Price versus value

This is from Bob Burg (http://www.burg.com/2011/02/if-not-an-objection-then-what-could-it-be/)

Think about how this can apply to your Medical Practice

Regards

Ian

A Deeper Look At Price vs. Value

February 21st, 2011 by Bob Burg

Should I cut prices? Perhaps offer discount coupons? Charge less but give less value? Stick to my guns and stay at the same price point, focusing more on communicating the value I offer? Or, charge even more and find ways to increase an already-exceptional buying experience?

Indeed, an ongoing theme in this blog and in many others is the issue of Price vs. Value.

Many of us do our best to persuade our readers that rather than submit to price-cutting pressure from prospects and a general price-lowering trend as a result of the economic climate of the past few years, that you instead increase the value (both real and understood) of your offering.

In other words, sell on value; not on price.

This is one reason why referrals, introductions and word-of-mouth are so important. Because you meet new prospects as a result of borrowed influence; that of someone theyknow, like and trust, you are viewed in a different, more positive and — dare I say — value-based light.

One helpful saying I either heard or read many years ago rings very true to me, and that is, “A person will exchange their money for that which they feel is of equal or greater value than the money they are exchanging it for.” Naturally, the more value they perceive compared to the money they are paying, the more likely they are to make that exchange.

And, with all that said, there are exceptions. Sometimes price is indeed the true issue, and the sale is unlikely to happen regardless of the value compared to the price. However, in these instances, it’s not an objection; it’s something else.

When a prospect objects to the price of your product or service, it typically means that he or she feels (whether consciously or subconsciously) that the price they are being asked to pay is greater than the value they would receive. Or, not enough value above the price to overcome inertia.

In this case — and it’s up to you to determine this through asking the right questions — your job is to effectively communicate the true value.

However, there are those rare times when price is the true issue and no amount of value will overcome this. This is not due to an objection but instead to a…“condition.”

Let’s take a look at this through several examples:

1. Lack of Funds

Even though the value of your product far exceeds the price, sometimes it really is outside what they can invest/spend based on their current financial situation.

A clever example from a reader, while extreme, I believe makes the point. You have a new techno-gizmo and a great idea for a commercial you just know that, if you could air it during the Super Bowl, would bring in more than enough revenue to cover all costs and net you a humongous profit. However, with the $2.5 million price tag to air, plus production costs, there is no way you can raise the money; at least not before the slots are sold out.

Do you have a price objection? No. Whether right or wrong, you place the value at much higher than the cost. It is a condition. You literally cannot make it happen.

2. Lack of Credit

When I sold a somewhat high-ticket item early in my sales career, about 1/3 of the people who really wanted it simply didn’t have the credit to be able to qualify for a loan. The challenge was not a price objection, a value question, or a matter of priorities. They wanted it; they simply could not qualify. It was a condition.

3. Product is Not Available and Time is of the Essence (While this is not price-related, I’m including it because it’s still a condition as opposed to an objection.)

They want it and know it would help in the project they are undertaking. Unfortunately, they are under contract to begin in 10 days and you can’t possibly have it for them before 30 days. Again, there is no price objection or question of value; it’s simply a condition.

Yes, usually a price objection simply means a lack of perceived value. But, not always. The point is only that, as much as we speak of value overriding price, there are exceptions.

Have you ever come across this? And, can you think of any conditions I haven’t mentioned?

Advertisements
  1. #1 by shaun on February 24, 2011 - 3:56 am

    If we give a good service are warm ,affible and are available, patients usually never compalin or have issues re pricing

    miscommunication is a cause for issues related to pricing too,
    the more you speak, explain and listen to patients , price issues become far less an issue

  2. #2 by hein vandenbergh on February 24, 2011 - 7:17 am

    Value, to a patient, is the sum of benefit minus cost. Therefore, to be of value, the benefit must exceed the cost. Unfiortunately, cost can be evaluated objectively, in numbers, whereas benefit can only be appraised in a subjective manner.

    The mistake made is that people focus on what they can calculate in numbers, viz cost in $$. Thus, we must provide, and be seen and understood to provide, tangible benefit – AND MAKE PEOPLE AWARE OF THAT. That’s where our ‘selling’ efforts must be directed [to hook-in on an earlier article].

    The other mistake made is that, in a competitive environment, lowering prices usually has the effect of reducing benefit [=profit] for the provider of services. One’s costs are relatively static for the delivery of a given service-environment. To compensate for this reduction in fees minus costs, one needs to see one heck of a lot more pts [if your fee reduction is going to influence pts to see you on the basis of price]. Seeing fewer people at a higher fee [thus profit, een though cost/service delivery may be slightly higher] results in a greater overall profit than that small profit multiplied by more patients. This is especially true in a competitive environment, which – per definition – has a limited pool of prospective buyers of your services. One is unlikely to find the numbers to make your fee-reduction ‘worth’ it.

    I get new [and at times old] patients to have a look at the skin-blog to explain the lesion and what I have seen through the skin-microscope, as well as outcomes of e.g. flap-procedures. I explain the blog as “an international teledermoscopy-site in which I and many experts from a number of countries participate on a daily basis”. You betcha they perceive value, and tell their friends!! Sure, takes a bit of time initially, but well worth it. Once they subtract my private fee from what they now know they are getting, they see value, and forget about $ cost.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: