Leveraging Value Selling to escape Price Competition!
Many companies today are facing increasing price pressure and are looking for new ways to boost their profits. The prevailing view is that customers buy ex- clusively based on price and that they hardly appreciate any added value.
However, a detailed analysis of customer needs usually shows a more differentiated picture: In most cases, a certain percentage of customers indeed purcha- ses based on price, but others are prepared to pay a premium for added value.
Based on this insight, customers can be grouped into different segments. These can subsequently be addressed with differentiated offerings at different price points. This enables suppliers to better monetize customers´ different price elasticities and to boost their overall average price. Studies demonstrate that a 1-percent price increase - given the same sales quantity - can boost profits by more than 10 percent!
Business practice shows that value selling hardly works with purelely price-orientated customers. However, it works very well with value-oriented customers, says Hans Walter Fuchs.
Customer segmentation is the first of 3 steps when introducing a value selling strategy. The next two steps are qualifying the sales force and developing tools to quantify a solution´s financial value for the customer. The better a salesperson can demonstrate that value, the higher will be the customer´s willingness to pay a price premium.
Applying a needs-based segmentation, customers can be grouped into price buyers and value buyers. The two segments can subsequently be addressed with specific solutions at different price points. Value selling enables suppliers to better monetize segment-specific price elasticities and to dramatically boost their profit margins.