Pricing in Business - How Much Does It Matter?

This article is not my own, but came across it, and wanted to share it with you……

I’m currently reading Warren Buffett’s autobiography, The Snowball.Released in 2008, it is a truly remarkable book and highly recommended reading into the most successful financial investor of our time.

Halfway through this book is the following quote from Buffett: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

This statement about price is more than an insight into Buffett’s mind. It is a mantra that directly relates to selling, price and most of all value.

Pricing is a subject that regularly comes up in our sales training. In sales, we all tend to get a bit passionate and more than a bit nervous about price.

Reactions include:

• What should I do when I get a pricing objection?

• Our customers never want to pay the price we set – they think we are too expensive.

• I always seem to lose out to competitors because of price.

Pricing objections, setting prices and establishing value are all indeed some of the trickier sales issues.
But sense can be made of all of it with Buffett’s line. Here it is again: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Now, extend that to the product or service that you are selling.

Customers feel the same way as Buffett: for them, it’s much better to feel like they are buying a wonderful product from you at a fair price, than to feel they are getting just an OK product at a knock-down price.

So the answer to all of your pricing concerns is simple: you have to position your solution as the most wonderful option available and your price as fair for that option. We call it building value or value selling.

Value selling is best imagined with the following analogy: imagine a set of weighing scales because this is usually how customers assess you.

On the left set of scales is the price. On the right is value.

If the price on the left is $100, then there better be $100 worth of value on the right, because the customer will believe that is balanced or fair.

If you can build more value on to the right set of scales then the balance starts to work in your favor and you are much more likely to get the deal.

Fair is good, for customers won’t think they are getting ripped off.

But value is better.

Ideally you want the right “value” side of the scales much weightier than the left. That way customers will know they are getting a great deal and will buy quickly before you change your mind.

Try this simple exercise when you are shopping: when you look at an iPod, a new shirt or a holiday, work out consciously whether you think the value exceeds the price.

TK MAXX for example is a fashion house that consistently builds the value side of the scales. Shoppers literally can’t believe their luck paying $80 for a pair of Jimmy Choo shoes that Scarlett Johansson was photographed wearing a couple of weeks prior. TK MAXX understands value selling.

So your job when selling, according to Warren Buffett (who knows a thing or two about successful selling) is to focus on value.

Your job is to think of ways to build value into the sale.

Don’t forget that value arrives at the ball dressed as many things – guarantees, positive relationships, after sales service, care and consideration, future discounts, price guarantees…the list goes on.

Warren Buffett is a man who could count on one hand the amount of times he has paid a wonderful price for a fair company.

Instead, he pays fair prices for wonderful companies.

By living out his mantra in the way you sell you will find that customers will want to pay you the price you want simply to get their hands on what you have.