Our prices (or fees) are higher than those of our rivals. That’s the main reason for us losing business opportunities. We’ve heard these words time and time again. Not just here in Australia, but all around the world, in places like South Africa, the UK, the US, Germany, France and Dubai.
In our opinion, using the price/fee argument is a lazy excuse. Blaming high prices or fees for failing to get a deal is an easy way out and leads nowhere fast.
Why? Because most businesses have not clearly determined what is unique about their offerings and what is of real value to clients. Many do not have clearly defined customer-centric value propositions that their people can take to market and use to demonstrate how they create value with, and for, their clients.
The reality in business today is that you have two choices on what you offer and take to market:
- which means you can charge a premium OR
- you are the cheapest.
That is it.
So before you and your people go down the ‘price is too high’ track, let’s look at the facts about ‘price’ and ‘value’.
The ‘price’ (fee) is an arbitrary figure with no inherent value in itself; it means absolutely nothing until it is made relative to something of value. Let’s take a simple example: you want to buy a pair of sunglasses. You can go to a pharmacy or $2 shop and buy a cheap no-name pair for between $5 and $20, or you can buy an expensive designer brand for $300. They are both perfectly good sunglasses. Why will some people pay more for one than the other? Because those people perceive the designer brand is of greater value to them than the other. Value to them could mean a number of things – prestige, one-upmanship, superiority, aesthetics/ design, and so on.
And this is exactly the point we need to understand: the client does not really see a ‘price’, they see – and are looking for – ‘value’. However, if we offer up nothing to differentiate ourselves, then ‘price’ will become the key focal point for the client.
If we don’t want to be the cheapest, our real mission when understanding and working effectively with clients is to find out what ‘value’ means to them – how they see and express ‘value’. And we can only find out what ‘value’ means to them if we ask questions about what they are looking for, what they want to achieve, and so on.
We cannot fall into the trap of assuming we know what is best for our clients before we ask them, even if we have worked with them before. By putting aside our perceptions and preconceived ideas, we can begin to move away from price/fee conversations and have more conversations about real value.
So, how do you understand specifically what ‘value’ means to another person – a client in this instance – especially when products and services are struggling to differentiate themselves and quality is becoming a commodity in many instances?
Well, businesses and their client teams need to shift client conversations away from product or service as the central focus to conversations centred on:
- effectiveness (how much better can I do?)
- efficiency (how much more can I do?)
- risk (what will happen if I don’t do it?)
- total cost of ownership (which includes a range of things such as price, access, storage, knowledge, distribution, funding, warehousing, logistics, quality, right for use, and so on).
These are the kinds of conversations we need to be having with our clients. Having the business acumen and skills to know how to ask questions and discuss these kinds of concepts is precisely where you will find real value and better margins.
Teaching our front-line people how business works, how our business can work in concert with our clients’ businesses and how we can create real value – this is crucial to migrating from the product/service price (fee) discussion to business relationships of real value for all parties concerned.