There is a difference between price and cost. Price is what you pay for something, and the cost is representative of the value (of which price is only part of the equation). Some people prefer to use price as the value, eliminating all other factors from consideration. Helping clients to recognize and address the other factors can shift them away from looking only at price.
All Things Being Unequal
I am going to use this example from a footnote in my book, Eat Their Lunch. I used to wear Johnston & Murphy shoes. I am incredibly hard on clothes, and J&Ms were durable, with a pair of shoes costing $249 lasting me years. These same shoes now last a year at the most. A friend of mine recommended that I buy Allen Edmunds, where a similar shoe comes with a price of something near $450, or $200 more than I was used to paying.
But because the shoes with the higher price tag last for 5 years, the math makes the higher price shoe the less expensive shoe. Buying the $249 shoe every year for 5 years is $1,245. Buying the $450 shoes is $450 over that same time, a savings of $750 (and a reduction of four extra trips to the shopping mall, which has an equal or greater value than the money for me personally).
Soft Costs Are Expensive
Sometimes the math doesn’t work out this cleanly or neatly. Instead, you have to engage your client about what else they value outside of price, or you have to prompt them with the value by addressing it directly. You have to point them at the additional costs they are going to incur by being cheap, things like missed deadlines, rework, reordering, waiting for product, additional labor, poor speed to market, falling behind their competition, more labor, disappointed clients, lost clients or customers, poor experience, frustrated internal employees, loss of reputation and on and on.
The soft costs your client doesn’t acknowledge often make the lower priced solution more expensive
When your dream client weighs price more heavily than other factors that are equally—or more—important, you are responsible for helping them break through the limitation of this thinking. You are also responsible for not allowing them to underinvest in the results they real need—and avoiding the higher price they pay by being cheap.
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Filed under: Sales