The Difference Between Price & Value: Create A Profitable Balance

It is imperative that every professional seller understand the difference between price and value. Many do not. Instead, sellers often use these words interchangeably. They use words like “value” to signify the cost of an item. This blurs the lines between value and cost or investment.

When value and price are thought to be one and the same, the inevitable result is that value gets diluted.The other components of value are forgotten. Real value (which is compelling as nothing else could possibly be) is not adequately represented in the sales presentation. Consequently, the customer does not ever have a chance to see the full value of what’s been presented.

Buyers themselves are the culprits behind this blurring of the line. They use these words interchangeably, too. And, at a time when buyers are more empowered than ever before, they frequently focus heavily on the price. Sellers follow suit.

Focusing on price alone commoditizes any product. It makes it seem as if one product is no different from another similar product. It ignores any service-related value, relationship-created value, or seller-differentiating value. Focusing exclusively or primarily on price weakens the seller's position.

Price is merely one small component of value. When we allow buyers to magnify the importance of price, we miss out on all the other components of value. We do this even though the real value – what matters most to the buyer – will always trump any discussion about price.

Let me give you an example. Think about someone you know who seems to be very price-conscious. They may even tell you that price is what matters most to them when they make purchasing decisions. But you can easily test that position. Look at the car they drive. Is it, in fact, the very cheapest make and model available? Look at the clothes they are wearing. Do they appear to be the very cheapest possible clothing items available anywhere? How about considering where they live? Again, is it that truly the cheapest alternative that there is?

By looking at just these three things, you can easily see that even people who consider themselves to be price-conscious think about other factors when they make buying decisions. The car they drive, the clothes they wear, the place they live… even the food they eat will show you indications of what matters even more than price to them.

People value quality, service, brand names, reliability, convenience and much more. Most people value these considerations above and beyond price. Of course, they will take into consideration the price tag. But it is not the sole determinant of what we buy. If it were, we would all be driving used Pintos or Gremlins. We’d all be dressed in clothes from the secondhand shop, living in dormitory-style housing and eating Ramen soup every day.

Price must be relative to value. It is not possible for a salesperson to appropriately position price until that seller understands exactly what the individual buyer values.

Different people value different things. It is not a good idea to assume that everyone places equal value on various features or considerations. That's why it's so important to ask questions like these:

Five Questions That Help Define Value From The Buyer’s Perspective:

1. What are your priority decision criteria?

2. What matters most to you? (You can even make this a multiple-choice question if you'd like.)

3. How important is quality to you?

4. What would cause you to invest at a higher level? In other words, what are you willing to pay for?

5. What do you like best about the options you've heard so far?

Questions like these give you insights into what matters most to an individual buyer. When you make a sales presentation, you should include these priority values so that your buyer can see exactly what they're looking for in your solution. If price objections are raised, your response should always include what matters to the customer. That's how you keep price relative to value. 

Create A Profitable Balance: Close More Sales Without Discounting Price

There's one other key distinction between price and value to keep in mind. Imagine that you are holding a scale, the kind of scale that balances one side against another. On one side you have price and on the other side you have everything else that comprises value for your buyer. In order to balance the scale you have two choices. You can decrease price or you can increase value. Here's the thing to remember – you can only decrease price so much and so often. If you choose to balance the scale by decreasing price, your approach will not be sustainable. That's why it's far better to increase value in order to balance the scales.

You cannot increase value by piling on generic features. You must increase value by calling attention to what matters most to this individual buyer. When you do that, price will become a distant second in the consideration of terms. What's more, your buyer will be able to see the high value of your product and that will prevent him or her from being easily persuaded by someone else's lower price.

To keep your buyer clear about the difference between price and value, here’s one more tip. Don’t use these words interchangeably. Draw out the distinctions between them instead. Use language like this “the value you receive includes x, y and z for the investment level of…” This shows the interplay between price and value without treating them as one and the same. Being sure that your buyers understand this will enable you to close more sales without discounting price.