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 IT'S ALL ABOUT (PERCEIVED) VALUE by W. David Downey July/August 2006 Customers NEVER buy on price ... they always buy on value. This is far more than a play on words. It is a fundamental marketing truth. No matter how much farmers talk or complain about price, price is not the issue. Price is never the issue ... unless the prospect does not value the attributes that determine the price. It is their perception of the value they believe they will get that ultimately determines who they buy from, or if they buy at all. TYPES OF BUYERS Farmers talk price. Recent research of farmers' buying behavior conducted by the Center for Food and Agricultural Business at Purdue University suggests that the "Economic or Price Buyer" segment is around 20 percent of the market and growing. Unfortunately, this segment consists of somewhat larger farmers. But even the most vociferous Economic Buyer is still making their decision based on the "value" they believe they are going to receive. It is just that the Economic Buyer often does not believe the benefits outweigh the cost and so price is left as the overriding factor. The same research shows that nearly half of all commercial farmers are "Business Buyers" who have a much broader set of criteria they consider when determining what is good value. This segment — which is also growing — is made up of more sophisticated and discerning producers who have more complex decision mechanisms. They demand personalized treatment that can tailor the value proposition to their unique needs. Price is important to this group too, but they are willing to consider a wider range of attributes in defining what value means to them. There are a few key points to consider here. First, recognize that most farmers are programmed to talk about price. Getting a "good deal" is a fundamental part of a free market economy and the badge of being an astute businessperson. Even "Relationship Buyers" (about 20 percent of the customer base) want to believe they got a "good" deal. So when a farmer raises the dreaded price objection, it does not mean they think the price is actually too high. It simply means they want what they want at the best possible price. But second (and perhaps more important) many customers who claim "your price is too high" are simply saying "I don't see the value of the bundle of attributes you are offering me justifies your price. Prove it to me." If you can, you have a good shot at getting the sale. After all, the price objection is clear evidence that the customer is interested or price would not even come up. HOW T SELL VALUE There are two possible explanations for this all too common situation. First, the customer may truly not need some or most of the attributes that have been built into the bundle being offered to them. It is important to recognize that in today's highly fragmented market, some customers have chosen a business strategy of providing many of their own services and so are not willing to pay for bundled services. Second, the customer just may not recognize or understand the value of important "benefits" that are included in the package, even though they might gain significantly from those very features. This common situation is usually the result of a company marketing strategy that has not accurately gauged the needs of the targeted segment or not effectively communicated benefits during the selling process. Further, effective selling often includes a strong educational component, designed to help the prospect recognize how key attributes of the product and services can directly and personally benefit their unique situation. If the salesperson has not identified and addressed the prospect's specific needs and value system, or has not helped the prospect understand how key attributes will impact their business, those same attributes are likely not to be perceived as value to the prospect and will discourage the sale. PERCEIVED VALUE = PERCEIVED BENEFITS — PERCEIVED COST The bottom line is this ... if total costs of acquiring the product outweighs perceived benefits, the purchase will not seem to be a good value and there will be no sale. It is all about perceived value. The fact is that customers never buy on price — they buy on perceived value. Marketing is all about creating and communicating Perceived Value. And selling is all about creating and communicating that value one-on-one to individual accounts. Dave Downey (dave.WDD@atlarge.net) is the executive director of the Center for Food and Agricultural Business at Purdue University. UPCOMING AGRIBUSINESS SEMINARS Marketing to Farm Businesses: An Online Course Starts August 7, 2006 Strategic Agrimarketing October 23-27, 2006 Tweet |
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