Go-to-market Strategies posted an article entitled The truth about selling value: you must ADD Value.
While there is much in the article with which I agree (Value is subjective; It is hard to get to value, etc), there is one key point to which I object strongly. The writer’s definition of value is "the amount of money or relative worth that is considered to be the fair equivalent for what is to be received in return." (Emphasis mine.)
This continues the thinking of business-as-zero-sum-game. The value the customer is getting should outweigh, in some cases significantly, the price that they are paying. This is the beauty and morality of the free market. Wealth is created on both sides of every transaction because they are a) mutually beneficial and b) entered into with the freedom to choose. The buyer benefits more than the price they pay and the seller benefits because they provide the good/service/knowledge for less cost than their price. Of course, this is called profit.
This is a reprint from Holden Advisors newsletter, this is the best advice for pricing in these economic times.
Emerging Market Innovations Protect Profits at Home
Commentary By Mark Burton
From Innovation Trickles in a New Direction, BusinessWeek.com, March 11, 2009
One the most effective ways to preserve the pricing power of high-value offerings is to have low-value flanking products within the line. These flanking products are critical, because they enable sales teams to give customers a low-priced option when they try to negotiate price on the high-value product. This turns the tables on poker playing customers who are just fishing for a discount. They now have to make a decision: go for the low-price, low-value option or admit their preference for the high-value one. Whatever decision they make puts the sales team in control as they force the customer to decide between “price” and “value.”
One problem many executives have with this concept is fear–fear of taking on additional development costs for a lower-margin offering and fear that the new offering will cannibalize sales of higher-margin offerings. Now one of the great forces of upheaval in our times, the growing power of “emerging markets” is being harnessed to make the process of introducing low-value flanking products easier.