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Sell based on your value – not your labour: Barb Pellow

Friday, 11 August 2017
By Barb Pellow

Companies within the printing industry have historically had a manufacturing mentality—they subscribe to the labor theory of value, which states that the value of a service is determined by the amount of labor that goes into production. Barb Pellow, Infotrends, looks at how to distinguish you business from the competition through value-adding.

Now, thousands of firms in a variety of industries are pricing their services according to the external value created—as perceived and determined by the client—rather than the internal costs incurred in generating services. This article explores the concept of value-based pricing and highlights some real-world examples of companies that are embracing this strategy.

Keypoints:

  • The most effective way to distinguish your business from the competition is by blending value-added services with print.
  • When it comes to value-based pricing, service providers must rely on good communication and interviewing skills as well as feedback from prospects to arrive at a fair price.
  • Once you have established the economic worth of value-added capabilities, or have at least initiated a discussion about what that worth might be, you will no longer need to justify any price premium for your offerings in relation to the

Introduction

Barb Pellow, Infotrends.

A business is defined by the value it creates for its customers. Your price speaks volumes about your value proposition, more so than any other component of your firm’s marketing. As print/marketing services firms build out portfolios of value-added services, they frequently undervalue their offerings. Players in the printing industry have historically had a manufacturing mentality—they subscribe to the labor theory of value, which states that the value of a service is determined by the amount of labor that goes into production. It’s time to change this pricing culture! Today, thousands of firms in a variety of industries price their services according to the external value created—as perceived and determined by the client—rather than the internal costs incurred in generating services. This strategy is known as value-based pricing.

This past week, I had the opportunity to speak with two executives about pricing for value when selling print/marketing services:

Based on these conversations, I recommend the following four strategies for selling based on value instead of price. 

1.   It Starts with a “Differentiated Offer”

Competing on price is a fool’s errand, so you must find a way to change your clients’ mindset and prove that you are different. The most effective way to distinguish your business from the competition is by blending value-added services with print. If you are providing a commodity that is not distinguishable from what your competitors are offering, the lowest price becomes the only logical choice for selecting one company over another.

According to Ken McNerney, “We have positioned our business as a marketing execution company. We integrate the latest print technologies with a broad range of services to provide customers with unparalleled marketing options. Earlier this year, we acquired a technology-driven marketing firm known as TDH Marketing. This is now our Bitstorm Connect offering and has broadened our portfolio to incorporate a full array of marketing services, including web design, marketing automation, video, and digital marketing. Many of our competitors have a limited set of capabilities, but our wide range of communication services enables us to offer the most appropriate solution to any customer’s marketing problems. That is our real differentiation.”

The competitive landscape in Spokane, Washington is primarily comprised of small and medium-sized businesses. According to Laura Lawton-Forsyth, “We’ve positioned our business to be the marketing arm for those small and medium-sized firms. Lawton Printing has evolved into an all-digital printer with a full portfolio of services. We work with our customers to handle personalized direct mail, manage brand assets, oversee the marketing supply chain, and help them communicate more effectively in today’s cross-media world. In our market, no other firm can offer this breadth of services. We can be the one-stop provider for all of their marketing needs.”

2.   Understand the Next Best Alternative (Competition)

What is it that sets your offering apart from the next-best alternative—the offerings of your competitors? When you’re thinking about the next-best alternatives, remember that these are not limited to printers and marketing service providers. As portfolios continue to expand, you might find yourself competing against an agency.

Lawton-Forsyth notes that the competition is changing. She explains, “When we price our services, we are no longer competing solely against other printers—we are offering agency-oriented services. Print service providers understand the price of print, but effectively building out your business model in today’s market requires a comprehension of how agencies price more advanced marketing services.”

McNerney shares this sentiment. He states, “You do need to understand the competition. When we create a solution, we look at competitive pricing in the market. Next, we look at the added value that we deliver. We don’t want to be a commodity pricer.” 

3.   Communicate Your Value

When it comes to value-based pricing, service providers must rely on good communication and interviewing skills as well as feedback from prospects to arrive at a fair price. McNerney elaborates, “We will ask the client what results they want to see from the campaign or marketing initiative. The results will be a combination of quantifiable dollars saved or gained, such as headcount reduction or increased sales, plus intangibles like peace of mind, improved reputation, and/or reduced risk. If you’re running a new customer acquisition program, you will want to understand the value of an incremental sale. Once we understand the economic benefit to the client, we can translate that into a value proposition that can be delivered and priced accordingly.”

Lawton-Forsyth asserts, “Customers need to be educated. We encourage them to try new communication techniques that will help them drive their businesses more effectively. As part of the education process, we share case histories, business examples, and market research data to illustrate how and why personalized direct mail and integrated marketing will work for them.”

4.   Translate Value into Price and Business Results

Savvy print/marketing service providers have discovered that customers are often able—and willing—to pay a higher price for a bundle of products/services if they perceive an added value. Once you have established the economic worth of value-added capabilities, or have at least initiated a discussion about what that worth might be, you will no longer need to justify any price premium for your offerings in relation to the competition. Instead, you can promote the services in concert with the associated added value that you deliver. You can also argue that your lower-priced competitors are actually overpriced because the lower cost of their offerings will not offset the value lost by not selecting your option.

Lawton-Forsyth states, “We provide a statement of work with each proposal that describes our comprehensive solution. It highlights the level of support we provide, a complete implementation plan for their specific project, and a bundled price. By taking this approach, our clients can focus on the totality of the Lawton value proposition rather than the price of each service. Throughout the entire sales process, we are continually articulating why our offerings are different.”

McNerney works to formalize the ROI in economic terms when he presents a proposal with pricing. He explains, “If the customer’s business objective is to achieve $6 million in incremental sales, spending $250K on a marketing campaign is reasonable. Establishing your value in dollars and cents is important. Once we’ve had a successful campaign that meets the client’s expected business results, they will have a lot of confidence in us. This creates the opportunity to cross-sell even more services, increases client loyalty, and improves long-term profitability.”

The Bottom Line

As today’s print/marketing service providers continue to expand their offerings, it’s critical to be paid for value-add in the eyes of customers. Service providers must clearly identify their value-added capabilities and create key points of differentiation from market competitors. The printing industry has historically relied on a manufacturing labor-oriented business model that sells based on price, but today’s business model is different. Service providers must shift the conversation from “print product produced” to “value delivered to the customer.” It’s time to change the conversation and the culture!


 

A digital printing and publishing pioneer, marketing expert and Group Director at InfoTrends, Barbara Pellow helps companies develop multi-media strategies that ride the information wave. Barb brings the knowledge and skills to help companies expand and grow business opportunity.

Please offer your feedback to Barb. She can be reached at barb_pellow@infotrends.com

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