Pricing Problems: On Claiming Value You Helped to Create
I feel so strongly about the principle that salespeople are to create so much value for their dream client that they can confidently capture part of that value for their company and themselves that I named it the Iannarino principle. Here, I am willing to draw a line in the sand and defend the idea from all attacks, foreign or domestic.
And so are you. I am about to prove it.
Here are a few not-so-hypothetical questions.
If you go out and do well selling and obtaining new clients for your company, are you entitled to some of the value you created for your own company?
If you generate enormous profit that didn’t exist except through your effort, are you entitled to some of what you helped to create?
If you lead the value-creation, should there not be an upside for you? Of course there should be, and it is almost certain that there is an upside called commission, or bonus, or override, or whatever. You created value, you captured a piece for yourself.
Is this fair? Is this just? Is this right? Or, when you win the big deal dream client and generate the commission, does it make you feel dirty, like you’ve done something wrong?
The Problems With Pricing Problems
Okay. Now we agree that when you create value you are entitled capture a piece of it for yourself. Then why in God’s name wouldn’t you feel that this same principle applies to your clients? While your company agrees to share your value creation with you, you refuse to extend the same principle to what you do when you sell, a principle that you find to be the picture of fairness when it is applied to you (and one, by the way, that your dream client agrees to in how it compensates its sales force).
You tell yourself the most dangerous lie that your prices are too high. But maybe, just maybe, they’re not.
Maybe the gap between your price and your competitor’s price is supposed to be as wide as it appears to you and to your dream client. The real gap isn’t between your price and their price; the real gap is between your price and your ability to create enough value to command that price, capturing value for your dream client, your company, and yourself.
The real gap is always between the value you create and your price, not your price and your competitor’s price.
When you hear from purchasing that your price is 17% higher than your competitor, you should respond very confidently: “Really? That seems a little low. We are creating a 42% greater return than your present provider now, and despite our price being higher, our cost is way lower. Can I review this with you again?”
The real pricing problem most salespeople have sounds more like this: “Your price is 17% higher than your closest competitor’s price.” The salesperson responds: “Really. Let me see if I can sharpen my pencil here.”
If the battle is over price, and it isn’t your company’s strategy to compete on price, you will sharpen your pencil to a little nub and still lose. Should you win, you will more than likely lose money or perform poorly because you aren’t making enough to handle the client properly—and you’ll get to enjoy all the complaining and the reputation damage that accompanies it.
Far be it from me to suggest that any of this is easy. It’s not. But it is your job is create enough value that your dream client that you can confidently capture some of that value creation for your company and for yourself.
If you are in sales, it is your job to create that value, and to know what the difference in that value creation are for your dream client—in monetary terms whenever and wherever possible. If you are in sales leadership, it is your job to build the tools that help your team to do the creating, and to help them calculate the return in a way that shifts that battle from price to cost.
Do you, as one who makes something appear where nothing existed, deserve something for doing so?
Why do you feel so strongly about being paid for what you do, and so much less strongly about ensuring that your company gets paid for what it does?
Are you 1,000% certain that your price is too high, or are you supposed to be doing something to make you and your company worth more?
What do you do that is worth paying more for? How do you demonstrate how that translates to increased revenue, lower costs, and/or improved profit?
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