The Seven Challenges of Value

The Seven Challenges of Value:from Axia Value Solutions by admin
Challenge #6:  Capturing your value through price. 
What is Value Based Pricing?
“A value based price is designed and communicated such that all parties understand, recognize and accept the distinctive worth of products and services purchased in the transaction and participate optimally in the gains created by their use”.
You’ll find much more where that came from in our book Value Based Pricing!
That’s easy for you to say….
Whilst as a definition it might not exactly trip off the tongue, the message is clear.  Value Pricing is basing your price on the value you deliver to your customer.  If you deliver no value, you don’t get paid (or bought!), the more value you deliver, the greater your rewards.  That, at least, is the plan.
However, if you don’t understand or can’t articulate your value, or you are dealing with a customer who can’t or won’t understand it, then you cannot sell or price on the basis of value.  (See Challenge # 3) In those circumstances you fall back on price – you’ll get the business if you’re the cheapest. (Which, I’m assuming, is not part of the plan)?
Who said it was easy?
Value pricing is far from an easy option.  You must have accepted – and met – the previous five challenges in order to be in a position to even consider doing so.  And there is a huge amount of difference between wanting to value price and actually being in a position to do so.  The other challenge is that implementation is an organisational issue.  In our research for the book, Value Based Pricing, it became clear that basing prices on value means that the organisation as a whole must have a focus on creating real value for the customer.  “This is a real leadership challenge.  Top and senior management must be actively engaged and supportive….”  We introduce a seven part implementation framework in the book:
R1 – Recognise that change is necessary and why
R2 – Review current methods and readiness to change
R3 – Research and characterise customer value
R4 – realign your company around value
R5 – Resolve opposition and reconcile genuine dissenters
R6 – Remove obstacles and roadblocks
R7 – Reward success
It is easy to assume that value pricing is the answer to all pricing problems.  It isn’t. It involves much hard work and the selection of the appropriate customers with whom to work.  You cannot value sell and price to customers who are not prepared to have open discussions with you about the value they are looking for.  Value customers are partnership customers.  Similarly, you cannot have those discussions if those involved with dealing with your customers don’t understand and/or cannot articulate the value you deliver. And finally, as we have seen, understanding and delivering value is an organisational issue – as we will see in Challenge #7.
However, we would make a clear distinction between Value Based Pricing and Value Selling.
Our definition of Value Based Selling:
“Value Based Selling is an approach to selling that aims to quantify the value that your solution delivers to a customer in economic terms, highlighting your advantages when compared with competing products or services”.
Many of our clients operate on the basis of published list prices.  They cannot simply ditch them and change their entire pricing approach overnight.  And an all out VBP approach is highly unlikely to be appropriate.  What the development of a highly skilled, value selling trained team is designed to do is to help justify your pricing on the basis of the value you deliver.  The inducement to buy becomes value delivered rather than just a discounting battle to see who cracks first.
At Axia Value Solutions we help our clients defend and grow their margins and build profitability.  We do this by helping them to reach a deeper understanding of the value of the solutions they deliver to their customers and through that understanding enable them to differentiate, price and communicate their offer increasingly effectively.
Axia Value Solutions – Value through Understanding
For more information you can contact Mike and Harry at info@axiavalue.com or click on the “Let’s Talk” link on the website www.axiavalue.com