At PricingBrew, we’re big proponents of value-based methods for pricing, marketing, sales, you name it. And our advocacy isn’t the result of faith in a popular trend, or subscription to a particular business dogma. No, it’s borne out of pure pragmatism…and a desire to work no harder than absolutely necessary.
We just figure that if it involves prospects and customers, it’s extremely difficult to go wrong using their perceptions of value as your starting point. And experience indicates that it’s true…it is indeed very difficult to go wrong using value-based methods.
Difficult…but unfortunately, not impossible…
The concept of economic value is one aspect of value-based pricing that B2B companies continue to struggle with. Now, the mechanics around estimating economic value aren’t really the issue. After all, the arithmetic involved is very straightforward. And companies aren’t even stumbling on the part about it needing to be relative to the alternatives. Here again, calculating a differential is a pretty simple thing.
So, where’s the problem with economic value?
From our perspective, companies run into trouble when they believe that economic value is all business prospects and customers care about. Companies struggle when they think that all that matters are the numbers, and anything that can’t be quantified down to the penny is tossed aside as unimportant or irrelevant.
The problem with economic value is that it’s not the only value.
The fact is, business buyers don’t make their purchasing decisions based solely on the economics involved. And anyone who’s made major purchasing decisions on behalf of their employer knows that there are all sorts of unquantifiable “intangibles” that can play a huge role in the decision—from the supplier’s reputation in the industry to whether or not the salesperson is really someone you want to spend a lot of time with.
Economic value is not enough. The numbers are not enough. Perceived value is a much bigger and broader concept than that.