Tuesday, September 01, 2009

The Price is Not Too High, the Value is Too Low

In a world of "Everyday Low Prices" when the goal is to assure that every transaction is a bargain, like with anything, we can take this to an extreme where we transact for bargains that ultimately deliver shallow and inadequate value. In our work, we are all required to convince someone to purchase something of value from us (time, knowledge, contacts, outcome) at some price (salary/wages, fees, attention, membership). These are the elements of transaction. As you know, much haggling occurs in the transactional process as we weigh and negotiate to assure the lowest price for the highest corresponding value. We err when we allow these negotiations to focus too much on price (the more tangible and quantifiable element) rather than value.

The utterance, "that price is too high" is frequent but the fact is that people pay whatever price is asked for what they value and sometimes they will pay extra and brag that they did so; just look at military, legal services and luxury goods transactions. This "price too high" utterance is sweet in the mouth but bitter in the ear. When encountered, our opportunity is to detect and devise value propositions that warrant the price. Note that often the price does not have to change as much as the perception of the value being offered for that price. Unfortunately, we do not instinctively go for the "value build" because of its greater difficulty versus price lowering. We miss the point that the difficult has the advantage of not being easily imitated and by getting good at value building, we gain a significant competitive advantage in all we do.

When faced with the response, "the price is too high", whether we are talking about money, time or the risk of being trusted to get a job done, it behooves us to think first about what value justified the price, and if we have articulated this value thoroughly and compellingly enough. Such thinking better connects us with the valuable outcomes of our work taking us beyond a task to a valuable outcomes orientation. This is critical in an age where employers are more readily hiring for outcomes than for the completion of tasks. When developing your "value build" story, think not only in terms of what value is gained if your price is paid but also what is lost if the price is not paid. When articulating value, also remember there is more to it than money made or saved. There is time saved, service levels guaranteed, knowledge and experience levels leveraged, relationships gained, repaired and sustained, processes made more efficient, downtime reduced, projects well managed, etc.. Build value on as many dimensions as possible in order to warrant as high a price as possible.

So, let's begin to practice this different approach of looking for the "value build" when asking for others' investment in our work.

Thanks in advance for comments and further insights on this topic.

No comments: