Real Benefit Provision

To command a price premium, a firm must offer unique value that is sufficiently compelling to customers to warrant the additional price of acquisition. In economic terms, from the customer’s perspective, the value being offered must provide a higher utility than other sources of similar value.

Firms sometimes with benefit provision because they fail to design and offer unique value that compels customers to “trade up.” The following are some of the necessary conditions that real benefit offerings must posses:

1. There must be fundamentally distinct and unique differences in the design and technology of the offering. Under this thinking, quality is a given – a hygiene factor, if you will. The product or service simply must be free from defects and perform as intended, first time, every time.

2. The functional performance provided by the offering must be superior to that provided by rival offerings. Customers must realize tangibly superior results from using the offering. Making improvements to a product or service which makes the offering look different do not count.

3. To compel the customer to move up the price ladder, some form of emotional engagement must take place. This can be achieved through brand values and cache, or “pampering” where the customer receives exceptional support and service over the life cycle of the offering.

The degree to which firms can satisfy these requirements for benefit provision will determine the degree to which they can realize the price premium they charge.

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