It’s Not the Price, It’s the Value!

It’s Not the Price, It’s the Value!
By: Mark Norato
I recently visited a local hardware store to purchase several gallons of paint for a remodeling project my wife and I had undertaken. After I found the color I wanted, a clerk walked up and asked, “Can I help you?”
I answered “I’ve found the color that I want, but honestly, your prices are higher than the Wonder-Mart super store down the street.” The clerk immediately replied, “Sir, you’ve selected our premium brand paint. It comes with a five-year warranty against fading and peeling and will cover in one coat. Because of the way it’s blended, scratches and other surface marks will wash off easily. I’m very familiar with the Wonder-Mart brand, it’s a good, lower-end paint but it has no warranty, and you will probably need at least two coats depending on the color you’re painting over, so it’s not really the bargain it appears to be.” I nearly fell on the floor! This 20-something year old clerk working at a hardware store in Conyers, Georgia understands what most sales professionals don’t…it’s not the price, it’s the value!
The clerk could have chosen to defend his price, which would have been a losing battle since his product was already higher priced, and I was convinced based on my limited knowledge that paint was paint. He could have offered me a discount, which would have only reinforced my opinion that his product was no different than the Wonder-Mart brand in addition to depleting his margins. Or he could have bent himself into a pretzel like so many sales professionals do by using some sort of manipulative sales tactic to “overcome” my price objection. Instead, he simply chose to sell the value of his product in a straight-forward manner that helped educate me on the fact that paint was not paint. This exact same scenario takes place every day in B2B sales, only in most instances the sales professional almost always falls back to selling price.
Consider this fact … regardless of the product or industry segment you’re selling into, when customers are presented with price versus value decisions, 73% of the time the purchasing decision will be based on factors other than price. This is not to suggest that price is unimportant obviously is however, it’s typically not the primary driver in the purchasing decision, although most sales professionals seem to believe otherwise. This principal should not seem all that extraordinary. If price was the only thing that mattered, we would all be driving Yugo automobiles and purchasing our clothes at Wal-Mart. The fact that Toyota commands a premium for its automobiles and department stores such as Nordstrom’s thrives on selling premium-branded products proves otherwise. The key point here is that unless you explain what value your product or service brings to the table, the client is left to think that price is all that matters, in which case the cheapest will always win.
Understand your customer’s needs and expectations and how your product or service meets those needs. Your current customers are your best source of information use them! In doing so, consider:
* What selection criteria did they use in picking your company?
* How did they evaluate the competitive landscape?
Understand your competitor’s products and services and what truly differentiates them from you. Typically companies face the same competitors all the time. Do your homework. Ask yourself:
* If I was the competitor, what value proposition would I be selling? Is it price, service, functionality, reputation, etc.?
* How would I differentiate my products and services?
* Other than price, what components of my product or service can be used to differentiate and drive value?
Use a consultative approach as opposed to that of a vendor. Ask plenty of questions to understand your prospect’s business, his or her specific problems and challenges, how your product will be used, etc., and then position your value proposition around these areas.
Focus your selling efforts on the market niche where you add value. Forget about chasing the 27% of any market that purchases on price alone; let someone else pursue these low-margin, no loyalty customers.
In summary, you have a clear and distinct choice when it comes to dealing with price and value. The way in which you respond will either drive the decision towards one extreme or the other. Beyond the basic information contained in generic marketing or sales brochures, very few sales professionals today truly understand the value differentiators associated with the products or services they sell. By spending just a few minutes THINKING through the above bullet points, you’ll be better prepared to deliver more compelling value propositions.