Start Standing Up and Profit from the Value You Create!
A common question I receive is “Rafi, how do I justify my price to customers?” It’s a good question and one that is integral to pricing for profits and growth. Surprisingly, most sales people that I have met do not do a good job of articulating the value of their product. When challenged on price, instead of taking the time to justify their price, most sales people default to their trusty crutch…the discount. If the people on your front line cannot convey (or do not understand) your product’s value, how do you expect your customers to realize how wonderful your product is? Without advance notice, why don’t you ask your sales force to articulate your product’s value. Are they doing a good job?
As fundamental as it may seem, the first step to standing up for your price is to ensure that your sales force understands the value of your product. Go through a Value Decoder analysis with your front line, show them how your product stacks up against the competition and how to justify your price based on value. This simple step will give your sales force the knowledge and confidence to stand up for your product’s value. Next, I recommend having your sales force practice having a calm, almost dinner-like, conversation with customers that clearly conveys your product’s value. Often when challenged on price, people tend to become anxious and defensive. A calm, confident conversation can help persuade even the most skeptical potential customer of your product’s value. One such conversation happened to me recently.
Over the weekend, an audio visual company owner came up to me at the conference I was speaking at to discuss pricing. He was a really nice guy and I enjoyed speaking with him. After establishing a friendly rapport, I asked him a question that had been nagging at me for a few months. A friend of mine had organized a conference where attendees were flying in from around the world. She needed a projector to hook up to a laptop to project PowerPoint presentations in the key strategy meetings. She contacted an audio visual company that was associated with the conference center and was quoted a rental rate of $500 for two days. I was shocked at this rental price, especially when I pointed out to my friend that you could purchase a new one from Costco for $700. I was unwavering in my judgment that the price was a total rip off!
The audio visual guy looked me straight in the eye and calmly started to justify the $500 rental price. While the $500 rental price was not a great value for all customers he noted, for many the price makes sense. He pointed out that the $500 rental projector was probably higher quality than a $700 one, the light bulbs of portable projectors are fragile and can easily break when being transported (thus causing more expense and the possibility that the projector would not work at the conference), the rental company would make sure that everything was working properly and if by chance the projector broke during the conference, they would quickly replace it. He then wondered out loud what a shame it would be if these executives flew in from around the world for these important strategic meetings and the projector malfunctioned. All of a sudden, that $500 rental price did not seem that bad! My audio visual company friend did an excellent job of justifying the value of the $500 rental (using the key principles of the Value Decoder) and even convinced a skeptic like me that renting was the right way to go.
I think your goal should be to train your sales force to convey the value of your product as articulately and confidently as my Tampa-based audio visual company friend did! You’ll be generously rewarded by taking this first step of establishing a culture of profit at your company – everyone needs to understand the value your company provides.
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