Price: The Value Equation and How to Use When Selling
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Price: The Value Equation and How to Use When SellingHow do people determine value when about to pay for goods or services? If a customer objects to going ahead with a purchase and says "that's too expensive", what do they really mean? Put another way, how do people judge what they're about to buy is going to be a good value for the money AND is there a formula for calculating this? If we knew of the components of how people judge value, then surely we can use this to overcome the price objection. Well, YES, there is a way, if we go back and look at the Marketing Mix as it applies to customers. The 7 "P's" of marketing are: Price, Product, Promotion, Place, People, Process, Physical Evidence. Going on the principle of "what you pay for is what you get", then value could be shown to be the 6 elements of the marketing mix divided by the 7th one, Price as seen below: Value = Product + Promotion + Place + People + Process + Physical Evidence/Price How this can be used in a very practical sense is as follows: Suppose a customer says "that's too much", we can find out which of the elements above the line can change rather than just lowering the price to get to their perceived value. So, can we reduce the product specification? Is the offer right, is it convenient enough for the customer? Do we need to change the person representing the company? What about aftercare? And finally, can we show we can really deliver to their expectations? Many times just going back through some, or each of these, factors will convince the prospect of the value to them and negate having to reduce your price and therefore, reduce your profits. I've found this a great tool to use when selling and also when teaching negotiation with salespeople. It clarifies how to position what's being offered to a customer and adjust accordingly without having to reduce your price and profit in the sale as a first option.After all,a salesperson's worth is to add value to the sale and here's an equation to prove it! |
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