Seth on Pricing Pressure

Seth Godin has a new post entitled No Such Thing as Pricing Pressure. To paraphrase his point, in order to get out of the commodity box you have to increase the value you create for your clients and prospects. And I mostly agree.

In business-to-business sales however, it gets a little more complicated. What if, for example, your client is Wal-Mart and the value they create for their customers is lowest price? The strategic choice they have made as a company is to compete on price. So what kind of value might they expect from those who sell them their goods and services? (I write this knowing that some of their service vendors create tremendous value by helping Wal-Mart with their legendary operational efficiencies, which contribute to lower price, without actually having the lowest price. I don’t yet know of any of their suppliers who provide products that compete outside of price). If your value proposition is in direct conflict with your customer or prospects, you have a recipe for a short relationship.

For more on understanding your prospect’s strategy choices, read The Discipline of Market Leaders.

Seth’s proposition is also complicated (at least in business-to-business sales) by the fact that many of your clients may not have the capacity to increase the value they deliver to their clients (they may lack the management resources, the ability to innovate, or the ability to execute a different value proposition). In the value chain, if your customer is competing on price, you are, eventually, competing on price. Unless  . . .

Combating the commodity trap requires a serious rethinking of how we sell (with skills I am calling 4GS–4th Generation Sales). In order to increase your value, you must me able to reach into your client or prospect’s P&L and show them how your product or service improves their ability to perform better for their stakeholders (it may be spending on your product or services saves money elsewhere, it may help them to innovate, it may be help them to better serve their clients, or it may include helping them compete and win in their space, etc.)   

Let Seth’s intentionally provocative post provoke you think about how you raise the bar on value creation.


Filed under: Sales 3.0

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