In these difficult economic times, it is tempting for businesses to degrade to that lowest form of marketing and sales – competing on price.  Now certainly, there are some products that are essentially “commodities” that require low-cost leadership to sell (and there are businesses – such as Wal-Mart – based on the notion of low price leadership).  But for most of us, we are selling something that isn’t a commodity – something that we think will add substantial value to our customers.

Yet, tough economic times promote desperation and marketing laziness.  This is based on the false notion that in tough economic times, customers are only focused on price.  The most egregious example of this was from a radio advertisement I heard last week.  Rudy Giuliani, former New York mayor and presidential candidate, was selling a leadership seminar that he was speaking at, along with other luminaries such as Colin Powell, Steve Forbes, Zig Ziglar, and even Michael Phelps (presumably without the pipe).  Sounds interesting and valuable, right?  Rudy told me that I could attend this session – which could change my whole life – for only $19!  Wait, not $19 per person, but $19 for my whole office!  Incredible – how could I pass up on such a deal?  Well, you’re now probably thinking the same thing I did, which is how valuable can Rudy really think it is if my whole office can attend for less than $1 per person?  (See their website which promotes the same offer).

Rudy blew his credibility with me.  His advertisement smacks of desperation, and he inadvertently created what economists call a Giffen Good, a product which is actually consumed LESS as the price goes down.  There are a number of reasons for this phenomenon, but in Rudy’s case, it is all about credibility.  When shopping, we’ve all considered that a higher priced item may equate to better quality, whether it is true or not (particularly when shopping for things such as electronics or fine wine).  We’ve also thought that something so cheap can’t be that good, because if it were, why weren’t they selling it for more?  The price of a product or service must have some relationship to its perceived value, or it has no credibility.

I previously wrote a series of blog entries on evaluating software ROI, and this is based on the principle that most products and services are purchased because of the value they bring to the customer, not their cost alone.  It’s a little too easy to forget this when times get tough.  But now more than ever, selling that value is paramount.

Rudy would have served me better by telling me that in this economy, everyone needs to hone their leadership skills, broaden their functional expertise, and grow their career. I suspect more people would have paid quite a bit more to do that.