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Building Value Rather Than Cutting Price

Author: Don Hutson

If you don't know how to build value, you'll be faced too often with the alternative of cutting price. The best way I know to build value in the prospect's mind is to talk needs-based benefits. We build value by showing how our product, service or idea can satisfy those needs.


I am often asked if I would rather be selling a product of the highest quality at the highest price or selling a product of marginal quality at a much lower price. I'll take the former rather than the latter every time. People are more willing to pay for quality than they have ever been. They just are not willing to endure the hassle that goes along with compromise in quality.

It is easier to explain price once than to apologize for quality forever. In our attempts to assess the mind set of these buyers, we find that people in practically every industry want problem-free products and services that do the job for them without requiring additional time and money to solve quality problems.

The best way I know to build value in the prospect's mind is to talk needs-based benefits. We build value by showing how our product, service or idea can satisfy those needs. Our value-based presentation should feed back to the customer needs-related data that was gained earlier in the Needs-Analysis process.

If you don't know how to build value, you'll be faced too often with the alternative of cutting price. A prospective buyer's mental image of value is their subjective viewpoint. Anytime a person says no or gives you negative feedback, all they are really saying is this: "Based on what you have told me so far, my perceived value of your product, service or idea does not seem great enough to cause me to take positive action when compared to the price."

Keep in mind that even though the value/price perspective is not sufficient to get a "Yes" at this point, as long as your potential client is willing to continue listening, your opportunity to make a sale is still alive. Remember, too, that you never lose a sale until you give up! So...keep building value. In addition, you must establish (hopefully multiple) unique factors of differentiation. There are several types of differentiation to focus on:

Product differentiation. Do your best job of knowing not only all value components of your product and unique factors of differentiation, but be knowledgeable about your competitors' as well.

Service differentiation. All other things being equal, extraordinary service and prompt response to unique service needs of your customers can clinch a sale for you. Have you identified your customers' service needs as well as product needs? Can you creatively respond to them with what has been called "knock your socks off service"?

Relationship differentiation. Can you outshine your competition in terms of your relationship development skills? How well do you get to know your customers? Are you endlessly putting pressure on yourself to take customer/prospect relationships to the next level? Be the kind of person that they want to do business with! If you do, you will get far fewer price objections and much more eager acceptance.

A few years ago, one of my clients was telling me a story about one of his best salespeople, Will Shulte, who called on the national headquarters of a rental company to present their office seating line. He wanted to become the primary supplier for the company's rentals to businesses.

Will already knew that his seating was priced at least 20 percent higher than the product the rental company was carrying. His approach was to build his presentation of quality and performance of his product in order to justify the additional cost.

At his first meeting with the company, Will realized that this sale was not going to be easy. Price, as he had anticipated, continued to be the primary objection. But even after several unsuccessful calls on the buyer, Will persisted in looking for the right hot button. Finally, he found a way to let facts and figures do the selling for him.

Will did an analysis based on the rental company's records of replacement costs, repair costs, and life of the chairs they were using (his competitor's product). He compared these figures with records on his chairs used in specific large industrial installations.

When this analysis was laid out in front of the decision-makers, Will Shulte made his sale. He showed the rental company that, even though they were paying less for his competitor's chairs, they were really paying more! With his products, they would pay less in returns and repairs and enjoy a longer rental life. And the real icing on the cake came later for the company, when the resale of Will's chairs after several years of rental turned out to be higher than the company had experienced before.

Within a short time, Will turned that company into one of the largest purchasers of his company's seating products in the United States. And he did it with a quiet, simple and very effective technique: he dazzled them with the details and showed them what real value is.

We can all learn something from Will Shulte. Price is not a singular, obvious number; price can be very complex. There is price as it appears on the surface, and there is actual cost. What is your product's true cost after considering every aspect of savings and benefit? I suggest you become knowledgeable about your competition's true cost as well. Remember, your boss could hire ne'er-do-wells at minimum wage to go into your marketplace and cut prices. He chose you instead! So go forth and talk value with great conviction.

Price cutting is a far more expensive exercise than most people realize. For example, if your company is offering for $1,000 a product which has a 40 percent gross profit in it ($400), and if a salesperson gives the customer a 10 percent ($100) discount, that represents a 25 percent decrease in profit! A little bit of discounting goes a long way.

One alternative to discounting in this scenario would be to add value by explaining product superiority or unique benefits that would accrue to the buyer when he selects this product. Another alternative to the price-cutting process would be to include a premium item. For example, in the earlier scenario, rather than discounting the $1,000 product by 10 percent, you might offer the customer as a premium a whiz-bang widget valued at $149 (your cost - $32) at no additional charge. You would thereby increase his perception of overall value, but it would cost you or your company $32 rather than $100. This way, you have sacrificed only very little of your gross profit.

All salespeople should understand margins, the impact of price-cutting, and the creative alternatives that will protect your sacred margins. Without "margin protection," the future viability of our enterprise is questionable!

Don't give away your margin, give away your heart. Give your heart away through extraordinary service and simple caring. Your heart will only get bigger when you give it away. Give away your margin, and you will be mortgaging your future.

Copyright 1999 by Don Hutson. All rights reserved.

Don Hutson, CSP, CPAE, is a professional speaker from Memphis, Tennessee. Don's careers in speaking, management and sales have brought him many honors. He successfully worked his way through the University of Memphis, graduating with a degree in Sales. After becoming the #1 salesperson in a national training organization, he established his own training firm and shortly thereafter was in demand as a professional speaker.

Don has addressed over two-thirds of the Fortune 500 Companies and is featured in over 80 training films. Today he is Chairman & CEO of U. S. Learning and makes over 120 speaking appearances per year. Perhaps you have seen him on national television where he is regularly featured on both the Public Broadcasting Station and the TPN Satellite Network. He is also the author of The Sale and is the co-author of three other books.

Don was elected by his peers to the presidency of the National Speakers Association, and he has received its prestigious "Cavett Award," as member of the year. He was also honored as the 1991 recipient of the International Speakers Hall of Fame Award, and Don was named the 1998 Consummate Speaker of the Year.

Don can be reached at 901.767.000 or via email at

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