Price versus value, cost versus value

differentiation, Marketing, Positioning, Product Management, Value, value proposition

This is a pertinent question in marketing or sales. I keep getting the statement – the price is too high – compared to what?

Does anyone going to a Ritz Carlton or a Four Season hotel say the price of the room is too high. Does anyone who is buying a Roll Royce or Lamborghini ever say the price is too high. For a lot of people the Mona Lisa is just another painting, but for a lot of others it could have huge value hence its kept under so much security unlike another painting in the Louvre museum.

I think its the marketing and sales teams’ responsibility to position the offering that they have, correctly. This does not mean that there won’t be competitive situations. Especially in technology marketing where the entry barriers are very low, the competition heats up very fast.

Even in technology companies though you will see that there are disruptors who come in and take away a large share of the market suddenly but companies like IBM , Oracle and others who continue working on giving more value to their customers and charging a distinct price differential.

The key point that needs to come out is Value. Like beauty lies in the eyes of the beholder, value is specific to the buyer. Unlike Gold which has a fixed value defined, most other things like houses, shares etc. all have relative value. For one person who is selling a share the value is less than the price he is selling it at, while the buyer is seeing more value than the price she is paying for it, hence she is buying it.

Similarly if the customer see the value that you offer for your product same as what someone else offers, then the only differential is price that the customer can work on.

One of the best ways to reduce the cost/price value argument is to educate the customer so she sees you as the authority on the subject. I have shared multiple posts on how education has eliminated the price discussion from the buyer’s mind altogether.

Other ways off course include things like the ecosystem – if you are part of a proprietary ecosystem than you have very little competition – IBM Mainframes , Apple and others have very strong ecosystems and the discussion on just price does not take place.

The key for any marketing or product management person is simple they have to be able to build the value of the product or service in the minds of the customer preferably through education. For the sales person its important to identify and understand the value that the customer is looking for before easing time on a deal.

As I said earlier “VALUE” lies in the mind of the person buying.

Till next time then.

Carpe Diem!!!

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