If it were true, who would need sales reps? Commodities are bought on an exchange, a market where buyers make transactions. They don’t need sales reps.
However, services are not commodities. They vary by supplier, location and individual. This variability removes them from commodity status. Add the importance of contract services to buyers’ business operations and it’s clear they’re not commodities.
So to hear “only price matters” means sales reps have packed it in. They want to believe buyers select contractors solely on price.
The truth is inconvenient. The truth is price without value is meaningless and buyers never select contractors solely on price alone.
Don’t believe that? Consider this:
I’ll Beat Any Price in Town!
Here’s an over-the-top hypothetical to prove price is not the sole determinant in contractor selection.
The market price of janitorial service to class A office space in your downtown is $0.10 per square foot, per month.
I meet with the property manager of the premiere office tower in your town. I offer her my cleaning services at $0.03 per square foot, per month. I have great references by the way.
Will she accept?
If she’s sane she won’t. Because for $0.03 per square foot my brother and I come in once a week and empty four wastebaskets and that’s it.
The value she’ll get at $0.03 is less than at $0.10.
Skeptics may say “But she’ll expect the same specifications at the same quality level!”
If she’s only been in the business five minutes she might. Hopefully she’ll see the disparity for what it is – that she’ll get what she pays for.
But for the sake of argument, let’s say she does have unrealistic expectations of price to value. She expects far more from what she’s paying than you might.
That’s the Point!
She has a connection BETWEEN price and value. They’re connected in her mind. She’s expecting something (value) in return for what she spends (price). We just might not agree with her level of connection. We might not know what her value expectations are. But there is a connection.
Low Specs, Low Price, Value
The price-value connection extends beyond specifications. Low specifications and low price doesn’t have to mean low value. Value is relative to:
- Buyers’ expectations
- Buyers’ value perceptions (do they see it as value?)
- Buyers’ experience (good/bad shapes the two above)
You may know of buyers who are extremely happy with their contractors but you see only poor quality and performance, e.g. dirty workplace, poorly trained staff, etc.
However, those buyers are receiving value somewhere else, in some other way than 100% compliance with specifications or service level agreements. Their contractors understand what their buyers want and need, and give it to them.
Back to Market Price
The market range is based on pricing buyers gathered from other bid processes. They look back at the old bid pricing, compare it to what they’ve negotiated with their incumbent and feel they grasp the market. From the low end to the high, buyers will only buy within the range of their market price understanding.
For any market, prices will distribute in a normal bell-shaped curve. This means that most buyers buy at pricing somewhere in the middle. Buyers definitely won’t pay 2x the premium market price. They don’t connect that much more value with 2x the price. However, some buyers are willing to buy at the premium end of the market (higher price) in the belief they’re getting what they pay for.
A Last Word About Specifications
Specifications are not the determinant of value. They provide the basis for price, but don’t solely define what buyers’ receive. Just think about all the customer service, account relations and non-billed value adds you know you’ll provide should the buyer select you.
Specifications provide a starting point for sellers to understand buyers’ value. A defined specification, by itself, doesn’t provide sellers what buyers value – the undefined parts of the specification are the outcomes and experiences buyers are seeking, and are willing to pay for. Those outcomes and experiences are never included in specifications or Request for Proposals (RFPs).
The Seller’s Role: Understanding & Communicating Value
Selling services is only about value: first uncovering the buyer’s version of it and then communicating it in ways buyers can see.
This is the reason selling services still requires sales reps. They uncover buyers’ value and communicate it with a price, not figure out price first, then attach value.
If buyers feel sellers are priced too high then sellers have either:
* misunderstood buyers’ service budget, needs & wants
* sellers have failed to communicate the value of their offer (more often this than the above)
And value communication is on-going. Sellers must communicate value continually:
- in advance to win the contract
- in progress as they deliver for contract compliance
- in summary as they publish results for customer satisfaction
What To Do?
So much for the theoretical, here’s how you can use “price without value is meaningless”:
- Find out what buyers’ value in terms of outcomes, business impacts & customer experiences
- Begin finding out the above from your first buyer conversation to the bid opportunity
- Dig deep to find how buyers recognize they’re receiving value – how will they know when they’re getting it?
- Package all the above into your sales proposal to win at the Moment of Truth