What makes some companies charge less than others for their products or services? Are they selling value or price to their target market?
The difference between value and price has become a hot topic. Many businesses have started using “value” instead of “price” to describe their offerings. Your sales team or sales rep probably has started using these terms in their sales conversation with your customers!
Businesses are pressured to offer high-quality services at low prices in today’s competitive marketplace. This means that they need to differentiate themselves from competitors who sell similar services at higher prices in their sales effort.
We live in a world where people are very cautious about spending their money, and they are swift to object that “your price is too high”. So you wonder if you are selling value or price.
This desire for rock-bottom prices is why there will always be a company that will sell its goods or service at a lower rate than its competitors.
According to this article, pricing is more straightforward for physical hardware products where the cost of sales is known but very hard for intangible services and software where the price is usually “value-based”.
The article mentioned above notes that value-based pricing problems compound in markets with few standards, and there is an unfair or uneven basis for comparison with alternatives.
But as business owners, we have to take a look at our business model and ask ourselves: am I selling value or price? It is something we need to consider.
The Value Seller
According to this article, value selling positions the salesperson as a consultant, guiding the prospect through the purchasing process to find the best solution for their needs. For this reason, some people also refer to value selling as “consultative selling” because the salesperson adds value throughout the selling process.
Throughout the sales process, value-based selling focuses on the benefit to the customer. It leverages customer anticipation of enjoying the value of the item for sale.
Value-based selling prioritises and reinforces the customer’s needs over those of the business. It engages customers and creates a buying cycle where they are less focused on price and more anxious to realise the benefits.
When the company hires a salesperson, they put the person through their sales training and encourage them to leverage customer service and positive customer testimonials whenever they are in a sales situation with a current customer or lead.
The Price Seller
Usually, a low starting price is used to attract new customers with penetration pricing. The pricing strategy is used if the marketing objective is to increase market share. This method will result in lower profits but will make it up in increased sales and market visibility. A price seller strives to identify the optimum price for a product or service. Generally, there will be a price increase to a more profitable margin after a low-priced introductory period.
Difference Between Price and Value
According to this article, price is what you are asked to pay. Value is what you are willing to pay.
So the money customers pay you is your financial reward for providing the item, while the value is what your customer believes the thing is worth. Understanding this difference is essential.
For example, a $1,000USD phone might seem expensive to me, but you might think of it as great value.
When making investments, we need to learn to concentrate on value as entrepreneurs. Click To TweetSo as humans, we either buy an item or invest our money if we believe the value is more significant than what we are paying the company.
As an entrepreneur, to persuade your target customers to focus on total costs rather than on acquisition figures or amounts, you must understand what your customers value now and will appreciate in future.
To gain market value over your less knowledgeable competitors, you need to draw on your knowledge of what your customers value and would value.
Concentrate on Value
Long-term value is the underlying worth of a commodity. When making investments, we need to learn to concentrate on value as entrepreneurs.
According to this article, the monetary figure you see on that tag on an item at the store is the quoted amount for that commodity, usually based on sentiments and not the actual worth.
So as customers, don’t look at that figure. When deciding to buy, consider the value you derive from the brand. And as entrepreneurs, we need to help our customers to concentrate on value.
Concentrate on providing a quality brand to your customers and help them differentiate the superior quality of your brand from the competition.
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Going back to the phone example above, if getting that phone in the next twelve months is your goal, have you taken the time to understand that phone’s underlying value? Beyond the cost, does it have any intrinsic value that would positively affect how you live daily? Can its value withstand the test of time such that you will do so at an excellent second-hand value if you plan to resell it?
These are the key questions you need to answer. The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for.
Rather than looking only at the monetary figure, we need to look at maximising the perceived value. Make sure that customers understand that it’s not just the brand they are buying.
But they must also consider the research and development and the ongoing support you will give. The certainty of on-time delivery, your company’s history and reputation. The resources that went into your offering. These factors are worth a lot! Therefore, you need to make sure you educate your customers on this.
Despite your best efforts, you will not convince some customers. So what are you going to do when your potential customer says “No”?
The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for. Click To TweetYou need to realise that they have a choice, and if they reject your product or service, that is not a rejection of you as a person. So learn from this rejection and improve your product.
A single rejection does not mean that other potential customers do not see value in your product or service.
Frequently Asked Questions
Why Is It Important to Sell Value Rather than Price?
You can’t price your product or service if it doesn’t have any value. If you are selling something with no value, you will not get paid. There is no way to sell anything without having some value. If you want people to buy from you, they need to know what you offer them. People who are willing to pay for something usually have a reason to do so.
Selling on value, not price, involves a balance of confidence, personal rapport, and doing your homework. It’s become more complex as technology gives consumers greater access to price information and competitors.
What Does Value Mean in Sales?
In business, the sale value of a product or service is the amount of money it would make if it were to be sold.
What Is the Value of Selling Price?
The selling price is the amount customers pay to purchase a product or service and includes the value of an offering plus a value that covers the costs of selling the offering or the cost of goods sold.
How Do You Sell Not on Price?
A good reputation is worth more than money because people buy from people they like and are more likely to become repeat customers. People who do business only with those who charge less are more likely to go elsewhere, looking for the seller with the lowest price. There is no loyalty with such people neither do they become repeat customers. People who do business with you online or in-person or over the phone are much less likely to do business again if their experience was terrible.
Conclusion
Understanding the value in business markets and doing business based on value delivered gives suppliers the means to get a fair return for their efforts.
If you are only selling for a particular amount, you soon recognise that when there is market pressure on this amount, your brand needs to respond by demonstrating that you have something different to offer your customers — something that will provide superior value.
Once you can assess and truly understand the value you provide in the industry, then you’ll be on your way to making a healthy profit.
In conclusion, it’s essential to understand how to sell value, whether you’re selling physical goods or digital services. Do you want us to assist you further with this? Schedule a meeting with us today. We will be glad to help.
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