What makes some companies charge less than others for their products or services? Are they selling value or price to their target market?
The difference between value and price has become a hot topic. Many businesses have started using “value” instead of “price” to describe their offerings. Your sales team has probably started using these terms in their customer conversations!
In today’s competitive marketplace, businesses are pressured to offer high-quality services at low prices. This means they must differentiate themselves from competitors who sell similar services at higher prices in their sales efforts.
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We live in a world where people are very cautious about spending their money and swiftly object that “your price is too high.” So you wonder if you are selling value or price.
This desire for rock-bottom prices is why there will always be a company that will sell its goods or services at a lower rate than its competitors.
According to this article, pricing is more straightforward for physical hardware products, where the cost of sales is known, but very difficult for intangible services and software, where the price is usually “value-based.”
The article mentioned above notes that value-based pricing problems are compounded in markets with few standards, and there is an unfair or uneven basis for comparing alternatives.
But as business owners, we have to look at our business model and ask ourselves: am I selling value or price? It is something we need to consider.
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Table of Contents
The Value Seller
Value selling positions the salesperson as a consultant, guiding the prospect through the purchasing process to find the best solution for their needs. For this reason, some people also refer to value selling as “consultative selling” because the salesperson adds value throughout the selling process.
Throughout the sales process, value-based selling focuses on the benefit to the customer. It leverages customer anticipation of enjoying the value of the item for sale.
Value-based selling prioritises and reinforces the customer’s needs over those of the business. It engages customers and creates a buying cycle where they are less focused on price and more anxious to realise the benefits.
When the company hires a salesperson, it puts the person through sales training and encourages them to leverage customer service and positive customer testimonials whenever they are in a sales situation with a current customer or lead.
The Price Seller
Usually, a low starting price is used to attract new customers with penetration pricing. This strategy is used if the marketing objective is to increase market share. This method will result in lower profits but will make up for them in increased sales and market visibility. A price seller strives to identify the optimum price for a product or service. Generally, the price will increase to a more profitable margin after a low-priced introductory period.
Value selling positions the salesperson as a consultant, guiding the prospect through the purchasing process to find the best solution for their needs. Click To Tweet
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Difference Between Price and Value
According to this article, price is what you are asked to pay. Value is what you are willing to pay.
So the money customers pay you is your financial reward for providing the item, while the value is what your customer believes the thing is worth. Understanding this difference is essential.
For example, a $1,000 phone might seem expensive to me, but you might consider it a great value.
When making investments, we need to learn to concentrate on value as entrepreneurs. Click To Tweet
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So, as humans, we either buy an item or invest our money if we believe the value is more significant than what we are paying the company.
As an entrepreneur, to persuade your target customers to focus on total costs rather than acquisition figures or amounts, you must understand what your customers value now and will appreciate in the future.
To gain market value over your less knowledgeable competitors, you need to draw on your knowledge of what your customers value and would value.
In business, the sale value of a product or service is the amount of money it would make if it were to be sold. Click To Tweet
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Concentrate on Value
Long-term value is the underlying worth of a commodity. When making investments, we must learn to concentrate on value as entrepreneurs.
According to thisarticle, the monetary figure on that tag on an item at the store is the quoted amount for that commodity, usually based on sentiments and not the actual worth.
So, as customers, don’t look at that figure. When deciding to buy, consider the value you derive from the brand. As entrepreneurs, we need to help our customers concentrate on value.
Concentrate on providing a quality brand to your customers and help them differentiate the superior quality of your brand from the competition.
To gain market value over your less knowledgeable competitors, you need to draw on your knowledge of what your customers value and would value. Click To Tweet
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Going back to the phone example above, if getting that phone in the next twelve months is your goal, have you taken the time to understand that phone’s underlying value? Beyond the cost, does it have any intrinsic value that would positively affect your daily life? Can its value withstand the test of time so that you will do so at an excellent second-hand value if you plan to resell it?
These are the key questions you need to answer. Shifting focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for.
We need to maximise the perceived value rather than only looking at the monetary figure. Ensure customers understand that they are buying more than just the brand.
However, they must also consider the research and development and ongoing support you will provide, the certainty of on-time delivery, your company’s history and reputation, and the resources that went into your offering. These factors are worth a lot! Therefore, you need to make sure you educate your customers on this.
Despite your best efforts, some customers will not be convinced. So what will you do when your potential customer says “No”?
The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for. Click To Tweet
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You need to realise that they have a choice, and if they reject your product or service, that is not a rejection of you as a person. So learn from this rejection and improve your product.
A single rejection does not mean that other potential customers do not see value in your product or service.
Key Takeaways
In today’s competitive market, sales professionals must focus on building long-term customer relationships rather than just making quick sales. The key to success with this sales strategy lies in adopting a value-based selling approach, where sales reps engage in meaningful sales conversations with prospective customers.
By asking open-ended questions and understanding buyer personas, salespeople can tailor their sales pitch to showcase their product or service’s value-added selling proposition. This consultative approach to sales leads to successful deals and helps establish strong long-term relationships and customer loyalty.
By prioritising customer engagement and emphasising the long-term benefits of their offering, sales organisations can increase their sales volume and achieve their sales goals. Ultimately, taking a value-based approach to sales leads to a higher return on investment and creates lasting relationships with loyal customers, setting the stage for future success in the sales cycle.
Frequently Asked Questions
Why Is It Important to Sell Value Rather than Price?
You can’t price your product or service if it has no value. You will not get paid if you are selling something with no value. There is no way to sell anything without having some value. If you want people to buy from you, they need to know what you offer them—people willing to pay for something usually have a reason to do so.
Selling on value, not price involves balancing confidence, personal rapport, and doing your homework. It’s become more complex as technology gives consumers greater access to price information and competitors.
What Does Value Mean in Sales?
In business, the sale value of a product or service is the amount of money it would make if it were to be sold.
The shift of focus from the money you pay to value would help you create a margin of safety between the amount you pay and the value you are paying for. Click To Tweet
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What Is the Value of Selling Price?
The selling price is the amount customers pay to purchase a product or service and includes the value of an offering plus a value that covers the costs of selling the offering or the cost of goods sold.
How Do You Sell Not on Price?
A good reputation is worth more than money because people buy from people they like and are more likely to become repeat customers. People who do business only with those who charge less are more likely to go elsewhere, looking for the seller with the lowest price. There is no loyalty with such people, nor do they become repeat customers. People who do business with you online, in person, or over the phone are much less likely to do business again if their experience is terrible.
The selling price is the amount customers pay to purchase a product or service and includes the value of an offering plus a value that covers the costs of selling the offering or the cost of goods sold. Click To Tweet
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What Is the Value of Sales?
- Sales generate revenue for a business.
- Sales help to increase market share and expand customer base.
- Sales provide valuable feedback on customer preferences and behaviour.
- Sales drive company growth and profitability.
What Are the Roles in Value Selling?
- Understanding the customer’s needs and pain points.
- Communicating the value of your product or service effectively.
- Building relationships with customers based on trust and credibility.
- Handling objections and addressing concerns to close sales effectively.
What Is Feature Selling and Value Selling?
- Feature selling as a sales methodology focuses on highlighting a product or service’s specific features and functions.
- Value selling as a sales technique focuses on demonstrating how a product or service can provide value or benefits to the customer.
- Feature selling often focuses on the product itself, while value selling focuses on the customer’s needs and how the product can meet them.
- Value selling tends to result in stronger customer relationships and higher customer satisfaction.
What Is the Key Principle of Value Selling?
The key principle of value selling is focusing on the unique value and benefits a product or service provides the customer. It involves demonstrating how the product or service meets the customer’s specific needs and solves their problems. Value selling emphasises building customer relationships and understanding their needs and preferences. The goal is to showcase the product or service’s value proposition in a way that resonates with the customer and differentiates it from competitors.
Conclusion
Understanding the value in business markets and doing business based on the value delivered gives suppliers the means to get a fair return for their efforts.
Suppose you are only selling for a particular amount. In that case, you soon recognise that when there is market pressure on this amount, your brand needs to respond by demonstrating that you have something different to offer your customers — something that will provide superior value.
Once you can assess and truly understand your value in the industry, you’ll make a healthy profit.
In conclusion, it’s essential to understand how to sell value, whether you’re selling physical goods or digital services. Do you want us to assist you further with this? Schedule a meeting with us today. We will be glad to help.
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