Maximizing Your Price - The Value / Benefit EquationThe Value / Benefit Equation & Customer Mark Hunter
Price increases are currently occurring at a faster rate than we've
seen in the US economy for nearly 25 years. The driving forces behind
these increases seem to be the rising costs of labor, raw materials,
etc. Although these are certainly valid, the real reason for these
price increases should stem from the value of the product or service
you're selling, not the cost associated with them. Unfortunately, for
the past two decades, there have been many companies leaving billions
of dollars of profit on the table because they've been basing their
pricing on cost rather than the value / benefit equation. However, if this was true for
all items in today's marketplace, then we'd all be paying a lot less
for tickets to concerts and sporting events, as well as items like
computer software, DVDs, etc. When companies understand that the real
profit is made by pricing their items according to the value / benefit
of what the customer is going receive from their product or service,
their bottom line will reflect it. Over the years, I've found that the
larger the company, the more confident they are with their role in the
marketplace, and thus the more confident they are in pricing themselves
based on the value / benefit equation. Small companies, on the other
hand, are less confident and are more likely to set prices using the
cost-plus model. Although there are many successful companies that use
the cost-plus model including Costco and Wal-Mart, I believe it's
imperative for every salesperson, no matter who they work for, to push
themselves to the value / benefit equation. As a salesperson, you should never allow yourself to get steamrolled into a price increase discussion with a customer that is centered solely on raw costs. Whenever you present a price increase, always begin by asking them questions about the benefits they receive from what you're providing them. This allows the customer to better understand the importance of you and your company to them. Encourage
them to explain how you fit into their supply-chain model or how you
impact their overall business process. The key is to get the customer
to share with you something specific and unique about how you help
them. Then, to further drive this point home, ask them follow-up
questions based on what they tell you. Their specific responses will
reiterate the fact that you and your company are an important asset to
them. Once you have achieved this level of dialogue, you can then
share your price increase. Because they realize how crucial you are to
their success, they will be less likely to raise any objections. At
this point, you will have achieved the value / benefit equation you're
looking for and the higher price you deserve. |
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