Understand and Sell Value

Dear Friends,

the roadshow around the two Wiley books The Pricing Model Revolution and The 10 Rules of Highly Effective Pricing will continue over the next few months. On October 22nd 2024 I will be joining the Professional Pricing Society in Las Vegas and you are all most welcome to join my workshop on how to successfully transform pricing in organizations. Let’s meet, learn, exchange and have fun in Vegas!

The same workshop will be offered again with the Professional Pricing Society for the friends not wanting to travel to the U.S. this time end of November 2024 in Berlin. Again, you are most welcome to join the workshop - it would be cool to meet in person.

Thanks a lot to Kevin Mitchell and Johnny Haskins Jr. MBA, MCTS, MCITP for having me at the Professional Pricing Society.

More events and dates to meet up will be communicated in the near future.

In case you missed them, here selected posts:

Trusted advisor at ExxonMobil: ExxonMobil is one of the world’s largest companies by revenue and one of the leaders in terms of innovations and technological advancements in the oil and gas industry. Cool to have supported their topline leaders. Find more insights here.

Pricing at Elektro-Material: what an insightful event hosted in the headquarters of Elektro-Material in Zurich, part of Rexel. Honored to have given a keynote speech at this event. Find a deep dive here.

Discussing pricing with a visionary leader: I had the privilege to meet a unique person. A super star. One of the most charismatic, visionary and successful managers of this world. A person I always admired. We discussed pricing and how he sees the future. Read the post here.

‘Understand and Sell Value’ is one of the key elements that characterizes an organization with a high pricing maturity and it is one of the 10 pillars you find in ‘The 10 Rules of Highly Effective Pricing’.

Let me share the introduction to this topic in the quoted book with you to trigger more thoughts on this topic.

How much is a glass of water worth? It depends.

If I am sitting comfortably at home, watching the Champions League final on TV with friends, it will have a value of diffuse sociability. Drinking water will be a momentary necessity, easily satisfied. I will drink it absentmindedly, while doing something else, perhaps not even aware of whether it's sparkling or still.

But what if that glass of water is the reward I expect after a long run - I hate running! -, or while hiking in the mountains, when water is in short supply and must be rationed along the way? Or – I am letting my imagination run wild here - if that water is the coveted prize after a long period of ‘nil by mouth’ in hospital; or, picturing a more adventurous scenario, after a ride on camelback, after a night spent in the desert - a fascinating experience, of course, but certainly a situation where water is not so accessible and guaranteed?

Freshwater: one of the "wars of tomorrow" according to some analysts, if the prediction that global warming will raise sea levels by 2100 is true. How valuable will the opportunity to drink fresh water be in that case, in that Underworld, as depicted in the science fiction movie from a few years ago starring a very young Kevin Costner?

Furthermore, what would I be willing to exchange that glass of water for? In the case of the football match on TV, maybe some juice, or a beer, as done in Germany. But the exchange value would not be the same if the valuation is done the moment I return home after a hot afternoon outdoors in the scorching sun, say, in Ibiza. And the evaluation of that glass of water would be off the scale, if water were a precious and scarce commodity, if we were in the midst of one of the water wars mentioned earlier.

The focus of this chapter will be on value, in its double meaning of attribution of characteristics (more or less rare, more or less valuable) to a given good or service, and of putting it in relation to other goods or services. Is everything comparable? Can I compare apples and oranges? The answer is obviously yes in our gold standard system, where gold, the currency, can set an absolute price compared to a good, and an "exchange value" in relation to everything present on the market. For example, when I think of 20 dollars, I immediately make the correlation: how many books can I buy with that? Two if they're cheap, or one if I buy Cormac McCarthy's latest. For someone else, like my daughter who loves chocolate, those 20 dollars will be equivalent to 3-4 high-quality chocolate bars. Therefore, the same value - 20 dollars - will be a book for me and 4 chocolate bars for my daughter. Will we be able to exchange our fulfilled needs? Probably, if I have just finished reading that book and my daughter has already eaten 2 chocolate bars.

What we are realising, therefore, is: how much are we willing to pay to obtain something - in absolute terms (chocolate, which is finished once eaten) or relative terms (a book, once read, can be put on a coffee table, and later resold or placed in the home library)? Furthermore, how much is the immateriality of a pair of shoes with a famous basketball player's logo worth, compared to the same pair of shoes with three diagonal stripes? It is a fact that the same objects cost more depending on the perception we have of their uniqueness. This brings us directly to the question of how much the fulfilment of a need is worth, or in other words, how much are we willing to pay to see our own - albeit small and ephemeral - desire fulfilled (desire comes from the Latin expression de sidera "to sense the lack of stars, that is, of auspicious signs"), desire being "that feeling or emotion which is directed to the attainment or possession of some object from which pleasure or satisfaction is expected" – as the Oxford English Dictionary puts it.

Let us now shift the meaning of the term "value," as we have framed it so far, towards what is in fact the primary relationship for any company operating in the market, namely the customer. We will do this by analysing what, in my opinion, can be considered the 5 steps required to "grasp" the value of products and successfully sell them in a mutually beneficial exchange:

• Understand needs and create value;
• Analyse the competition;
• Quantify the value;
• Set price based on value;
• Communicate the value.

Interested in learning more about ‘Understand and Sell Value’? You will find a deep dive on all this in the book The 10 Rules of Highly Effective Pricing, released by Wiley. Philip Kotler, The Father of Modern Marketing, stated that this ’…is one of the best books on pricing’.

Get your copy of ‘The 10 Rules of Highly Effective Pricing’ here.

Get your copy of ‘The Pricing Model Revolution’ here.

You are most welcome to share your views, feedbacks and own pricing experiences. Thanks a lot for your interest and support!