In our past blog posts; “Seven Key Questions to Uncovering Economic Value” and “Value Based Selling: Win Price Negotiations on Value,” we provided value based selling techniques to help manufacturers and distributors maximize profits during price negotiations. Our pricing experts direct on how to use the value your product or service brings to the buyer to get the price you deserve. So how do you quantify the value your product or service delivers?
Value for manufacturers and distributors is comprised of a number of elements designed to deliver benefits to the customer. A basic value framework consists of two elements that are measurable and one that is not. Measurable elements include items that reduce business costs or risks and increase business performance.
1) Quantify reductions in business costs or risks:
• Labor costs
• Transportation costs
• Material costs
• Product or manufacturing defect rates
• Floor space requirements
• Warranty returns
Each of these elements is easily measurable and can be presented to the buyer in quantitative terms.
2) Quantify increases in business performance:
• Cash flow
• Profit margins
• Web-based inquiries
Each business has its own measurable value elements that are critical to its business success. The key is to identify the most important value points for each buyer or buying influence.
Finally, intangible benefits may be considered. However, the inability to measure these features makes it difficult to consider when selling economic value.
3) Emphasize additional intangible benefits:
• Brand awareness
• Employee retention
It is very worthwhile to spend time with your team identifying all of the economic value elements your company delivers to customers. You may be surprised at how many value elements you can identify. For best results, conduct this exercise in a team environment. And remember: Quantifiable value is key. Intangible value like morale improvement is helpful but takes a back seat to quantifiable value.
Your objective is to assemble your economic value argument in the form of an ROI or whatever metric the customer uses to make buying decisions. Rather than argue price levels with weaker intangible benefits, sellers are now in a strong position to negotiate pricing on a level playing field with the buyer. Each party is talking dollars and cents. The buyer will try to remain focused on the price point while the seller will focus on the delivered economic value.
The pricing experts at Price Point Partners deliver your manufacturing or distribution operations team with experienced advice and proprietary tools to analyze your current pricing, propose a more profitable pricing strategy and teach your sales team how to maximize profit with our Selling for Profit™ onsite business to business sales training program. Contact us for more information at 330-342-0923 or fill out our contact us form and a pricing consultant will be in touch: http://pricepointpartners.com/pricing-consultant.