Question: (edited for clarity) Mark Stiving, my experience shows that some companies tend to believe that their own products are the best on the market, without listening to sales members or even worse they don’t listen to customers at all! Therefore it leads towards a kind of blindness and poor optimal pricing decisions. In fact, some companies guess they are different from their competition, but their consumers don’t think like them. Given that, I believe when we work in companies like that, it’s impossible to develop an accurate Value-Based Pricing strategy. What’s your take on that matter? – Alexandre
Answer: Hi Alexandre. You make a brilliant observation. Often, the CEO does this too! However, my experience is that, most often, companies underestimate their value rather than overestimate it.
As a pricing professional, you will win more clients and have more successful engagements if you focus on helping clients discover the value they aren’t capturing. This discovery often comes from listening to users and buyers, especially during win/loss analysis.
The hardest thing is to work with a client who doesn’t know they don’t have much value in the marketplace. I was on a Strategic Pricing Consultation
call last week with a company who sells retail through Amazon. Amazon is copying their popular products for Amazon Basics while simultaneously putting price pressure on them to lower prices. They also face price pressure from many new competitors. They were hoping for some pricing advice or trick to help them dominate their market again. Unfortunately, it doesn’t exist. The best advice for them is to rethink their business model. They need to understand value so they can create new products, communicate their differentiation and capture that value. Today, they are a me-too supplier, even though they once were the leader. They didn’t want to hear that message and I’m not sure I got through to them.
Alexandre, every company I coach hears the word value 100 times per meeting (exaggeration?). We often talk about ourselves as pricing experts, but in truth, we are value experts. If I were in your shoes I’d constantly ask about value. Who believes it? Where did it come from? Let’s talk to a buyer. I’d force them to articulate value. Inevitably, they will realize they don’t understand their own value. Then the real work begins. If they aren’t willing to focus on value, I’d fire them as a client. The probability of success is way too low.
I hope that helps.
Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.