Contacts, Cost, and Value

A few months ago I installed a contact manager app on my phone. I was quite pleased with it; so much so that I also installed a desktop version of the software on my Mac. As you might gather from some of the stuff about which I rant here on the screed, I read fine print pretty carefully. When I did these installs there was no mention of a trial period nor a limit on the number of contacts. It was quite clear that the version I was using had a premium option with more features, but I was just fine with the basics I was getting for free.

Last week, after a few months of use, I got a message when I opened the app that I would have to upgrade since I had over 1,000 contacts. In fact, I have 2,325 and have had that many for nearly all of the time I’ve used the app. The app no longer performs the free basic stuff it did before. The premium version is $100. Per year. No thanks.

I checked out some other contact apps. Some are also $100 a year, some are $100 once, and some are $2. Based on reviews, there doesn’t seem to be a huge difference between many of them; certainly not a factor of 50 or 100 times with respect to usefulness. Putting aside my anger at my previous app’s misleading and dishonest app store copy which makes no mention of a contact limit, I started to think about one of the most basic business ratios: the cost/value relationship.

Customers assign value based on the benefit they receive – how well you solve their problem – in the context of what it costs them for the solution. Warren Buffett explained it as price being what you pay and value is what you get. Any of us in business need to do that in the context of what other solutions are available and what they charge. A new Lexus and a used Volkswagen but solve the transportation problem but they are only comparable solutions on the most basic level (they both get you from point A to point B). The mistake many of us make is that we look at our unique benefit from our own perspective rather than that of our potential buyer. While we may see the multitude of features our product or service provides, most customers don’t. They see a price tag, first and foremost, and while they might love to have the Lexus they aren’t willing to assign a sufficient enough value differential to the great customer service, the luxurious interior, or the better ride and handling to make up for the large price difference.

I’ll find another contact manager. I don’t even mind paying for one. Like most consumers, I do mind the bait and switch that happened here (and I’ll post a review to that effect in the store). Whatever value we believe justifies the cost we ask customers to incur, we need to be upfront about it as we try to justify the reasons why we’re worth it. Make sense?

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