We all know the difference between the “price” and the “value” of something. Understanding and communicating this difference to your customers and sales staff can affect your sales numbers and your bottom line.
Gianfranco Sassi (Key Accounts Manager at Fiandre), a great teacher, afforded some great insight into understanding the term “value” many years ago. I can honestly say that only recently did I fully understand the importance of what he shared with me.
This epiphany happened in my own retail operation. Working day-to-day with the consumer and also our sales staff, I noticed how one would come in and find something to be a “great price” only to be followed by another thought that the same item was ridiculously priced. As a buyer for the company, I make every effort to buy things that have value, and I price the items accordingly. However, unless I have communicated the reasons for the final “assessed value” (price) to the sales staff and in turn with our customers, the sales staff and customer will assume their perceived value is correct, and that perceived value could be low, making the product or service seem overpriced.
In the tile industry, there are many factors that can influence the value of a product. A few of these factors include: reputation of the brand, where it was produced, quality of the products used to create it, performance values, design elements, uniqueness, environment in which it is shown, customer service during and after the sale, and the handling of complaints when there are problems. Each of these factors along with others has a weight and importance with the buyer in helping them assess whether the “price” is a good one.
We’ve all met with that person who says they want to know the price of something, so we quote a price or meet a competitors price only to find out that they also want it delivered, they want free samples, they want terms and have bad credit, and by the way, they’re going to take that 5,000 square foot order out in 100 square foot increments. I would dare say that a customer like this has burned us all, at least once. As my mother use to say, “If the donkey kicks you once it’s the donkey’s fault, if he kicks you a second time, it’s yours.”
It is critical to ask questions to find out what is important and what will be factored in when one assesses the value. I believe being up front is better than wasting time and energy.
Here are examples of a few questions to start the conversation in establishing the value for the client:
- What’s your budget? You don’t know? Are we talking $2, $20, $200? This will usually get them to cough up some number.
- When do you need the product? Are you willing or can you wait for a longer lead time?
- Is the quality of the product important or do you just want something to spruce up the place?
- How important is original design and/or unique materials?
- Do you have any manufacturing criteria, i.e. where it is produced, green certifications, etc?
A wrongly perceived value might be reached when price is announced without marrying the price to the factors that cause one to determine the perceived value.
Another important part of value assessment is to make sure you are not allowing another person’s assessment of the price affect yours. If you have examined the product or service correctly and taken into consideration factors that make a product or service profitable to your company, then take the time to help your sales staff understand. This will arm them to meet objections or answer the questions of the client/customer about why and how something is priced. If this communication doesn’t happen, then when customers ask the price of something and the sales person continually meets resistance on the price (i.e. “are they crazy?”) then the sales person may soon believe that the pricing is out of line, thereby inhibiting their ability to sell the product.
It’s imperative that we communicate with our customers and our staff the many components of assessing value. Conveying those benefits (value factors) of the products/services and helping them understand fully the value of the product and not just the price will only increase our sales and profitability.