“You have no chance of beating our current price!” So said the buyer to one of our clients’ sales team. Taking a look at the price they were paying, he could only agree. The price was significantly – very significantly – lower than anything he could get close to. “Not only can’t I get close to the price you’re paying right now, I really wouldn’t want to. What I would like to do though, is to take a look at how you’re using the product and see if there is any way we might be able to help”.
It soon became apparent that despite of – or because of – the low buying price, costs were actually higher, not lower, than they could have been. From the buyers point of view things looked good. A tightly negotiated, low price deal and a job well done. But there was a failure to fully understand the implications of this low priced solution on the business. A little investigation soon identified a number of opportunities to significantly reduce the customers’ costs as well as improve the quality of the finished product. This provided an opportunity for the customer to premium price and improve their own margins.
Plugging some of the numbers into a Value Calculator (built around the three Value Triad© elements of Cost Reduction, Revenue Gain and Emotional Contribution), our client was able to demonstrate such significant savings to the customer that they are now paying THREE TIMES more than they were previously.
A simple, but powerful demonstration of the fact that low prices do not mean low costs. All too often the two are confused. Focus on delivering high value, not low prices!