Duuuugh! What a great observation on the obvious—“If all else is equal, price wins!” You must be asking, “Dave, is that what your clients pay you for?”
Actually, they do. I am constantly surprised at how complicated people can make around the concept of creating value—for your customers, partners, stakeholders, others. Millions of dollars are spent on consultants every year, hundreds of pages in books, magazines, and journals. Everyone is looking for the silver bullet in maintaining their pricing or margins for customers, how to minimize discounting, and other similar issues.
It is so simple—-if the customer cannot perceive any difference between the alternatives offered to them, then they are forced to make the lowest price decision—to think anything else is idiocy.
So what does this mean? It means that the organization (sales, marketing, others) must create meaningful differentiation. They must find a way—important to buyers—to set themselves apart from the alternatives. If this cannot be done, the only way to win is with the lowest price.
There are all sorts of ways to do this. Discussing them is not the purpose of this blog. It is important to realize that value is in the eye of the beholder—it is the customer that determines what value is. The elements of value can include all sort of “hard” and “soft” things.
In the end, this is not rocket science. Executives should not be surprised. Executives should not be asking how do we maintain our prices—this gets you down the wrong path. The critical question is “How do we create compelling and differentiated value for each customer?”
Your thoughts?
Dave,
This is a classic post.
Price is easy to explain, value is not. Companies should focus more on price and not on value. When I hear the ‘V’ word, I know I am talking to a sleek sales guy trying to rip me off.
Jay: I can understand what you are saying about sales people using the “V” word. It has been misunderstood, misapplied, and is too often a manipulation–having absolutely nothing to do with value. Having said that, it doesn’t mean we abandon our focus on creating and communicating differentiated value. We have to improve our ability and authenticity in execution. If we are going to compete at a higher price and want to win, then we have to make value the differentiator and get the customer to set the value we create as the baseline by which they evaluate alternatives.