Mailbag: Price Vs. Value in Sales

price vs value

Hi Mike,

I’ve really enjoyed some of the advice you’ve given on your blog recently about the various aspects of sales. But I do have a question: what are your thoughts about the importance of price as it relates to winning new customers? Marketing strategies and other things are nice, but lately, it seems like price is the only thing that customers care about. I would really appreciate your input on this.

Tom D.

 

Hi Tom,

Thanks for your email. You bring up an important topic, and it is one that I’ve encountered numerous times over the years. I agree when you when you say that price is one of the primary things that customers use to make a decision. And candidly, I would also argue that for a small group of customers, price is the only thing that they use to make a decision.

With that in mind, it is important to note that the amount of customers who only use price to make a decision is much smaller than you might think. Instead, I believe that customers initially focus on price because they assume that they know the value at which a particular item/service should be priced. Before a salesperson decides to “give up” on a customer who won’t budge on their bottom line price, ask them to itemize the value equation of their proposal and compare it to the competing price. Remember:

It is very rare that offerings of truly identical value are dramatically different in price. Any time a price is substantially lower, there are usually key value components missing.

These missing components are usually things like hidden fees, lack of insurance or warranty, required minimums (or maximums), unstated travel times and countless others. And unfortunately, many customers are unaware of these things and only find out about these value differences when it is too late.

Itemizing your proposal’s value equation may be time consuming; however it can be a useful strategy when winning over certain customers.

What do you think? What is the relationship between price and value in sales? Leave your thoughts in the comments.