Don't want to compromise on price? Experts explain how to stay competitive based on the value of your product or service to consumers.
In a famous video clip from Penn and Teller's Showtime hidden camera show, diners are lured to an upscale restaurant branded as the world's first boutique vendor of bottled water. A water steward presents each table with a menu discussing the finer qualities of water purportedly shipped in from mountains and streams all over the world, some of which cost as much as $8 a bottle.
Of course, the joke is on the customers because all the water actually came from the garden hose out back, but the message was clear: People are willing to pay more for a product if they think it gives them a truly special or significant value—and if you present it to them in just the right way.
Your company is probably selling a stuff that's a lot more valuable than fancied-up hose water. Selling on value, not price, involves a balance of confidence, personal rapport, and doing your homework, and it's become more difficult as technology gives consumers greater access to price information and competitors. We've talked with veterans of selling their value, and they share some tips on how to make your products stand out in a low-cost world.
Choose Your Targets Wisely
New companies often make one fatal mistake that forces them to compromise on price, says Barry Farber, a business consultant who has worked with American Airlines, AT&T and BMW, and author of more than 11 books on sales. Companies don't narrow their target market, and don't understand their products likely aren't for everyone.
Farber says to do this by researching the potential client to see if they are a good candidate to meet your price needs. This saves you from wasting time talking to people who only want the cheapest deal.
"Some sales people, they just make sure the prospect is breathing and then they dump all this info on them," he says. "That's not a good return on your investment of your time. Sales reps that don't have that kind of aggressive focus, if they lose [the deal], their month is dead, their year is dead."
Nat Kausik, CEO of Trubates, an online marketplace for adjustable local deals, says his company knows that many consumers are familiar with the nature of value-based pricing, especially after dealing with fluctuating airplane fares. The right customers will be receptive to hearing why they should pay more for a certain product over another: That's why his site lets users review an offer after they redeem it, and makes the review available to other users.
"Consumers, they're very sophisticated," he says. "They understand how to explore price for value."
About one-third of consumers are purely hung up on price, while the other two-thirds are open to at least hearing your argument, says Tom Reilly, an author and value-based shopping expert. Innovators and early adopters are more likely to shell out the extra money, he says.
"Be crystal clear whom the market segment is that you're designing for," he says.
Dig Deeper: How to Narrow Your Target Market
Leverage Your Strengths and Experience
Once you're in the sales meeting with a potential client, you had better be ready to stiffen your backbone and wield the full weight of your company's strengths. This comes largely from sales skills, but you can prepare your team by educating them on how your company stands out.
"It's almost embarrassing at times the way people don't understand all the ways they bring value," Reilly says.
You should also be telling the potential client or customers about the history of the company, which helps build confidence in the product. Build up your success stories by documenting testimonials from past successes and showing them off to future opportunities.
"Be able to successfully use your customers as your sales people," Farber says.
Orwak, a company that supplies waste compactors, baling systems, and other recycling equipment, emphasizes its value thanks to its trans-continental reach. Based in Europe, the company has seen recycling grow leaps and bounds ahead of the United States over the past 40 years. Its sales team pitches its products as a way to help companies stay ahead of the recycling curve.
"We try to sell it as, 'Hey we've been there, done that. Let's look at Europe, that's the future of America,'" says Mark Lanning, Orwak's national sales manager. "We're going to give you a little peek at the future from our experience."
Dig Deeper: Secrets to Getting Good Reviews Online
Know That Confidence is Key
When you're highlighting the value of a product over cheaper competitors, you shouldn't be vacillating on price or negotiating. Reilly says to avoid words and phrases that suggest flexibility, things like saying "generally, we charge" or "your price."
"The time not to show a lack of conviction is when you're asking people for money," he says.
Drop the price without hesitation and without getting defensive, he says.
It is the time, however, to mention the advantages you bring to market: global sourcing, logistic support programs and other things that go beyond the features of a single product or service, Reilly says.
You can be confident without dragging your competitors through the dirt, Farber says. Highlight why your product's value is worth their consideration over lower-price options.
"The most critical thing an entrepreneur needs more than anything else is confidence," he says. "If that's missing, I don't care if you have a plan and all that stuff, you're dead in the water. You can lose your edge right away, and selling value becomes 10 times more difficult."
Dig Deeper: How to Boost Confidence and Success
Emphasize Your Customer Service
The toughest job selling value to customers is getting them to picture the full depth and breadth of everything your company has to offer.
Lanning says his company likes to talk about more than just the product, as comparing balers can feel like just comparing one hunk of steel to another. Customers now expect a quick response time, an ease of use and the feeling that you care about them.
"It's easier to paint the picture about service than a hard object," he says.
Farber advises people to foucs on personal touches and developing a rapport with the client by getting to know their needs and business background.
"I'm a big believer of handwritten thank you notes," he says.
Often the customers who are obsessed with finding the lowest price turn into the biggest headaches, he says. But the customers that see your value understand you'll be there to provide customer service.
Make sure to keep providing good service throughout the lifespan of the customer, which will let you pile up those customer testimonials you can use to show future clients why you provide the right value.
"Value is always long term," Reilly says. "Price is short term."
Dig Deeper: How to Deliver Great Customer Service