Where Is Your Greatest Value Hiding?

Why do so many B2B manufacturers, distributors, and value-added re-sellers fail to spot the biggest value they provide to customers?

I believe it’s because when they look at their businesses, there’s a focal point that’s so powerful that their attention is irresistibly drawn there. So they miss something else that’s crucial to their survival and growth.

To illustrate what I mean, consider this photograph of lions in the grass:

If you’re like me, your attention was drawn to the lower right quarter of the picture where you see two lions. Can you see the third lion in the picture?

I couldn’t spot it, until I got a little help:

(Credit for the picture to John Mauldin and Rob Arnott, who took the photo in Tanzania. John writes Thoughts From the Frontline, a valuable yet free newsletter on macroeconomics and investing.) http://www.mauldineconomics.com/frontlinethoughts/the-lions-in-the-grass-revisited

For companies that manufacture, distribute, and resell products, product is like the two lions in the lower right.

Product is often the over-dominant focal point in their business. (Understandably; so much of their internal attention MUST be devoted to conceiving, developing, sourcing, producing, stocking and distributing their products.)

This means, though, that management’s attention may be drawn away from where they’re probably adding considerable value for their customers—the customized, expertise-based services they wrap around their products to create solutions.

If this is true for you, it can leave your greatest value hidden — and you may not even realize it. If your greatest value is hiding from even you, how likely is it that your value is clear to your prospects and customers?

And if you aren’t clear on your value, only by the happiest of unlikely accidents will your pricing compensate you for that value.

Why Overfocus on Product Depresses Sales and Margins

To get more yeses, shorten the sales cycle, and get paid what your solutions are really worth, your sales conversations and marcom can’t be about a product-at-a-price.

The problem for manufacturers?

A product-at-a-price is where many prospective customers tend to take the conversation. (“Give me a quote on this part or that SKU,” and such.) Too often, I see sales forces take the conversation to the same place. That’s a problem.

So we have to re-orient the conversation. By seeing your firm as a services business (that has very impressive manufacturing / distribution assets) you can change the game.

That’s only the messaging aspect. Pricing by manufacturers, distributors and VARs is typically product-based, yet

• The value they provide to customers often goes far beyond providing the product
• The people and processes used to provide services represent a substantial portion of their operating costs. The nature of these costs isn’t well-represented by “overhead” cost allocations.

The number one consideration in setting or accepting prices should be “What’s it worth to the customer?” However, it’s also important to consider your costs as one factor in setting floors for acceptable prices. (Head over here for my Daring Caution framework for balancing four factors when you set your prices.)

Unhide Your Full Value and Factor It into Pricing

• Even if your company makes or resells products, try viewing your firm as a services business.
• Unpack the elements of your offering so you can better understand where the value is and restructure your offering and pricing.
• Communicate your value. Touch multiple decision makers and steer the conversation to connect with what prospects need and want most (it’s not price as often as many people assume). Don’t leave prospects and customers underestimating the value you’re providing.

I help clients overcome the challenge of hidden value. When we find and estimate their hidden value, they can get paid what their solutions are really worth—and attract customers willing to pay more when they see value.

If you’re struggling to shift how you view your business and know that sales and margins aren’t where they should be, let’s schedule an exploratory call. Whether or not we decide to work together, you’ll leave the call with:

• Increased awareness of value that your team may be taking for granted (a gap that customers can exploit)
• Specific ideas about one or more services you’re currently burying in your product prices that you could be charging for
• Your #1 overall opportunity to improve sales and margins over the next 6 to 12 months

Bob Sherlock