I remember speaking at a sales conference for a major industrial company a number of years ago – in Copenhagen coincidentally. I arrived the evening before and had dinner with the client. Almost everyone I spoke to told me that they delivered “great value” to their customers. In fact, I was told this so often that I decided further investigation was required. The following morning, at the start of my session, I asked the various groups to define value. There were probably around 10 tables of 12 people. The result was 10 different definitions, one of which is now the definition of value that we use (you’ll need to be at the conference to find out what it is!) It became apparent that not only couldn’t they define value, but that they had no real idea of the constituent elements of value – what we call The Value Triad©.
On many of the workshops I run I’m regularly told how wonderful the company’s products or services are and what great value they deliver. Despite that, their prices are frequently the same as, or less than, the competition. When asked why, there are usually a variety of answers including “If we put our prices up we’d lose the business” to “our customers only care about price”. But there is one reason they rarely give us – that they don’t understand value and how to quantify it in monetary terms.
Conversely, there are companies that tell us that their products are commodities and that their only real differentiation is price. Frequently they turn out to have a larger market share than their competitors – suggesting they are delivering something over and above competitors that their customers value.
The problem that many sales people face is that they simply don’t understand value in enough depth to feel truly confident and discussing it with customers. Without that understanding it is all too easy to revert to price as the primary differentiator. This is what I call the “discount default”. When any pressure is applied the first response is to offer a discount. Buyers know this, so whether you really are too expensive or not, most buyers will tell you that you are – in the almost certain knowledge that they will get a discount.
The role of the sales force in delivering pricing excellence cannot be underestimated. They are one of the key points at which your business and the customer’s business truly meet. As a result you need people who feel comfortable exploring and identifying customer’s key challenges and issues, communicating those back to your business, and then effectively communicating your differentiated solutions to the customer. And capturing some of that shared value through effective pricing.
Co-Author of the book “Value-Based Pricing”