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Never undervalue what you offer 9 January, 2007

Posted by varoom in Selling.
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Increasingly I’m meeting startups who undervalue what they have on offer. On meeting early customers they get influenced by two things, the enthusiasm to achieve early business and the negotiation tactics employed by experienced customers.

Once you set the level of expectation and value on your product offering it can be very hard, if not impossible, to lift it back up in the future.

Also the value you have invested in your product is not the same value to your potential customer. In order to effectively negotiate you need to know what your product is worth to the customer.

Questions to ask are, can the customer create the same product with resources he has today? How does the cost of development inside your customer compare to the offering you have at the price you are selling it at? Is a similar product available elsewhere? How do the prices compare? Are there some features not available elsewhere, how valuable are these features to your customer?

Is time to market a factor in the equation? If the customer is late to market he often loses much more than the cost of your product in sales. Your product is available now any delay in buying could cost serious money.

What about cost basis? Can you deliver the product at a more competitive cost than competition both internal and external, If so, what is that cost to the customer? The cost of internal or other external options may be much higher in the eyes of your customer than your own internal cost.

What about opportunity cost, if the customer buys from you he can use his resources for some other profitable activity. Do you know what else he could do? What are your customers’ strengths and weakness’?

In summary be careful to assess the true value, in the eyes of your customer, of your product before you set the price.

 

Greville Commins

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