Price Your Value, Not Your Cost!

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Price Your Value, Not Your Cost!

Written by Stu Schlackman

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Selling Strategies - Solving the Pain or Creating a Gain

Customers make decisions emotionally and back them up with logic to justify their decisions. Our goal then is to ask the key questions that get to the heart of the decision maker and build trust and confidence leading to a long term consultative relationship. We need to be a partner to the customer and not a vendor.

Of course the answer is “it depends.” The more important question to the customer is “when it comes to investing in the solution, what’s most important to you?” That will more closely address which is more important, solving the pain or creating a gain.

Customers make buying decisions based on needs. As Miller Heiman mentions in their model, customers take action when they are in “trouble” or “growth” mode, not “even keel” or “overconfident.” So the need is generated from a problem or challenge they are facing or the potential growth or gain they are looking to achieve.

Customers also buy for both business and personal reasons. The business reason is tangible and objective, the “Result.” It’s to increase productivity, decrease operation expenses, improve market share or their competitive position. The personal reason is the “Win.” This is the intangible and subjective result which says what it will do for the decision maker. Will it give them peace of mind, a promotion or a bonus? Both business and personal reasons drive the decision, but understanding which reason might move the customer to decide is key.

In Rick Page’s book “Hope Is Not A Strategy” it says this about pain. “Pain doesn’t come from the business problem; pain comes from the political embarrassment of the business problem.” I believe this is so true. Customers don’t make decisions until the pain hurts to a point that it must be alleviated, which includes their own embarrassment for not taking action. Pain needs to be heightened from both the business and personal perspective. We need to explore with the customer which need is hurting the most. Pain is a present existing condition, which is easier to address than exploring potential gains, which is a promise in the future. Rick also says that to create a sense of urgency to close business, we must creatively take the invisible costs and make them visible and politically painful. In other words we must put a price on the customer’s procrastination. Giving out more price cuts or discounts doesn’t create a sense of urgency to buy unless it’s for a stereo system on sale just for the day! With complex sales situations emotional issues usually override cost justifications.

I agree with Rick Page that emotional and political problems drive buying activity more than logical ones. That’s why we scratch our heads when our pipeline forecasts look like a cloudy weather report. Customers make decisions emotionally and back them up with logic to justify their decisions. Our goal then is to ask the key questions that get to the heart of the decision maker and build trust and confidence leading to a long term consultative relationship. We need to be a partner to the customer and not a vendor. Vendors sell hot dogs. When we become a trusted partner the promise of the “gain” in our solution becomes a reality to the customer based on their confidence and our track record to deliver.

We should always prepare questions prior to our meeting with a customer which can gain us credibility and earn us the right to continue down the path to winning the sale. Most sales people don’t ask the tough questions since it will ruin a perfectly good forecast. Some example questions that I like to use to engage the customer are:

How have these issues impacted your business?
What are the critical success factors you expect from the solution?
What is most important to you for this project?
What other impacts might this problem have on your business?
What do you see as the benefits in solving the problem?
For you personally what’s most important?

These are some examples of some pain and gain questions that can help us to dig deeper into the real issues the customer is facing from both a business and personal perspective. Asking our customers better questions gives us better answers and a leg up on our competition.

Good selling!

How does the prospect view your solution? Will they buy or decide to wait? Is there a sense of urgency on their part to make a decision? My favorite saying is, “If you can’t price your value, all you can price is your cost.” If that’s the case, the customer views your solution more as an expense than an asset which means they can live without it. Perceived value must always trump the cost of your product or service. Customers buy when it’s obvious to them that the benefits of the gain or alleviation of a pain far outweighs the financial investment.

Perceived Value vs. Cost
Let me give you an example. Let’s say Joe goes to the doctor for his annual physical and he’s told he needs to lose twenty pounds. The doctor tells him about a new diet that will help him lose the twenty pounds in six weeks and the cost for the diet is two hundred dollars. Joe weighs the cost versus the benefit of the weight reduction and comes up with the decision to hold off. Why? Well, Joe knows he needs to lose twenty pounds since his doctor has mentioned it the last five years. Is it too much money? Can Joe do it on his own (well he hasn’t in five years)? Let’s make one change to this scenario. Joe’s doctor says if he doesn’t lose the weight this time he’ll have to start taking medication to get his cholesterol down. Joe asks how much the prescription will cost and the doctor says roughly $250 per month until his deductible is met. Now we have Joe’s attention to take a harder look at the diet for $200. Why? The perceived value of losing the twenty pounds just moved up and become more important than the $200 for the cost of the diet.

Customers buy when they see a perceived value that outweighs the cost of the investment. What we need to realize is that there are three components of value; economic, business and personal. All three have an impact on the customer’s view of the investment.

Three Types of Value
Economic value is the financial impact of the investment. What will be the return on the investment? What will it do for the company financially? Will it cut operational costs, increase inventory turns, increase revenues or cash flow? Economic value is of most importance to the economic buyer compared to others that might be using the solution for the business benefits.

Business value is the primary consideration to the user of the solution. What can the investment do for the organization and how can it increase productivity, increase efficiencies and effectiveness for those that use the solution. The problem with business value is many times when we sell to the user group that sees great value; they can’t convey that value to the economic decision maker such as the CFO. In other words the business value needs to be conveyed in economic terms to other decisions makers involved.

Personal value is the third type of value that needs to be considered. This is more of an intangible value. What will the decision do for me personally? Will I get a promotion, a bonus, peace of mind, or improve my influence with other organizations? Personal value is equally as important as the business and economic and sometimes can be the determining factor in the decision. Why? We need to understand that in the brain emotions always trump logic. We make decisions based on emotion and then back them up logically. Personal value can only be uncovered when there is trust and a strong relationship with the decision maker. We also need to realize that personal value will be different for each person involved in the decision making process since personality styles influence what is valued.

As sales professionals we need to understand each aspect of value and how it impacts each of the decision makers. There is not a “one size fits all” for value. Asking the right questions will help you understand what’s most important to the customer.

Here are some example questions that address each type of value:

What do you consider being the most important benefit of this solution to your business?
What is the most important financial consideration for this investment?
What are the benefits of this solution for you personally?

Good Selling!

Stu Schlackman
		About the author:
		Stu has spent over 25 years in sales management, sales and sales training with world class companies like Digital Equipment Corporation, Cap Gemini and EDS. His focus is on “the application” of the skills and techniques he shares. He is the author of Don't Just Stand There, Sell Something and Four People You Should Know. .