Price versus Value

Price versus Value

Have you ever heard from a prospect, “We are going with another company because of price”? Based on experience, their decision is not about price, it is about value. Value is a real or perceived belief that a product is worth more than its cost. Value-add is real or perceived benefits that differentiate the product from the competition and gives the prospect a logical reason to purchase it over the competition. Thus, in the example above, the prospect believes they will receive greater value and benefits by buying a product from the competition versus you.

In a cost-driven business environment, how can price not be the primary reason for making a purchasing decision? Because people buy for reasons other than price all the time; e.g., brand, expertise, recommendation, etc. In fact, the primary reason why prospects buy is to solve a problem. Price is just one component of the decision-making process. It is not whether the product is $200,000 or $250,000. It is, does the prospect believe that the product is worth more than they are spending for it and are its benefits greater than those being offered by the competition?

For example, it may cost the prospect $250,000 to move their datacenter to the cloud (price). However, by running their datacenter in the cloud, they can save 40%-70% per year (value). The fact that your firm has done 300 datacenter migrations in the last 18 months may be a key differentiator over the competition for ensuring the project is competed both on-time and on-budget (value-add). Remember, if the prospect does not buy from you, it is not their problem, it is your problem. Your value proposition was either not convincing enough or strong enough.

All contents copyright © 2013, Josh Lowry. All rights reserved.


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