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Selling Value Does Not Mean Discounting

Confession: I put a mental "Easter egg" in the post "QUIZ: Why Would a Firm Buy from YOU?" To describe the term "PRICE", I purposely used a standard definition of "VALUE" -- "the ability to offer the most for the money". I did this because that popular notion of value is flawed and I knew it was only a matter of time before somebody said something. Here's the inevitable comment:
Arguing on semantics here. "Price: Your ability to offer the most for the money" is what was written, NOT to "offer the lowest price"... I would argue that is always important to offer the most, (benefits, quality), for a given price, especially if the price is higher than the competition.
No, no, no. Bad idea. You're falling into the trap of treating value as a function of price (value=features/price). When you define value that way, you end up discounting without realizing that you're doing it. Here's why:


Let's start with the simplest example. Suppose product "A" and product "B" have identical features, but product "A" is higher quality than product "B." If they sell for the exact same price, under your definition, product "B" is the better value. But, in fact, because you're selling them at the same price, and the quality built into product "B" increased the cost of goods, you're actually offering product "B" at a discount.

If, however, you increase the price of product "B" to reflect the additional quality, it has the exact same value as product "A" because the customer is now paying for the additional quality.

In other words, your definition of "value" is simply a definition of full price, and pricing with discounting. Therefore, when you're selling "value" you're either simply discounting or selling at the appropriate price. So value and price are essentially identical, except for the amount of discounting you can offer the customer.

Welcome to a price war.

What you need is a more sophisticated notion of value. One that isn't exactly proportional to the price.

For example, suppose product "A", which is low quality and has 2 features, costs twice as much as product "B", which is high quality and has 20 features. If those two features are truly unique to product "A" and solve a gigantic customer problem, then product "A" is being UNDERPRICED. It should be four to ten times as much as product "B".

Of course, the sales rep for product "A" is going to have to do some work to help the customer understand why those two features are so important. And there's always a danger that the customer will be hypnotized by the bells and whistles (i.e. useless features) in product "B".

But if the sales rep for product "A" does his or her job correctly, the higher price becomes largely meaningless.

In other words, "value" is not about the value of the product. It is about the value of the product to the customer.
Value is also related to intangible issues. For example, let's suppose product "A" is identical to product "B" but costs more. If the customer trusts the sales rep (and firm) for product "A" more than the sales rep (and firm) for product "B", there's a good chance the customer will buy product "A." That's because the intangible of "trust" has value to the customer.

READERS: Have I made myself clear on this point? Are some of you still hypnotized by the notion that you should create value through discounting.