What's More Important,Price or Value?
I have coached sales teams that tell me their product is a commodity, and I have had sales professionals that never lower their price and are top producers in their field of competitors. What is the answer; value, price, or both?
According to a recent study on consumer spending, only 14% of consumers shop based on price alone. Another study done by Capgemini found that 8 out of 10 consumers are willing to pay more for a better experience. Do you see a pattern emerging?
Value is subjective, and so is a price. If you offer me the best organic eggs in the world and discount them to one cent, I will still not be interested in buying them. Why? I am allergic to eggs. See it does not matter what the price is if it holds no value for the buyer.
Value is distinctive. How well do you know your customer, your market, your competition? If you do not know all three very well, you will be forced into the sea of commodities.
Why should a buyer pay more if they do not recognize your value? If you tell me you have the best service, I will ask you why. If you say you have the best quality, I will ask you why. I will keep asking why until the answer you give is so unique your competitor could not in truth say the same thing. I will keep asking why the buyer should choose you until you tell me two things. One, your unique value; two, what that means to the customer in a clear, distinctive way. Only then can you define your value.
I understand buyers beat you up over price. I get it. In some companies, that is their job. Just because they ask for a discount does not mean you have to give them one. Be prepared for the price question, and understand the value you bring to the customer well enough to describe in detail the reason for the price you charge.
Reasons Not to Discount
Why not discount? There are many reasons why you should not discount your offering. The cost of supply, labor, and taxes do not go down over time for a business. If you discount routinely and the costs of doing business continue to rise, you will reach a point where the company is losing money.
The customers you will lose will be marginal. It makes sense for a business to have quality over quantity, even in the client arena. The cost of doing business with people who only care about the price is not worth it.
You do not want to be known as the company with the lowest price. This will haunt you and the business the rest of your career. Buyers will come to you first, but rarely will they buy from you.
There will always be low-cost competitors in the market place. A small percentage of buyers will always keep them in business. Understand your value, and you will not be a commodity in the marketplace.If you think about your own shopping experience, rarely do you decide on price alone. Most people do not. If the price were the only measure, there would be no market for good, better, best or luxury items.
Hope this helps the next time you face the dilemma of discounting.