|Helping Manufacturers And Distributors Improve Sales Performance And Profitability 800-867-2778 Issue No. 41|
Are You Adding Value?©1996-2008 Industrial Performance Group
Manufacturers, reps and distributors truly believe they are adding value for their customers.
Despite this belief, many of them have seen their profit margins become razor thin because of deeper discounting, extended terms and special offers.
The question at the front of everyones mind is this: "If we are adding value, why do our customers continue demanding lower prices?"
Customers have heard the promise of added value from advertisers and salespeople for the past twenty years. Yet in reality, this promise has rarely been delivered in a measurable way.
In fact, our research indicates the majority of salespeople cannot quantify the dollars-and-cents value they add for customers not because they lack the desire, but rather, because they simply dont know how to do it.
How do you respond when a customer demands lower pricing?
If your customers are not aware of the economic value they will derive from your product, you have left them no choice but to view your product as just another commodity that should be purchased on the basis of price alone.
When a customer gets to this point, its very difficult to convince them to pay more.
The good news, for manufacturers, reps and distributors is that you probably are in fact adding value. You just need to start measuring it and communicating it to your customers.
What is measurable value and how is it created?
Measurable value is the dollars-and-cents benefit customers derive from purchasing and using your product.
Lower labor costs, improved productivity and/or reduced exposure to risk and liability are all examples of measurable value.
Measurable value is created for customers by addressing the root causes of their business problems.
But what if your customer does not understand the root causes of their business problems?
Selling value rather than price
The traditional approach to selling has been to inform the customer about how they will benefit from a products features.
The assumption behind this approach is that the customer will see the dollars-and-cents value they will derive from the possession and use of the product.
This sales approach works well when the customers business problems are relatively simple and the dollars-and-cents value they will derive is obvious to the customer. For example, the added value is obvious to the customer if your product lasts twice as long as the product they are currently using and its only slightly more expensive.
However, when a customer does not understand the root causes of their business problems, they tend to focus on the one thing they do understand: PRICE.
How do you convince a customer to pay more for a product that creates measurable value by addressing root causes theyre not even aware of?
Selling value rather than price requires that you spend more time on the "front end" of the sales process, making sure the customer understands the root causes of their business problems.
Selling value also requires that you help the customer understand how your product will deliver measurable dollars-and-cents value by addressing these root causes.
If youre adding value for your customers but they continue to demand lower pricing, perhaps its time to modify your sales approach.
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