Why should we care about value?

By Philip Huthwaite on December 2, 2014

I attended a Professional Pricing Society Conference in November, and one of the speakers made an excellent quote:

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There were a few giggles in the room, and perhaps we should use a politer term like "guts", but either way this statement is very true. All too often we're so worried and focused on price, that we forget about the value we are giving to our customer. Our go to approach if the customer puts up a blocker is to discount. 

 

What is value?

Some clever chaps at Axia Value Solutions have come up with a great diagram to explain. Entitled "The Value Triad", they suggest it is a combination of Revenue Gain, Cost Reduction, and Emotional Contribution.

The Value Triad
Source: Macdivatt, H. & Williamson, M., Value Based Pricing. McGraw Hill (2011).

 

Why should we care?

There are 3 types of buyers:

  1. Price Buyers
  2. Value Buyers
  3. Partners.

Approximately 60% of buyers are typically Price Buyers, who are mainly concerned with getting the best deal and seeking the biggest discount.

If we can communicate the value of our product or service to these Price Buyers (Type 1), we can subtly move them into a higher category (Type 2 or 3).  Once we do this, the focus is no longer about Price, and instead looks at what you can bring to the Customer in terms of The Value Triad.

With value, it is easier to justify and defend a higher price. A higher price means you are happy because you have grown the profitability of that sale; but the best part, is that the customer is also happy, because they are clearly aware of the amazing value you're going to bring to them.

 

Conclusion

So the next time you're face to face with a buyer who is challenging your price, don't immediately push the button on a discount. Remember buyers have trained extensively on ways to get good deals. Instead turn the discussion to articulating the value you will bring and stand by your price. You will be surprised by the results and think "why didn't I do this sooner?".

 

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