As we work with clients or conduct workshops, we are finding a recurring frustration: CEOs who believe they sell "value" are losing bids over pricing issues. They are realizing that being a "value-add" solutions provider is not as valued as it used to be. And they're having to admit that if they can be easily replaced by another company's solutions at a lower price, what have they actually created? Something ephemeral? Not really of such great "value"?
What is value anyway? And is your company's value at risk as business changes what it values?
Merriam-Webster Dictionary defines value as "the regard that something is held to deserve; the importance, worth, or usefulness of something." Seems rather straightforward. But notice: Value has to do with how something is perceived, is regarded. It is given its "value" rather than having "inherent" value.
Back to those CEOs I mentioned previously. Their frustrations, even anger, has led us to work with them about the real meaning of "value"...and not just in their minds, the manufacturers, but in the minds (and hearts) of the user. What do they do when things change? What happens to that wonderful "thing" they have spent years creating when it no longer aligns with the price/value that someone wants today? For many of them, this is a real challenge.
Remember Kodak's Brownie camera? A solid seller for almost 70 years, Kodak then disregarded the possibilities that digital cameras might offer and walked away from the future as they held tight to that "valuable" camera that everyone no longer had to have.
The moral of the story? Value is really what you make it!
Are you a business leader facing a "value-challenge"?
At SAMC we are currently working with several companies that are facing major changes in their market space. Whether they're providing consumers with home services, manufacturing craft beer, creating innovative water bottles or building products for the automotive industry, these business leaders are watching as their customers are changing and the value of their products or services is being redefined. They and others much like them are facing what we are calling the "value-challenge."
What can they do about it, beyond getting angry? Here are 3 solutions that might in fact apply to you and your business too.
1. The source of the problem.
Why do you think you have the right mix of design and function to warrant the price of a "value" product?
While we encourage companies to think beyond incrementalism and search for value + innovation (where they pull out unnecessary costs to reach the price the user wants), we find that most companies tend to add cost as they add value. The result, at times, is an over-engineered product that has too much "me-too" components to warrant a high-price.
If a purchasing agent or consumer can easily replace one solution with another without missing a great deal, you might have over-designed the solution you are selling, adding "value" way beyond what is required, or perceived to be needed. This signals that you need to change your cost/benefit equation.
2. Why do you think yours is so great and that client or purchasing agent is so wrong?
Ask yourself: why do you think what you are providing is of such "value" that it is worth a premium price?
Several business leaders have told us how they did what they did—from fine engineering to construction to bridge building—as if they were the "best of the rest" or even the "only." Perhaps that was true in their own assessment of what was important. But were those some attributes—the elements of their value—appreciated, needed or aligned with what their clients' really needed at the price they were willing to spend? Often, no.
3. Demands of the market are changing. Are you ahead or behind those changes?
It doesn't seem to matter if you are in the B2B or the B2C world, the business environment is changing. Supply seems to be outplaying demand. Buyers are often 30-somethings that search the internet to find their solutions at a price they wish to pay. Value to them comes with ease, speed and often simplicity, not complexity.
This is challenging at the very least and threatening the great value you believe you have worked hard to create. Are you stuck in the market you have always competed within? Or are you out there looking for new market space? Are there nonusers searching for your solution, including online searchers, whom you are disregarding because they don't fit your current buyer's profile? Are there unmet needs you could fulfill if only you stopped believing that your current customer is taking your solution or product and using it just like you expect them to?
Remember what Yellow Tail wine was able to do by going after non-wine drinkers. To date, they have sold 1 billion bottles since 2001 by focusing on people who typically drank beer or hard liquor. How? By creating a wine that was easy to buy (all color coded), easy to drink (a bit sweeter) and affordable but not "cheap" ($6.99, like a premium beer).
It is a model worth reviewing for those of you who are angry at all those know-nothing purchasing agents or clients that are seeking reasonable quality products, services or solutions at the right price for their needs...and not yours.
Time for a new value-proposition? 5 ways to get there.
If all this is sounding familiar to you, here are the 5 things I urge you to consider. Think of it as a checklist for "real value versus a value-challenge."
1. Your sales folks can tell you pretty quickly about the pressures they are facing when they are out with potential clients. So ask them what they are hearing. Listen carefully.
2. Online search can give you amazing information and insights about what keywords people are using to find solutions and answer their questions. Are you set up to capture them?
3. Don't think about the competition. In fact, make it irrelevant. How? One way is by implementing something we use with so many of our clients: the tools and methods of Blue Ocean Strategy. What is your real value, not in relation to others?
4. Look at your data. Have sales been climbing or sliding over the past 12 months?
5. Shop your own business and see how easy or difficult it is for you to solve a problem. Pretend you're an anthropologist, like we are at SAMC, and observe your processes as if you're an outsider. If there's a better, easier solution, what's to keep consumers from going there?
Go through these 5 steps and it won't take long before you are discovering a lot of holes in the "value-add" that you thought was the essence of your business. But don't get discouraged! There are ways to change your strategy.
To learn more, check out these blogs, podcasts and white paper
- Blog: How Blue Ocean Strategy® Helps You Find (and Convert) Nonusers
- Blog: Has Your Business Stalled? Maybe It's Time For A Culture Change!
- Podcast: Finding The "Holes in the Cheese" To Build A Successful Business
- Podcast: Ready to Increase Your Business Revenue, Profits and Value?
- White paper: Rethinking the Customer Relationship
Maybe it's time to take a deep look into the entire business model you've created.
Treat nothing as non-negotiable. What could you eliminate or reduce to create new value in clever, innovative ways? You need to look deep and hard or you will hold everything to be sacred—and new buyers will not. Nor will savvy innovators who seeing an opportunity, swoop in and grab your market space. Contact us to schedule a consultation to find out how we might help your organization change, innovate, overcome challenges and reach its potential for success. We look forward to hearing from you.
From Observation to Innovation,
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