Is Price All There Is?
Price establishes value perception.
If you sell a burger for $1.99, I expect one thing. If you sell one for $8.99, I expect something else. Given the choice, I may opt for the $8.99 burger because it gives me what I want and that’s worth $8.99. That’s called “value.” You don’t have to be the cheapest burger in town to sell a lot of burgers. You merely need to offer a compelling value. The same thing is true of a business-to-business product or service. Your price says something about the comparative value level of your product or service. If a client can accept the value, you make the sale.
You compete at your chosen price level on other factors.
To go back to burgers for a moment, there is probably more than one restaurant offering $8.99 burgers. Over time, that $8.99 price point comes to signify a particular set of attributes: maybe ½ lb. fresh ground beef, all the trimmings, and fries on the side. That’s what all the $8.99 competitors are offering. You can’t win at the $8.99 level by dropping price to $7.99, because it would erode your margin to a greater degree than it would lift your sales. What you need to do is add value at the $8.99 price point—better service, more interesting environment, more exciting toppings… whatever.
Again, the same thing is true of business-to-business offerings. Once clients become comfortable with a particular price point, they are apt to make decisions based on other factors. This is borne out by Ken Allred, CEO of Primary Intelligence, a Salt Lake City-based provider of win-loss analysis and customer experience solutions, who claims “fewer than six percent (of thousands of buyers in the staffing industry) have cited price as the primary non-selection reason.” We’ll say it again: most customers don’t buy price; they buy value.
Every industry has its own price standards. Leaders aren’t necessarily the cheapest.
The moral of this story isn’t that price is unimportant. Of course it matters! But it’s a poor salesman who jumps immediately to price cuts to make a sale, or who always blames price when he loses a sale. Your customers will accept your price if it’s in line with your value.