look good. Except for the fact that it doesn’t look good at all.

This house, with all the potential in the world, is painted in the normal beige colour. Well chosen white couches in the beige living room. A large mirror against the beige ‘feature wall’ (‘feature wall’ between brackets because at the moment it’s just a freestanding beige wall). A lovely glass table in the beige dining room. A nice black TV unit in the beige TV room. Nothing, not even paintings against the beige walls of the beige passage. A very modern kitchen with beige walls forming the backdrop. The main bedroom has a very cool king-size bed with beige walls. The beige bathrooms, the beige patio, the beige everything. If I look at my hands in that house, my skin looks beige. Everything is bland. Nothing exciting, nothing original, nothing that can make any kind of impression. If someone were to want to complement them on their house, the only comment could be: “Wow, your house is kind’a large”. In total, the place is boring. And most of the houses that I see are like that.

When you ask a person why their house looks like that, the answer is that they don’t know what to do, they don’t know who to ask, they do not have the energy to research their options, they don’t know what they like, and the list goes on and on and on.

This specific client’s answer was: “Well, I’m just too afraid to try something that might not work”. And it is at that instant that I thought of my absolute unwillingness to browse around in a clothing shop.

You see, my reluctance to look for clothes is because I do not know what would look good. I do not know where to start looking if I were to try and find out. I am overwhelmed by the enormity of options available. I feel like a fool if I ask the wrong question to anyone that is in the know, or even anyone in general, because mostly all people know more about clothes than me; I think. I hate to look stupid, so I rather do not wonder into those shops; for fear that I might look at woman’s clothes instead of men’s clothes because I might not know the difference. And I think it is a problem with most of the people that know their house is not in the shape that they want it to be, but does not know where to start, and as such does not start.

And this is where I come in. Like the image consultant that I would like to tell me what would look good on me, both for my professional interaction, as well as my social interactions; my company has set itself up to be interior lifestyle consultants. We know all the products that would suit your style and preference. We have already done the research and have already negotiated with all the suppliers. We know what is modern, what is classic, which products are better than others, what colours goes well with what others, what styles would match your particular tastes, and we are very, very good at it. We also know how overwhelmed you must feel: you see, years ago when I started this business, I also did not know what was available. It too was like a major mountain for me, and I also needed advice.

A nice advantage of my company’s offering is, instead of just giving you advice like the image consultant would do, we offer advice, and make the clothes: we will design and implement the designs. We can cater for all your tastes, simply because we know what it takes to bring it to reality, and as such I have all the up-to-date knowhow of which products are better than others. This puts you in a position in which you will be able to make informed decisions, because I will inform you. It also puts you in a position to be confident about you choices, and to be proud of the end result.

This is what I do, and what I love doing. If there’s an image consultant out there you can give me a call. I might need new clothes soon, and I need advice on a new hairstyle.

Investing in your home

There’s money all over the place...

... Just not in my pocket!

So, the question is; where is it? The obvious response would be, in everyone else’s pockets, right? Wrong!

The money is all over the place. You see, no company can survive if money is in everyone’s pockets. So too can no person survive to buy food, cell phone time, or any necessities if money is in everyone’s pockets. People are holding money back because they are scared to spend it. And that creates a downward spiral in the economy and in everyone else’s lives.

What needs to be asked is: now that the bubble has burst, and money does not flow around so freely anymore, what do I spend my money on so that it can come back to me? And the answer is; investments. Not so much the stock market – especially not now – but rather anything that can make you money because it increased in value since you bought it.

Obviously a car does not fall into that category, so too would it seem a house would not fall into that category anymore.

You can now buy a house on an auction for a fraction of the price that you would have paid for it five months ago, or a piece of land around a not-fully-developed golf estate for half the price than what it was advertised for, and I know there are a lot of deals like that all over the place at the moment. But are these really good deals? Or is it simply the market correcting itself after a couple of years of ludicrous buying and selling, over inflated by real-estate agent’s sales talk, and the fact that credit was so easy to come by?

If you bought a townhouse for R 1 million one year ago; is it still worth that? The fact is that people will only buy something that they like, can afford, and perceive as higher value than a similar offer; and if they cannot afford it, your house can be worth R10 million, and they still will not buy it.

So, what is there to be done? Say for instance you live in a townhouse complex where all the houses look similar, and you need to sell it. You would like to get R1 million for it, but the guy next door is selling his for R900,000. Who’s going to get the deal? Your neighbour - unless you can increase the value of your offering – because like anything else, if you have beter features in your product, it can be sold for a higher price.

Take a car for instance. If you were to put two 3 Series BMW’s of the same year model next to each other, the one with leather seats and electric windows and the other with material seats and manual windows, all other things being equal, the first one will sell for a higher price. And that is the same for your house.

If you have a house in a townhouse complex, the comparison is far easier than if you have a free standing house in an established suburb, but the comparison can still be made: Houses in the same area, generally sell for around the same price.

You see, everyone wants to sell at the moment, especially their investment properties which are now becoming a financial burden. This means that all of a sudden, your neighbour – or the guy living a few houses from you – has just become your greatest competition. And the guy walking into your house to see if they want to buy this one; your most important client. But as with any client, they will look for the best deal. Not always the amount that they have to spend, they might have the R1 million that you are asking, but if your neighbour is selling for R900,000, they will purchase his house.

Except if you can give them more value; and that is not as difficult as you might think. You just need to start thinking a little out of the box.

Let’s take the car example again, but this time two different makes. A couple of years ago, BMW brought out its first built-in GPS screen. Nice and original, looks really cool, and the lady telling you when to turn left or right and when to make a U-turn if you missed your turn-off was just the pits! Audi did not have that feature yet, and a lot of people that was in the market for an Audi thought “What the heck, lets buy the Beemer; this little screen is SOOO cool!”

The same should go for your house. A nice fresh coat of paint is not going to do the trick: all houses have paint. Also will a couple of different colours, trying to make it look a bit original, not cut it. It might just make your prospect, your client, think: “Hectic, now I will have to repaint the entire bloody house to fit in with my furniture and taste! How much extra is that going to cost me?”

No, you will have to dig a little further. There are amaising products on the market! Very few people have it, but everyone that sees it, wants it. These are the products (features) that you want in order to increase the perceived value of your house. Invest a little to get a lot more out.

Now let’s go back to your townhouse. Your house is identical in size and design to that of your neighbour’s, but you have these extra little features added to it that makes the client’s wife love it. You are asking R1 million, your neighbour wants R900,000. You have this nice little water feature by the entrance, immediately calming your prospect as they walk in. As you enter the front door, instead of the usual roughly plastered wall painted in beige on the far end of the entrance hall, you have this lovely red SatinCrete or Stucco wall that can make virtually any piece of furniture look absolutely posh – the client’s wife loves it. It goes perfectly with that little antique table and flower vase that she inherited from her gramps, but that has been standing in the garage all these years because they had beige walls in their previous house.

As you turn left into the living area, the far end of the wall has this lovely rough quartzite strip wall, breaking the feel of the rest of the room – that is still beige – into something exquisite. The three down lights that you had installed about 30 centimetres from the stone wall, creates such an emphasis of light and dark shadows on the stone, that no one can do anything else but comment on this stunning feature that you have created – you genius, you!

On your way to the kitchen, you have a wall perfectly techniqued in a dark-brown suede effect.

And the client is sold. They tell you that they are firstly going to have a look at your neighbour’s house, but comes back 10 minutes later to sign the offer to purchase as “that other house was just so boring. It looked exactly like all the other places that we have seen over the past two weekends. This one is just absolutely beautiful!”

And how much did it cost you? Not even R50,000. You created a couple of features. It took the project manager a week to complete the project. Obviously you don’t tell your clients that much, you just nod and smile as you think about how easy that went.

And that, my friend, is quick return on investment: Creating something really beautiful, really original, really stunning, something that blends well with everyone’s tastes and accessories, something that creates the perception of great taste, and lovely luxury and richness, and that sells for a 100% mark-up, and sells quickly.

In these times we must work cleaver with our money. That does however not mean that we must leave it in our pockets. Rather, spend it on something that will add value, and it will realise itself in profit for you.