How to position price in the context of value
Buyers go through many phases on their journey from thinking there might be a business problem to finding a product or service to solve it. Initially, they may not be aware that there is a specific need, only that there is something off, small difficulties that they are ignoring as just part of the job. Eventually, they will discover that there is a real need. It’s here that they start to investigate. Buyers today are well informed and arm themselves with a great deal of information before they ever engage with a salesperson. In this second stage, their great concern is need. What is the exact nature of the issue and what is the way to solve it?
As they enter this second phase of the process, their focus turns to the best solution. They have a very good grasp of the difficulty they are facing and begin in-depth research into the possible solutions available. Here they will look at multiple companies and multiple products. They will research features and function, attempting to know if this solution matches their needs. As they narrow their search down they will begin to evaluate the risk involved. What will it take to implement this new product? How much will it cost? Can my people be trained to use it effectively? The possibility of not seeing a return on the investment looms large and negotiating the best price to mitigate this risk becomes one of the most important factors.
Eventually, they will choose a solution that best solves their basic need. Price is still a powerful driver in the end, one that determines which products and services they purchase. As a seller, maybe price isn’t the driving factor behind your product. Perhaps it provides a better service or delivers higher functionality, but maybe it will always cost more. How do you position yourself to compete against competitors that will attempt to undercut you on price? The answer lies in making value the centerpiece of your sales discussion.
Know the buyer phase
As a seller, each time you engage with a buyer, they will be somewhere in one of these phases of buying. The earlier you engage with them, the more control you will have over the conversation. With early stage buyers, you can more easily position yourself as a partner and a consultant, helping them choose the best solution for their given problem, and in some cases, even helping them discover what that problem is. Through a consultative dialogue, you can build trust with your buyers and help them to recognize the value in your solution, what the return on investment will be, and how it solves their problem. Allow the buyer to drive the metrics that define what value is to them and work to ensure your product or service meets those benchmarks. By aligning the value analysis with the buyer, it keeps you both on the same page and takes the focus away from just hammering on a price point. This will also put the value in real numbers that decision-makers can see.
Sometimes, you may find yourself engaging with a late stage buyer, someone already looking at multiple options and with a great deal of knowledge around their vision for a solution. Even if you are not completely in the driver’s seat of the conversation, all is not lost. By focusing on the value of your product, by closely listening to the determined needs of the buyer, and by re-engineering the vision they have created to align with your product or service, you are still able to demonstrate the value in your solution and position yourself to close the deal.
Ways to demonstrate value
There are several ways to accurately demonstrate value while either engaging in a consultative dialogue to discover solutions or re-engineering a vision after entering the process at a later stage:
- Show how the product will improve revenues
- Demonstrate how the product will eliminate costs
- Show how the product will eliminate future risk
The first is by highlighting the capabilities your product or service has that will help the buyer increase revenues and profits. You can demonstrate that your product or service will reduce the amount of time needed for certain business practices, increase the company’s ability to react to new competition, increase the company’s market share, or increase their demand. Focus on how, by investing in your product or service, the return will be well above the cost of implementation. The business math on a value added such as this works out every time.
The second way to demonstrate value is by showing how your product or service helps the buyer eliminate an existing cost to improve profits. Show that your product reduces headcount and improves productivity, demonstrate that it reduces equipment or maintenance costs, or show the buyer how the product reduces inventory costs. The overhead of employees, equipment, and inventory are always major concerns for buyers in every stage. By showing how your product or service reduces those heavy costs, it will make sense for them to buy.
A third way is to show how what you are selling can mitigate the risk of future costs and provide a greater sense of financial security. If, by making an employee’s job easier, it reduces overtime or lowers the risk that they will turn over because the job is untenable, or if you can demonstrate that your product can ensure that vital equipment is down much less often, then it will demonstrate inherent value. Buyers naturally take these costs into account and by quantifying how your product or service reduces the risk of unforeseen costs, you can demonstrate value well above the price point.
Quantifying value
In some cases, the true value add has no definitive dollar amount attached to it. Perhaps the product improves employee morale or the company image. It’s possible to use these intangibles as some leverage in the bargaining process to further demonstrate added value of the product or service. If, however, the main purpose of your product or service is an intangible benefit, it may be more difficult to properly position value.
Once you and the buyer are on the same page as to the potential value added, that value must be quantified. Both sides must agree on what constitutes success criteria for the implementation of the product and what determines if it is generating value for the company. It is important not to position the success factors too broadly, as they may not provide a good indication of how effective your product or service actually is.
Conversely, it is important not to focus them too narrowly, as you may miss the agreed upon metrics entirely and end up with a dissatisfied customer. Go back to the problem that the customer is trying to solve. What specific metrics will be affected by your product or service? Do you know by how much? If you do, focus on these as your success criteria and consider which stakeholders you need to maintain relationships with to keep track of that information.
Don’t sell products, provide solutions
By continually focusing on value, not price, you can help your buyers understand the return on investment potential and retain a non-combative negotiation as you both work toward solving a mutual problem, providing the best solution to the buyer, and creating value for the company. Haggling vigorously with buyers over price or attempting to undercut your competition on cost is no longer as effective as it once was. Demonstrate the value in what you sell, show how it will affect their bottom line, and focus always on learning about your buyers need so that you are not just selling a product, but providing a solution.
