“How to Justify Premium Pricing in Competitive Markets. The Value-Based Selling Method for Business-to-Business (B2B) Managers”.

"Discover how value-based pricing and value-based selling can help you?justify prices, increase ROI and close more sales in the competitive B2B world."

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"Did you know that 80% of B2B buyers are willing to pay more if they understand the value they'll receive?"

?"Many B2B marketers and managers struggle to justify high prices or differentiate themselves in competitive markets.?The result: reduced margins and customers who don't see the real value of their solution."

In this article, you'll learn how value-based pricing and value-based selling can help you justify prices, close more sales, and increase profitability in the competitive B2B world.?Discover practical strategies, success stories, and tools to implement these methodologies in your company.

I'll tell you a story that I often hear in the companies I visit.?It may sound familiar: The customer is from an industrial company that needs a machine to improve the efficiency of its production line.

To which our sales representative arrives with years of experience and to serve you based on his expertise.

Traditional approach:

"Our machine is made with HIGH QUALITY MATERIALS and has a 5-YEAR WARRANTY.?It costs $50,000."?(Unbeatable offer thinks that the customer perceives it that way).

Valued Based Approach

?(Identify value)?"I understand that your production line has a bottleneck that costs you $20,000 a month in losses.?Our machine can eliminate that bottleneck."?(Quantifies the value)?"By removing it, our machine will save you 240,000 a year but investing 50,000 means an ROI of 380% in the first year."?(Justify the price) where?"The price of $50,000 is not a cost, it is an investment that will generate a significant return."

Conclusion of the case: "This approach not only justified the price, but also closed the sale in less time.

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Fundamentals Value-Based Pricing vs. Value-Based Selling

First, to understand this logic, we understand the concepts of?From Value Based Price to Value Based Selling, which seem the same, but are different but both must be mastered by KAM or B2B salespeople

Value-Based Pricing

Definition:

It is a?pricing strategy?in which the price of a product or service is primarily determined by the value it generates for the customer, rather than based on production costs or competitors' prices.

Key features:

·?????????Customer focus:?Price is justified by the value perceived by the customer, not by internal costs.

·?????????Quantification of value:?The economic impact (cost savings, increased revenue, efficiencies) that the product/service generates for the customer is calculated.

·?????????Example:?If a solution saves?the customer $100,000 a year, a price of$100,000,?a year?can?be?set for the customer,?regardless of whether the cost of production is $10,000.

According to a study done by Bain & Company - called “Price Premiums in B2B Markets”, it states that “Companies that train their teams in value-based selling (vs. feature-focused) achieve 12-20% higher prices in industry sectors”.

1. Value-Based Selling

Definition:

It is a?sales approach?in which the salesperson focuses on demonstrating and communicating the value that the product or service generates for the customer, with the aim of justifying the price and closing the sale.

Consultative approach:?The salesperson acts as a consultant who understands the customer's needs and proposes solutions that generate value.

Communication of value:?The salesperson explains how the product/service solves specific problems or generates tangible benefits.

·?????????Example:?Instead of selling a machine for its technical features, the salesperson explains how the machine will reduce the customer's operating costs by 20%.

2. How they complement each other

Although they are different concepts,?value-based pricing?and?value-based selling?are closely related and complement each other:

1.?Value-based pricing defines the "what":

o?Sets the price based on the value that the product/service generates for the customer.

2.?Value-based selling defines the "how":

o?Communicate that value to the customer during the sales process to justify the price and close the deal.

3. Importance for KAM or B2B sellers

For?Key Account Managers (KAMs)?or B2B sellers, both concepts are essential:

·?????????Value-based pricing?gives them a fair and competitive price that reflects the value delivered.

·?????????Value-based selling?allows them to communicate that value effectively, overcome objections, and close sales.

Do you want to know how to calculate ROI for your client??Keep reading."

?However, another study by Harvard Business Review (HBR) - “The B2B Elements of Value” found that: Companies that communicate economic value (ROI, savings) rather than technical features close sales 18% faster and with 10-15% higher margins. Companies that communicate economic value (ROI, savings) rather than technical features close sales 18% faster and with 10-15% higher margins.

4. What is the basis of?1.?Value-Based Pricing

1. Understanding the Customer: What problem does your product solve? How much does that problem cost the customer? How much money, time, or resources does your product save you? What emotional or functional benefits does it offer?
2. Know the Alternatives: What would the customer do if your product didn't exist? Would you use the competition? Would you look for a less efficient solution? Knowing this defines how much you can charge.
3. Measure Value: In B2B, this is cost savings, increased production, or revenue. In B2C, emotional benefits (e.g., status) also play a role.
4. Decide the Share of the Value to Receivable: Once you've measured the value, decide what percentage of that value you'll capture in the price.
5. Test and Adjust: The price is not fixed. Test, get feedback, and adjust based on the market. Use data to see if you're overcharging or undercharging.

In summary, Value-Based Pricing is about:

• Know the customer in depth.
• Understand your options.
• Measure the value you bring to it.
• Charge a fair price for that value.
• And adjust the price according to the market's response.

5. How I Apply It to My Salespeople

Recommendations for implementing both approaches

1.?Train your sales team:

KAM?salespeople must be proficient in quantifying value and communicating value-based pricing.

o?Example: Train them in consulting techniques and storytelling with data.

2.?Develop quantification tools:

Create?templates or calculators that show the ROI of your solution for each customer.

o?Example: A spreadsheet that calculates cost savings or revenue increase.

3.?Customize the proposals:

o?Use customer-specific data to justify the price.

o?Example: Include similar success stories or projections based on your industry.

4.?Monitor and adjust:

o?Periodically check if prices are aligned with the value delivered.

o?Example: Conduct satisfaction surveys to understand if customers perceive the expected value

"Mastering Value-Based Pricing and Selling is essential for success in B2B sales.?By focusing on the value you generate for your customers, you'll be able to justify premium pricing, close more sales, and build lasting relationships.?We invite you to apply the strategies and tools presented in this article to transform your sales approach and reach new levels of success."

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To transform your business strategy??Get started today by implementing these approaches and find out how you can increase your margins and build customer loyalty."

OFFER "Download our free guide: 'How to Quantify Value for Your B2B Customers' and take your sales to the next level."

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Author Marco Antonio Hernández Gómez

He is the Founder and CEO of AIpyme 3.0, a digital AI Training platform focused on Business Strategy (Competitive Intelligence and Marketing B2B and ABM Acoount Based Marketing).?He is a consultant and advisor in Business Strategy, Sales, Marketing and Innovation.