Value is Pure Economics…Well Almost


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Capital equipment buyers buy for only one reason. It’s to make a profit.  Nothing else matters. Just look their buying process. They:

  1. Verify sellers’ claims
  2. Negotiate offers
  3. Do the math
  4. Select the offer that produces the most profit

It’s a pure economic decision. No emotion. It follows then that if you sell equipment, your value-based strategy should focus 100% on economic value drivers. Right?


2 Types of Value Drivers

Value drivers are factors that can drive customer value up or down. They come in two flavors, economic and emotional.

Economic drivers are the factors that can make or save the customer money. Take for example these potential economic drivers for a capital equipment purchase:

Factors that make money:

  • Number of customers
  • Product prices
  • Factory output

Factors that save money

  • Operating costs
  • Raw material costs
  • Equipment acquisition costs
  • Maintenance costs

Emotional drivers are the factors that affect how the customer feels. Things like:

  • Prestige
  • Confidence
  • Aesthetics
  • Security

Buyer as the Enterprise vs. the Buyer in the Enterprise

When you are selling capital equipment, you are selling to an enterprise. That enterprise is purchasing the equipment for the sole purpose of making a profit. For the enterprise, only economic value drivers matter.  The enterprise does not have feelings. Emotional drivers can be ignored.

However, the individual in the enterprise does have feelings. That individual may need to feel secure that his equipment purchase decision  won’t put his job at risk. Or he may need to demonstrate that he’s a tough negotiator to earn the boss’s respect.

Individuals can satisfy an overwhelming portion of their emotional needs by looking after the economic needs of the enterprise. By consistently making decisions that lead to higher profit for their employer, an individual can expect to feel secure, appreciated, and respected.

But you cannot expect that the enterprise and the individual are always one in the same.

For example, suppose an individual decided to buy your competitor’s equipment the last time he purchased. This time around he’s changed his mind and wants to buy yours. However, he’s worried that doing so will appear as an admission that his previous decision was a mistake. This individual has an emotional need to “appear competent” in both decisions.

Implications for Value-Based Strategy

Value-based strategy has two distinct phases.


Value Strategy Phases


The first is producing valuable products.  This phase has three steps:

  1. Define value in the eyes of the customer.
  2. Create the actual product that will deliver more value than alternatives in the market.
  3. Market that product’s value to generate demand and establish value-based pricing.

When producing valuable products, the focus is 100% on the buyer’s enterprise. Value is defined in pure economic terms.

The second phase is selling value. Here the focus is on winning discrete purchasing decisions at prices that reflect the product’s value.

When selling value, products with unique economic value will be the principal driver of your success.  However, the salesperson must ensure that the individuals making the purchasing decision also achieve a personal win. For that, emotional value drivers may need to be addressed.


Value Strategy Value Drivers