Positioning and Value as Escape Tools
All too many customers focus just on the need to acquire the right product for the purpose—or get some work completed—as cheaply as they can buy it. Unless countered, that focus will put your business in “Pricing Prison.” If that’s where you find yourself, with little power to resist pricing pressure, start plotting your escape!
One path out of Pricing Prison: Explore if your most valuable strengths may lie in what you do for customers beyond the core product or service.
Look first at how your current communications position your business. Do your marketing and sales communications define your company by a noun and a couple of adjectives? As in, “We’re a manufacturer of components for equipment” or “We’re an HVAC distributor” or “An IT services firm.”
While few companies can make their customers better off in all eight dimensions, most can find two to five factors that apply. And that’s plenty for escaping Pricing Prison.
For example, a manufacturer developed a new industrial control product that combined two formerly separate devices and a housing into a single unit priced $8 above the total of the old pieces. Why would end users gladly pay more? The new product could be installed faster and save labor cost, reduce ergonomic injuries with their costs and liabilities, and reduce the lost revenue from factory downtime. Distributors would pay more because this appealing product boosted revenue, reduced working capital tied up in inventory, and decreased operating expenses.
You can make a spreadsheet for estimating what doing business with your company could be worth to your target customers. List the relevant forms of economic value down the left side of the sheet, and make a column to the right for quantifying the estimated financial value of your solutions. You can use this worksheet as one input to your pricing decisions—and incorporate the value messaging and estimates into your marketing and sales communications.
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