Value-Selling Mistake Lesson LearnedUnderling, “My customers always ask me about price early in the sales cycle. What should I do?”

Seasoned sales guy, “Avoid bringing up price for as long as possible. Make sure that the customer understands all of our advantages first.  Keep the conversation focused on value.”

What to do think?  Good advice or is this a value-selling mistake?

Super Simple Concept of Value

As you might have suspected, there is a fundamental flaw in the seasoned sales guy’s advice.  If you don’t talk about price, it’s impossible to talk about value.  Promoting all the valuable attributes of your product without the context of price isn’t value selling. Value is the difference between the gains the customer receives as a result of purchasing your product and the cost to acquire those gains.

 

Simple Value Equation

 

Your price is part of the customer’s cost to acquire your product’s gains. So the conversation recommended by the seasoned sales guy isn’t a conversation about value at all. It’s a conversation about gains. It’s not a conversation about value until you relate those gains to price.

Equating Highest Gains with Highest Value is a Value-Selling Mistake

The product that produces the highest gains isn’t necessarily the product that produces the highest value.  Your customer knows this, and it’s why he or she wants to understand price, at least conceptually, early in the sales process.

Consider this example where two types of equipment, Equipment A and Equipment B, can meet the customer’s process requirements.

Equipment A has a throughput of 5000 units/year. Equipment B has a throughput of 4000 units/year. Using the gains-equals-value logic the seasoned sales guy suggested, Equipment A is more valuable because it has higher throughput. It certainly produces higher gains on a per machine basis. But it is only more valuable if the depreciation expense(price factor) plus other operating costs are no more than 25% higher than that of Equipment B. So if that total is $800,000/year for Equipment B, Equipment A’s must be less than $1,000,000/year to produce more value for the customer.

To talk about Value, Talk about Price and Gains

Customers need to understand price to assess value. Sellers want value-based prices.  Talking about gains without talking about price is a value-selling mistake that will keep you both from achieving your objectives. The sales conversation needs to include both gains and the cost (including price) to acquire those gains.

Take house sellers. They make list prices available at the very beginning of the sales process.  Real estate listings describe both gains and price.  That allows the buyer and the seller to engage in a conversation about value early in the sales process.  For example, a home with a pool might list at a higher price than a similar home without one.  In the selling process, the seller will promote the gains that pool can provide in the context of the higher price they can expect to pay for those gains. That conversation about both house’s pool and price serves to support a value-based price when the deal finally closes.

Or in our equipment example above, the seller of Equipment A would include the expectation for a higher price in the conversation about its throughput advantage. This sets up a sales cycle spent substantiating the value Equipment A provides the customer even at its higher price.

A conversation with the customer about both gains and the cost to acquire those gains is the essence of value-selling.