By: Chris Provines, CEO, Value Vantage Partners
Do customers even care about value? A common compliant heard from some salespeople is that more and more it feels like all customers’ care about is price. Despite valiant efforts at communicating value, the buying decision often seems to come back to price. So, why bother with value?
Read surveys on what’s important to the customer in a buying decision, and price usually shows up after things like quality, delivery, training, and support. Moreover, talk to any procurement person or read their books on strategic sourcing, and you will see clearly that it says price should not be the top buying factor.
So, what’s going on here? How can price seem like the primary focus of buyers when surveys show that it is not one of the top buying factors? There can only be a limited number of explanations for these different perspectives:
The customer really doesn’t care about value: For a variety of reasons, some customers really only care about price. It could be how they view the supply category. Maybe they view what you sell as a commodity and you’ve done nothing to persuade them that it isn’t. On the other hand, the customer may simply be under tremendous short-term financial pressure, and is willing to take the risk of using a lower-cost, lower-quality supplier. It could also be the buying rules of the organization – they may be required to pick the lowest priced supplier.
It’s a negotiation tactic: Customers are becoming increasingly sophisticated buyers. It could be that the customer has learned to focus on price as a negotiation tactic to get suppliers to lower their prices. It’s a very basic purchasing tactic. Ask any professional buyer and they will probably admit to using this tactic.
There are no perceived value differences: The customer may see no real difference in value between your solution and the next best alternative. So, price is the deciding buying factor. This, of course, doesn’t mean that the solutions are the same. It only means that this is the customer’s perception.
You’re not aligned with the buying process: All customers have a process to buy goods and services. It starts with problem or opportunity recognition. Later, their buying process moves on to developing a sourcing strategy and negotiating with suppliers. If you engage at the wrong time in the buying process or engage in the wrong way, there’s no hope to get your value message across.
You’re talking to the wrong person: It could merely be that you’re talking to the wrong person. Maybe the person you are selling to has a personal incentive to reduce costs and doesn’t care about value differences. If this is the case, you need to find someone who cares.
Sorting through all of this can be a challenge. Often, it’s not obvious what is happening. Rather than believe that the customer doesn’t care about value, you should spend some time to try to understand why you’re hearing this feedback. Go through items one through five above and really challenge yourself. There may be times when you’re dealing with a customer who really only cares about price. Yet, this is usually not the case. This is particularly true in healthcare as the healthcare system shifts from fee-for-service to value-based reimbursement.
About the Author:
Christopher Provines has over twenty-four years of global experience. He began his career in hospital finance and reimbursement. After graduate school, he joined Johnson & Johnson and later moved to Siemens Healthcare. His roles have included vice-president-level positions at both companies.
He has extensive global experience in a variety of functions, including strategic pricing, reimbursement, health outcomes, finance, procurement, commercial excellence, key account management, and business improvement. He is a world-leading thought leader in selling, defending, and capturing value. He is an advisor to many of the world’s leading companies.
Chris has written many papers, articles, book chapters, and books. He is on the board of advisors for the Professional Pricing Society and is an award-winning adjunct professor at Rutgers University, where he teaches in the Supply Chain Management and Marketing Sciences Department. His research interests include the transformation of supply chains and the implications for suppliers. Chris earned his MBA from Rutgers University.