EP40: David Richards –Talk About Value: Understanding Value Through Its Five Elements
David Richards is the managing director at Talk about Value , a company that helps entrepreneurial businesses to accelerate their growth by designing, validating and communicating their customer-focused value propositions so they shine in a competitive marketplace.
Listen in to this episode, as he shares about the different elements of values that help in optimizing the price. With his relevant experience in the world of pricing and value, David surely articulated so well the important points we have to know about pricing and value.
Why you have to check out today’s podcast:
- Learn about the five interrelated elements of value creation
- Know how to build your communications strategy and messaging so your prospects and customers can see you, like you and buy more from you
- Understand why you need to work with your customers to understand what they value so you can match what you’re selling… to what they want to buy.
“Find out what [customers] they’re willing to pay. Do as much as you can to understand your customers at a really deep level so that you can understand the value that you’re offering to them and then charge what you’re worth and value rather than necessary your time or your product.”
– David Richards
Get Accelerate Your Subscription Business: Your Blueprint to Packaging & Pricing for Growth Course at https://www.championsofvalue.com, Use the DISCOUNT CODE: ‘EARLYBIRD’, valid until October 31st, 2019.
01:11 – David Richards’ ambition: “My ambition is to put value at the top of the agenda in businesses. “
02:33 – What is Value all about according to David
04:45 – What are the ways you can create value
08:19 – What is in a Relationship Value
09:13 – Understanding Perceived Value
09:41 – Getting deeper with Experiential Value
11:04 – What help does his company Talk About Value provide
12:49 – Discussion around what segmentation is all about
14:14 – This thing called Value Conversation
15:49 – How to add value to the relationship
21:16 – Best pricing advice from David Richards
“Value is in the eye of the customer, not in yours. They define what value is, not you. And I think it’s really important that people understand that because too many times, particularly, my fellow marketeers believe that just saying what you sell is enough, what you need to do is to link that with what people want to buy.” – David Richards
“What is a good value for money? It’s quite an interesting word. So, the way I like to describe it, mainly, is the activities you undertake that can add a benefit to the success of the customer that you’re working with.” – David Richards
“If you want to be really successful, you need to be the best you can in each of the segments you’re playing in and just trying to cover everything and never saying no is, is not a sustainable competitive advantage in my opinion.” – David Richards
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Full Interview Transcript
(Note: This transcript was created using Temi, an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
David Richards: Find out what they’re willing to pay, do as much as you can to understand your customer’s really deep level so that you can understand the value that you’re offering to them, and then charge what you’re worth and value rather than necessarily your time or your product.
Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing value and the spectacular relationship between them. I’m Mark Stiving today. Our guest is David Richards.
Mark Stiving: Here are three things you want to know about David before we start. First, he runs a company with a fantastic name, Talk About Value. He frequently interacts with me, with me on LinkedIn. I love having those conversations and he’s passionate about classical singing. Wait to hear his deep voice when he wants to share it with us. Welcome, David.
David Richards: It’s a pleasure to be with you.
Mark Stiving: I’m pretty excited about this. So first off, what is talk about value. What are you trying to do there?
David Richards: My ambition is to put value at the top of the agenda in businesses. And what I mean by that is to ensure that in effect, people understand how value can be priced every day. And by showing that value, you can really start to engage with customers at a really deeper level. And as a result, you can do more profitable business, you can do more business, and you’ll also gain customer loyalty as well. So what I do is help people to create value, to understand what value is that then create it. Then, of course, the most important thing is to validate that value with your customers. Because as you know, Mark, value is in the eye of the customer, not in yours. They define what value is not you. And I think it’s really important that people understand that because too many times, particularly my fellow marketers believe that just saying what you sell is enough. Well, you need to do is to link that with what people want to buy.
Mark Stiving: I absolutely love that answer in so many ways. I often find it frustrating that when I talk about the fact that I’m a pricing expert, so many people say to me, ‘Oh no, no, I don’t do pricing.’ But what I really am is a value expert. Right? It’s really about understanding value. And so I think that’s absolutely fascinating. Now, have you thought about this hard enough to be able to give me a definition of value?
David Richards: Well, I think value can be described in many different ways. It’s a hard one to define per se, and I know one of the people on one of your previous podcasts has said it’s a mystery and I’m probably not as cynical as that. I think the way to look at it is to look in an in it way. It’s interesting isn’t it Mark? Because people know when you have value, but they actually know more when you don’t have value. But like quality when things are poor quality, you get it. But what does high quality mean? What do, you know if something is not good value for money, you understand it intuitively. But what is a good value for money? It’s quite an interesting word. So the way I like to describe it mainly is that its activities you undertake that can add a benefit to the success of the customer that you’re working with.
David Richards: And that can happen in a number of ways. And I think there’s sort of five regions of value that I love to look at. So the first one is financial value, which most people get. It’s that ROI is that return in investment it is the cost-benefit analysis is simply doing the numbers in terms of saying, ‘I’m going to invest this money and this is what I’ll get back.’ And I think at some level that’s useful and you’ll know lots of companies and corporates use that simple methodology for analyzing projects. But what it misses is the value that you can offer that really brings it to life in a way. The more emotional things. So things like perceived value. So I often say, you know, why do people buy a Rolls Royce? Whereas they could drive a simple, you give me an example of an American vehicle.
Mark Stiving: A Ford.
David Richards: Yeah. Why did, why does somebody, because actually the reality is that the need of a vehicle is simply to get you from A to B. You know, that’s what it’s designed to do, is to take you from place A to place B. So why would you want to buy something that is five, six times the cost of another vehicle? And it’s the reason is it’s about the bragging part and if that’s a good word in American, but being able to show off to your friends, it’s about the state as it can give you. That’s an area of value that many people don’t even consider.
Mark Stiving: Yeah. So, so David, do me a favor real fast and run through the names of the five values that we’re going to chat about. Cause I really want to interrupt you and talk to you about each one of these. But I feel like I’ve, I do that we’re not going to get all five.
David Richards: No problem. So there’s financial, there’s perceived, there’s relational, there’s experiential and there’s social. Those are the five. What’s quite interesting is the last one, which I think has for a long time, been floating around is now coming to the fore, particularly in the UK where social value, social enterprises, people giving back something to the community either in terms of to people who are requiring additional support or even if you like in the eco world is quite important, but
Mark Stiving: Okay. So you were causing me to think hard, David. Thank you. I love that. And first off, let me give you my definition of value. I think value is what a customer is willing to pay.
David Richards: Yes. We’ve had that discussion before Mark. I know, yeah, yeah, that’s right. From a pricing point of view, I think that’s absolutely right. What I found is that particularly in the UK, that concept of willingness to pay is quite difficult for people to understand. So yeah, it’s, yeah, it’s not a common language that I found, but if you can give, if you like stories or examples of where value can off, you can offer value in different ways. People seem to click into that more readily. That might be just my experience. But that’s certainly an interesting fact, I think.
Mark Stiving: So I want to talk about your five uh, value. What did you call them? Five value…
David Richards: Well, the elements of value or ways you can create values.
Mark Stiving: I would think of those as sources of value creation. So how is it that I could create value and I could take any one of those and turn that into the willingness to pay. Yeah, right. Oh yeah. I’m willing to pay more because you guys are a socially conscious company. You care about the environment. Therefore I pay a little bit more because I want to support you and your organization. Sure. So I think that’s a nice way to say, okay, here’s where value comes from. I liked that a lot.
David Richards: You know, you can read reports from Bane Consultancy and you know, I’ve got my office, I’ve got probably 15, 16 different books on value and they all have a slightly different description. Some are equations that you can create about the total cost of investments minus the total benefit you get, minus the total cost of ownership, that type of thing. I think what I found is that sometimes that goes over the heads of people and that just saying basically you can offer value in five sorts of different ways and what you need to do is go back into your business and work out areas where you potentially don’t add value that you should be because people are willing to pay for it to use your phrase or the other way. Whereas your giving value away and not charging for it, which I’ve seen as well. So I think there are all sorts of different ways of making it work, but I think if you conceptually put it as just five areas that you need to focus on, as you say, that you can use to, to make people more willing to pay for your services or products or professional expertise, that’s a good thing.
Mark Stiving: Yeah, I’ve got to say I’m a, I’m a huge cynic in a lot of ways. And so when I look at things like first off, if I was in a B2B sale, I would say all of these get tied back to financial. So I’m not going to, no offense to anybody, but I’m not going to care about the environment and put money into saving the environment. Unless I get kudos from people and more people, my customers are going to value that. And so, therefore, I get paid for that.
David Richards: I agree to a degree. If you’ve got a strong purchasing methodology, you got people whose role is to do that, then they will take a very rational approach to the decision making. I think the one thing you do need to remember though is that you know, humans are generally making decisions in a lot of cases and they have biases and they have wishes that are not necessarily financial. It may be that they want to just work with somebody they like working with. That’s a sort of relationship value
Mark Stiving: 100% with you. And so, I would take, so although I love financial from a B2B, I think the end of the logic we have to use in B2B is always financial. I would think in truth, it’s almost always what I would call perceived in the sense that it’s, what do I think is true? Do I think I like you? Do I think you’re helping the environment? Do I think I’m gonna make money if I buy your product?
David Richards: The old classic who you remember from IBM that never, nobody ever got sacked for buying IBM. Yes. It’s that perceived value that it’s worth its weight in gold really, because people have or make decisions, not necessarily what you’re charging, but what they’re willing to pay. It’s a back to your points and they’re prepared to pay extra for the safety net that IBM was giving them all the ability to solve a problem if it went wrong or the support mechanisms or whatever IBM was doing. I think that’s the powerful bit.
Mark Stiving: Yes. Okay. So I think we’ve, we’ve at least touched on four of the five real quickly. What’s experiential value?
David Richards: That’s basically my experience of working with somebody. So you know, you go into a relationship in the early days you don’t really know, especially if it’s a new client, you don’t really know what they’re going to be like. You’re taking a degree of risk in that. You probably looked at testimonials and case studies and war stories about them to give you some idea that they’re a credible organization that is worth working with. But until it comes down to the delivery of a service or a product or support or professional expertise, you don’t really know. And generally people, people like to work with, people they like working with just those human relationships. You know, I’ve often heard that people, you know, when to send somebody closes a deal, they say, well it’s just because I’m a great salesperson. And you know, and I know that that may be a factor, but it’d be a whole load of other value things. It might be the company had a great brand, it might be that they’d had a relationship before or they knew somebody who had used the service. There may be other things impacting on that. And this is the bit I find that most companies miss is the stuff around the financial bit. As I said, is the perceived value, the relationship value, the experiential value, and then there’s this social value as well.
Mark Stiving: Okay, as a company, what are you, what are you guys doing?
David Richards: Well basically we are going into typically business owners, organizations who really aren’t growing as fast as they can do and they don’t understand quite why. You know, their sales are stalled or they’re having issues and breaking into a market. And what we do is we go in, we basically look to segment their market for them to work with them and understand how their market operates, to identify their target market, the key players in that market decision making unit, and then create value propositions for the segments they want to attack. And very rarely do I find somebody who’s, we’ve got that all lined up in one go. They quite often there’s a lot of understanding about the market, but then splitting that down into different needs rather than geographies or sectors or whatever can be challenging. And then creating value in those sectors. A real deep understanding of customer engagements. It really needs, I think, far more time spent by marketing teams looking and understanding the customer than we probably have done in the past. Once that’s done, you’ve agreed what your target market sector is, what the value proposition is, then you can roll it out into the community through your communication channels, you know, whether that’s social media or whether it’s email or whatever. And you’re consistent into the markets you’re addressing. And I believe that if you do that successfully, you’ll grow your business more quickly, more profitably.
Mark Stiving: I think what you’re saying is an absolute no brainer. I would absolutely agree as well that I don’t know that I’ve ever walked into a company where they truly understood a, their market segments and b, what value they were offering to the buyers in those market segments.
David Richards: Yup. I totally agree. Um, I’ve just been writing something about segmentation in general and you know, one of the things we see in the UK is a lot is simply geographical segmentation on a regional basis or zip code postcode basis. And the salespeople just treat that as a territory that they own and they’ll go in and talk to their customers in exactly the same way irrespective of the industry sector or the knowledge or the need of that customer. And what I’m saying is yes, that might be a good way of managing the cost of sales of a sales team. But what you also need to do on top of that is the help that sales team understand the needs of the particular people within the market sector.
David Richards: So rather than going in with one set of PowerPoint slides for every company is you might have four or five dependence on the sectors and the segments where you’ve identified a common need. You’re overlapping both need a segmentation with a geographical segmentation, but it’s rarely done, Mark, that I’ve seen though, where people will do that. But I think if you want to be really successful, you need to be the best you can in each of the segments you’re playing in and just trying to cover everything and never saying no is, is not a sustainable competitive advantage in my opinion.
Mark Stiving: Oh my gosh, there’s no way you can win at high prices if you’re going to do that.
David Richards: No, because you can’t offer the value. You can’t understand the customers enough so that you can really understand the value they’re going to get from you. Completely agree.
Mark Stiving: Yeah. There’s a fascinating concept that I ran into a couple of years ago and I have just been so enamored with it lately. It’s called a ‘value conversation’ and it’s where we teach salespeople as opposed to walking in and saying, ‘Hey, let me tell you about the value of my product.’ It’s how we go in and ask the customer the buyer questions so that, so they can tell us the value that they might achieve if we solve their problems. And just amazing, amazing conversations.
David Richards: We’ve discussed this before, but an even more simple concept if you’re not having those values conversations I think is to ask a customer of yours at the point of a new contract, why they bought from you. Just to understand at that point in time, because it’s a point where they don’t really have an understanding of your experiential value. Maybe not even your relationship value because it may be a new account, but you get an idea of what value they see from you per se, mainly from your marketing messaging and also from your sales messaging. If you’ve got a sales team.
David Richards: And I think that’s quite a critical point. And I’m always amazed when I go to a networking event and ask somebody, okay, so when did you last talk to your customer about why they bought from you, how few people do it? And I think that’s really disappointing because that’s where the insight is. That’s where deep knowledge is that you can use to your advantage. But it’s rarely done. And I think value conversations is absolutely the way to go.
Mark Stiving: Yeah. And what’s fascinating is if I just asked somebody why they bought from me and they give me an answer, oftentimes I can just go repeat those words to the next buyer and they’ll buy from me too. Like ‘Oh wow. ‘
David Richards: The only caveat I would say, Mark is that sometimes it may not be best to ask the person who sold the product or service their expertise to interview the customer.
Mark Stiving: Definitely.
David Richards: Because it will be biased towards their information will be fed back in a way that is more positive in some ways than others. So one thing I have said to people is that rather than you to it, you know, may employ an outside consultant to do it or a senior member of your team that’s not related to the delivery or the sales process, maybe on the delivery side so they can have a more open conversation, which gets into the reality of the situation.
David Richards: In fact, one of the things I do know is when I do a case study for a client, I spend the first 10 minutes of that case study interview, understanding why they bought the products and services in the first place. Because suddenly you uncover some really interesting insights that you wouldn’t have necessarily thought about. And that’s where it can really add value to the relationship.
Mark Stiving: Yes. Yeah. Nice. Hey, let’s take the last few minutes. You posted an article that was talking about the Van Westendorp’s Price Sensitivity Meter on LinkedIn and you ended up getting a bunch of what I’ll call relatively high powered pricing people to argue, which is pretty cool.
David Richards: Mark. I just may expect that. I just think it was bizarre. It was at a conference recently, and this the name cropped up. To be honest, I haven’t really heard I’d heard about it, but I didn’t know what it meant. So I thought as a marketer ought to go and find out. So I did a bit of research and dug around and I found out this concept of, you know, uh, by this Dutch Dutch economist who basically helped people understand how to look at optimizing their pricing and working out the highs and low, you know, how much would we, you know, if you’re, if you’re buying something, what would seem to be too expensive for a product?
Mark Stiving: Yeah. Let me read the questions. If you don’t mind, just everybody can hear. So, with Van Westendorp, what you do is you go out and you describe your product or what you’re trying to sell and then you ask four questions. You’re not prompting them with any prices or anything. But the four questions you ask is – at what price would you consider the product to be so expensive that you would not consider buying it? At what price would you consider the product to be priced so low that you feel the quality couldn’t be very good? At what price do you consider the products starting to get expensive? So it’s not out of the question, but you would have to give some thought to buying it. At what price would you consider the product to be a bargain, a great buy for the money. Okay. Back to you David.
David Richards: Those are the four questions and conceptually I think that’s a really important idea. I felt it was important that somebody who’s struggling with the price and doesn’t even know where to start in terms of whether they can increase sales, what people are prepared to pay or willingness to pay. It would give them at least a basis on which to start a conversation. And I was quite surprised by the response because clearly as you said, a number of the greater, the good in the pricing world have slightly different opinions.
David Richards: Many, many, many were supportive of it. It’s like, like you are Mark and you were saying that it’s a useful tool, but people were also very happy to share the weaknesses of it, which is mainly, you know, if you’re working with say, for example, high luxury items where there is, you know, if you in my language more far more perceived value than a financial value where it can skew it so that it’s meaningless. But I w I was delighted with the debate about it and I think it’s, you know, I wanted to share an idea and stirring up that debate. I think in my view, adds some value to the whole conversation about price and pricing.
Mark Stiving: Yeah. I think the debate in that whole posting was around, is this a great technique or not? And I think the answer should be it’s a good technique for getting a rough estimate? And there are better techniques for being more precise.
David Richards: Yeah. I think it’s a concept that people who are not pricing experts with understand, I guess is where I come from. It’s just the way that a CEO or somebody who’s running a business who’s got a problem with pricing, can see that there are methodologies available that can help them make sense of their pricing and how they can optimize our pricing if they want to take, if they’re in a particular industry where every price point is so critical, they need to get it to spot on. You’re absolutely right. You need more sophisticated and clever attendees to do that. I just liked the idea. I think it was a really, really clever idea and somebody implemented and did something about it and I just wanted to show that.
David Richards: Yeah. And, and I actually think that if you use the Van Westendorp’s Price Sensitivity Meter technique, it is probably better than what 90% of companies are doing. Yeah.
David Richards: I see. I think you’re being very generous with 90% Mark.
Mark Stiving: Okay. So.
David Richards: This is my variance in working in this field for many years in marketing is, you know, the four traditional piece of marketing, you know, price promotion, place and product. The one that I spend less time on and there’s the least information about is price. And yet it is the tool that you can change the direction of your business most quickly and most effectively. We spend, and I don’t if this is your experience in the States, but we spend far too little time on price and pricing.
Mark Stiving: Oh, that is so true. That is so true. But it’s fascinating.
Mark Stiving: Okay, so I’m going to share with you and all my listeners a trick that I’ve used many, many times. I teach this in my classes, but I don’t think I’ve ever said this in public.
David Richards: Wow.
Mark Stiving: What I do instead of Van Westendorp’s Price Sensitivity Meter is I often ask a different question and I don’t ask how much are you willing to pay? I often ask the question, ‘How much do you think somebody else like you would be willing to pay?’.
David Richards: It was like interview questions. So if I was to meet a friend of yours on the street, what would they say about you? I like it. Um, so it’s pretty, it’s pretty fascinating when I teach that. I often talk about the election and you know how most of the pollsters didn’t predict that Trump was gonna win the election.
Mark Stiving: But a few of them did. And a couple of the ones who got it right, the question they asked wasn’t, who are you going to vote for? It was who is your neighbor going to vote for? And so it was a way of saying, ‘Look, I’m not talking about you. But you know, when I answered the question, I’m talking about me.’.
David Richards: Yeah, it’s a great question. To be honest. It’s a great way of putting it.
Mark Stiving: Just don’t tell anybody else.
David Richards: I promise. No problem.
Mark Stiving: Excellent. David, I always wrap up with the last question. So I’ve got to ask you this. What’s one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
David Richards: Find out what they’re willing to pay. Do as much as you can to understand your customers at a really deep level so that you can understand the value that you’re offering to them and then charge what you’re worth and value rather than necessary your time or your product or whatever.
Mark Stiving: But I couldn’t agree more. That was awesome. David, thank you so much for your time today. If anyone wants to contact you, how can they do that?
David Richards: Well, probably the easiest way is to connect with me on LinkedIn. I’m publishing on a regular basis I’m writing a book that’ll be out in August 2020 about my experiences in business and you know, discussing some of the things we’ve discussed today. So yeah, if people want to find me, I’m David A. Richard’s MBA and I look forward to connecting with people and sharing ideas.
Mark Stiving: Excellent. Thank you. Well, that’s a wrap on episode number 40. Wow. I’ve gotta tell you my favorite part of today’s podcast. Boy, that’s hard to say. I love talking about van Westendorp, but I also really enjoyed thinking about the five sources of value we talked about early on. What was your favorite part? Please let us know in the comments or wherever you downloaded and listened to and while you’re at it, would you please give us a five-star review? If you have any questions or comments about the podcast or about pricing, feel free to email me, email@example.com. Now go make an impact.
**Note: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.
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.