Are You Undercutting Product Value?

Are You Undercutting Product Value?

The strategy of pricing products and services based on value is predicated on effectively communicating value during the selling process. An increasing number of manufacturers and distributors are moving toward a value-based pricing strategy – that is, setting prices according to the value, and specifically economic value, that the product delivers to the user.

Are you undercutting product value?

Pricing to value can be successful only when buyers clearly understand the benefits they are receiving before the purchase is made. Communicating value is often a key component left out of the value-based pricing scenario, yet it needs to start the moment you meet a new prospect. Your very first presentation of your firm’s value proposition is key in setting the proper value perception in the eye of the buyer.

Ask 10 of your sales reps for their value proposition; more than likely you will get 10 different answers. You may be surprised by the inconsistency and weakness of the actual value present in these statements.

However, creating strong value propositions is not terribly difficult as long as you have a structure to follow. Below are the key elements to a strong value proposition:

  • Identify the target audience.
  • Identify the cause of the pain or problem that we can relieve.
  • Present our solution. Keep it to one simple sentence.
  • Describe how we solve the problem.
  • Present the benefit to the customer.

Value Proposition

Different situations may call for slightly different value propositions. Here is one used by PricePoint Partners for our sales training program. (And, no, this isn’t a shameless promotion of our services. We just happen to have a pretty good value proposition statement.)

PricePoint Partners helps manufacturers, distributors and B2B service companies that are frustrated with negotiating with buyers who want to focus solely on price.

We provide the knowledge, strategies and tools to sales teams to move discussions away from price and toward value, thereby closing more sales more profitably.

PricePoint Partners delivers a one-day onsite training program for sales teams that instills the confidence and capability to sell value and defend price effectively.

In the end, our clients sell more and see a profit improvement of 1.0% to 1.5%, or $100,000 to $150,000 on $10 million in effected revenue.

Keep your value proposition to four or five sentences. You are only introducing your capabilities and igniting a conversation to qualify a potential buyer. More detailed discussion can follow.

Once you have fine-tuned your value proposition, have your team memorize it but make it sound conversational rather than recited.

The process of developing a value proposition in a team environment can be somewhat challenging to the participants as they strain to truly verbalize value. But ultimately these discussions are vitally important – leading to a better understanding of not only value but also competitive advantage within an industry.

Contact us today to learn more about our pricing strategy training for executive and marketing teams. We also offer value-based sales training for sales teams.

About the Author

Ralph Zuponcic

President, PricePoint Partners

Ralph is a national authority on strategic pricing. He has been featured in publications including The Wall Street Journal, Fortune Small Business, CFO Magazine and Marketing News.

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