The one value-based pricing strategy you probably never use | Association for Manufacturing Excellence

It doubled the company’s profits (including case study and profit calculator)

If you’re in a tough, competitive market where price matters, one of the most overlooked strategies for understanding how to price for value is the Lost Business Review. We either skip doing them altogether because none of us like asking the awkward questions or hearing the bad-news answers, OR we do them in a half-hearted way, accepting the customer’s excuses at face value.

If you fall into either of those camps, you’re leaving a lot of money on the table.

When you ask your customers why you lost the business, their first answer will almost always be “price.”

Yet that’s rarely the real reason. It’s an easy out for them, and it helps them make sure you’ll sharpen your pencil the next time. However, the real reason is often much deeper, and holds the key to creating a value-based pricing opportunity the next time around.

Yes, there are many sealed-bid situations where it’s “lowest bid” or “lowest compliant bid.” That doesn’t mean you can’t still win the business on something other than a deep-discount price.

Over the years, I’ve trained savvy sales teams to work with the client in advance to structure the Request for Proposal (RFP) so that they are either the most compliant OR the most highly rated vendor on desirable factors…which often trumps low price. An in-depth review of the RFP will often show elements that are favorable to a particular vendor – and that shows you exactly where to up your game. You can also work to be the vendor with the inside track – IBM did it successfully for years.

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The one value-based pricing strategy you probably never use | Association for Manufacturing Excellence.