Positioning Customer Value

by | Jun 26, 2009 | Selling Value

Do your customers focus on the cost of your products and services or the value you provide?

A few years ago I needed to get a new lawnmower. As my son Bryan was growing up, I decided to take him along to help; after all, he now had time behind a lawnmower and expected plenty more. We decided to shop at Home Depot because of their range of selections. I was looking to buy a lawnmower that was low cost, so I went right for the $125 Murray which I knew would do the job just fine. Bryan chimes in, “Dad, I will be cutting the lawn. I say we should bring home the Honda.” I was incredulous; the Honda cost $450. We were here for a low cost mower.

I responded, “That’s over three times the cost of the Murray. Why would I ever buy a Honda for just cutting a small lawn?” Bryan explained his reasoning. The Honda was top quality (which I did not dispute); however, specifically this meant it had essentially no maintenance, and was reported to have no long term service issues. Bryan explained that the yard would be healthier with the Honda’s rotor blade for mulching and he would save time not required to empty bags of grass clippings. His arguments set me to reconsidering. Our last mower was a Murray and it needed a tune up every year: a cost which escalated to my last service bill for $85. Which would you have chosen?

We bought the Honda and four years later it is still working like new and we have spent no money on service or maintenance. I still haven’t even changed the oil! Which mower had greater value? Well the lower long term costs of ownership offset the higher up front cost of the Honda. The Honda saved my time managing annual service and my son’s time at yard labor. We both felt better at the environmental plus of mulching over landfill. So which supplied better value to us, the customer? After four years the Honda was a smaller dollar and time investment than the low cost Murray.

One of the challenges every sales professional faces is positioning value of our product or service to prospects and repeat customers. It’s natural for us to convey value to the customer from our perspective since we know our products and services better than anyone else. Or do we? Does not the customer use the product and depend on it? The buyer must continually justify his purchase through the life of the product; where the sales professional justifies it only pre-purchase. We need to position our product’s or service’s value from their perspective and not ours. For example, we might be leading with the value that our products or services can increase productivity by 30% over the course of a year or that it may improve customer service response time by 20%. The question becomes, is that what the customer needs? What if the customer’s biggest challenge is to reduce operational expenses by 20% over the next 6 months?

When positioning value, put yourself in the customers shoes and ask “So what?” and “Who cares?” Honestly answering these questions can help you discover the value perspective of the customer and who in the customer’s organization will most benefit from the product or service. The argument is tuned to the correct target.

“If you cannot price your value, all you can price is your cost”. If you do not correctly set the value in the customer’s terms, the customer will stay focused on costs over benefits. The customer will either not buy or negotiate for a lower cost. A simple formula for value is Customer Value=Benefit/Cost. The only value the customer acknowledges is that which meets their needs. The more benefits the customer can see, the more value they receive which minimizes their focus on cost.

We like to categorize value in four areas. They are:
• Total Cost of Ownership [TCO],
• Quality,
• Capability,
• Service.

Customers will look at your solution and use these criteria to measure what they perceive as value. The question becomes what is their priority among these? Which is most important and which is the least important? Here is where personality color will help with this sale. Different personality colors will rank these differently. As you have discovered the target, you are no longer selling to a whole company but just to the specific decision makers the company has elected to evaluate your product’s value.

Determining their personality color gives a wealth of information on their ingrained criteria of setting value. For example, Quality is prestige to a Gold personality but reliability (remaining hassle free) for an Orange. Service is more important to right-brained personalities such as Oranges and Blues. Capability is most important to a Green. A Green will need to agree with how you calculate TCO, while a Gold needs to trust you, in order to trust your calculation of TCO. TCO quantifies the sum total of quality, service and capability; but may be ranked of lower priority than immediately solving that “burning customer service issue” to a Blue or Orange.

When you know a client’s personality color, you know what kinds of things they value. When you have identified the customer’s needs you will know how to position your value. Customers will invest in you when they clearly see the value from their perspective!