Marketing Series Article Selling Value...Part One They may not ask for it...but it’s what your customers want! by Dick Barnes, Principal, The Freeland Group As the economy tightens up, and budgets do the same, our customers are looking harder to find real value in everything they buy. Often times they don't clearly know when they do or do not receive value for their money, but they do have definite feelings in that regard. When they don't believe they have received value, we are to blame as we either failed to understand the true value of our products or to communicate those values to our buyers. Value is simply the quality or utility of a product in comparison with the cost. There are many components of value that may, or may not, be attached to certain products or services. For instance, if you are in the maintenance and repair business your customers might measure value by such components as timeliness, quality of work, follow-up, and problem resolution. After the service is delivered, the overall results will be measured against the cost of the work and the customer then decides whether you have delivered value. To perceive a positive value outcome, the customer must feel they got more than they paid for, or at the very least a fair return on their money. In a service business like the fore-mentioned maintenance and repair firm, the word "feel" is an important point to keep in mind as much of the value the customer receives is "intangible value." Two such firms may deliver the same product yet leave customers "feeling" very differently about the results. Taking the measure of intangible value is usually a subjective and difficult operation. It's also important to remember that every product has a service component of some type, so this potential "feeling" is always a possible outcome. Every product has some measure of intangible value just as it has some measure of tangible value. Even outside of the service aspect of a product, a tangible product has intangible value that can make overall value a difficult thing to measure. A good example can be found in foreign made products. In the first few decades after the Second World War products from Japan were generally thought of as low in quality. This remained true even when the quality of those products began to match, then to overcome, other nation's products. It took many years for the tangible value of Japanese electronics and automobiles to be recognized therefore increasing their intangible value. Today, products with brand names like Toyota and Honda are considered a good bet to return value for your dollar. As managers, we must make certain not only that our customers receive a positive value from being our customers, we must also be sure they understand they have received that value. You can give them all the value in the world, but if they don't consciously know it you could be out of business in short order. To avoid such disaster we need to be able to communicate value. Tangible products are the easiest to paint a picture of. In the business-to-business world many components of value are tangible and lend themselves to decision making based on the concept we call Net Present Value. This commonly embraced principle takes into account costs and the current value of future revenues in order to make purchase decisions. When we introduce our product to a buyer, we often miss the opportunity to communicate the true value of the product over time. Salespeople should take this into account and not simply leave it to the prospect to make their own calculations. I once met a salesman of machine tools, the manufacturer of which always put out three levels of each machine at three different prices and with three different life expectancies. This salesman could have simply introduced models A, B, and C and given the specifications and prices of each. That's exactly what the average salesperson would have done. Instead he introduced the products not as three different machine tools, but as 18,000 completed functions, 22,000 completed functions, and 28,000 completed functions. He knew most buyers would rather have 28,000 completed functions than 18,000. He gave them a volume price on completed functions, at a lower cost per function, and they realized the greater Net Present Value. The buyer also was reminded he wouldn't have to go through the purchase process as often, and that saved time and trouble. The other salespeople with this company were always selling the cheap models…but this particular salesman always sold the top of the line. In affect, he helped the buyer through a "value analysis;" a process which is sometimes used by the members of buying centers to help make purchase decisions. When the people in the buying center use a value analysis process, the salesperson who doesn't clearly communicate all the components of the product's value is not likely to get the order. A common error in this regard is that the salesperson does not recognize what level the buyers are operating on. He may assume they are "price conscious" buyers (looking for the cheapest possible deal) or "prestige sensitive" buyers (looking for the highest quality product or best known brand name). More often, today, they are "value conscious" buyers who want a combination of quality and economy…in other words to get an optimum return on investment. The sales spiel used might be completely wrong, and even communicate the opposite of what the buying center members want to hear. "You can't find anything cheaper than this," or "it's the best you can buy" may be the last words they listen to. After that they shut down and start thinking about the last presentation or what's on the menu for lunch. So we do want to communicate why our product has a positive value to the customer. And we have to take into account that the components of value might not hold the same meanings for different people in different companies. We also must take into account that every product has both intangible and tangible value. A good way to start attacking the value issue is to sit down and build a list of your products, what they deliver to your customers, and the value of those deliverables. Get your entire sales force and marketing department in on the exercise. The process may well help the people in your company to better understand what your products really represent to the marketplace, and help them tell the story more convincingly. Next month we'll take a closer look at the components of value and some ways of making certain your customers understand just how valuable you are to them. (next article in series) |
