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Printing Industy Blog

Value-Based Selling and Pricing - It's All About the Numbers!

By David Dodd
Published: May 13, 2010

For the past several years, printing company managers have been urged to practice a value-based approach to selling and pricing.  Value-based selling and pricing are particularly important for companies that provide more complex offerings such as personalized direct marketing campaigns and online collateral management systems or other web-to-print solutions.

Purchasing these kinds of solutions often requires the buyer to make a significant change from the status quo.  Therefore, demonstrating the value of the proposed solution can be critical to closing the sale.  Unfortunately, many printing companies are not quantifying the value that their solutions will deliver.  Over the past several months, I've reviewed numerous sales proposals for direct marketing campaigns and web-to-print solutions and not one of these proposals contained a quantitative estimate of value or an ROI calculation.

I often hear managers say they're having difficulty selling marketing services and/or web-to-print solutions, and I've read similar comments on several online discussion forums.  I strongly suspect that one of the primary causes of these difficulties is the failure to provide potential buyers with compelling value estimates.

It's also important to use value-based pricing when you are selling more complex offerings.  If you use cost-plus pricing for things like marketing services and web-to-print solutions, you will often leave a significant number of revenue and profit dollars on the table because the "hard" costs of the time and materials required to produce the solution don't reflect the value that the buyer will obtain by purchasing that solution.  But you can't price based on value if you don't know how much value your solution will actually create for a customer.

The bottom line is that you can't practice real value-based selling and pricing until you quantify the value that your solution will produce for a prospective buyer.  Qualitative descriptions of value - phrases like "Our personalized marketing campaign will produce higher response rates" or "Our online collateral management system will lower your cost of processing requests for collateral materials" - are important and useful in the marketing/sales process, but they are no substitute for a quantitative estimate of value and ROI.

G. David Dodd is available for speaking engagements and consulting projects. To get more information contact us here.

G. David Dodd is a principal of Point Balance, LLC ( www.pointbalance.com ), an executive education and management consulting firm. Point Balance provides cutting-edge management education programs designed for printing and publishing executives. The firm also provides management consulting services involving business strategy development, strategic marketing, cost management (including activity-based costing), business process management, and balanced scorecard performance management systems. Dodd is a co-author of Activity-Based Costing for Printers: An Implementation Guide, the authoritative resource relating to the use of activity-based costing by printing and publishing firms. Dodd also co-authored Making Value Added Services Work, a comprehensive reference tool for printing company managers who are just beginning to consider diversification or who have already added new services and are not receiving the benefits they expected.

David Dodd can be reached at ddodd@pointbalance.com,931-707-5105.

 

Discussion

By Linda Bishop on May 14, 2010

I agree. When we present a value proposition, we must ask ourselves if the outcome is plausible or probable. If it's only plausible, we're unlikely to sell it. If it's probable, we increase the odds of a sale if we show specifics and offer proof. The sales team can sell like that. They're smart, but they need training to execute.

 

By David Dodd on May 14, 2010

Linda,

Thanks for your comment, and I agree completely. Recent research has shown that fear is the most powerful (and often hidden) emotion involved in the B2B buying process. A credible and compelling estimate of value and ROI can go a long way toward eliminating perceived risk and fear.

 

By Erik Nikkanen on May 14, 2010

David, the fear factor makes total sense. People are just too afraid of being the first (actually second) to try most things. I have come up against this all the time.

I have a clip from Ted.com which talks about how to start a movement. It is amusing. It is not exactly about selling a concept but it shows how people are reluctant at first and then accept a idea without any actual data to show them a benefit.

I hope you enjoy the talk.

http://www.ted.com/talks/lang/eng/derek_sivers_how_to_start_a_movement.html

 

By Joe Rickard on May 14, 2010

David, I agree and thanks for starting this discussion. I have one comment to add. We have found that the process to determine the value-based price versus cost-plus for printing products and solutions needs to be led and embraced by management.

Value-based selling is a important challenge for those in sales and marketing. Getting customers to agree that the operational and financial value of a new printing-based solution compared to an existing alternative justifies a higher price requires very good consultative selling skills.

Having case studies, white papers and customer testimonials that show improved sales, profit, cash flow or ROI results certainly makes the job easier. Let's keep this discussion going.

 

By David Dodd on May 15, 2010

Erik - The video clip is great! Everyone should take a look at it.

Joe - Thanks for your comment. I certainly agree that case studies, white papers, and customer testimonials are important marketing/sales tools. However, I would also suggest that there is no real substitute for a customer-specific value estimate and ROI calculation when it comes to making a powerful proposal.

 

By Anuraag on May 16, 2010

I agree that value based pricing lets you sell at a better profit without eroding the value proposition. Unfortunately, that's until your service is commoditized by product and technology companies. There was a time when even DTP could be sold in this way, but no longer!

Marketing Services is the new area to sell by value and I want to note that the time we get in this age to sell based on value is getting shortened with the increased speed of innovation.

 

By Mark H on May 17, 2010

I have been selling successfully using a value based pricing model for over 20-years, across several industries. In all these years the one truth I have learned is that when you are reduced to fighting on price alone, then either you aren't differentiating your product from your competitor's, or there's isn't any noticeable difference.

When your customer is comparing apples to apples, the lower price will always win out. But, when I can help them compare the competitor's apple to my Dutch Apple Pie and demonstrate that the pie will generate more revenue, then the decision is easy.

Unfortunately, there are too many lazy, content salesmen in the print industry who think that if they can shave another thousandth off the job the sale is theirs. They don't understand value-based pricing, don't believe in it, and as a result can't sell it.

 

By Web to Print on Jun 03, 2010

Excellent article David. There is certainly churning in the print industry and the marketing and selling techniques of yesterday will not be as effective going forward.

 

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