The Difference Between Cost, Price, and Value - and Why It Matters

Cost is the actual hard cost in dollars of physical materials and labor it takes to get a product or service out the door. Price, on the other hand, is what your company chooses to tell prospects they can purchase your product or service for in dollars or even other forms of payments. Finally, value is what your customers and prospects think of your product’s utility in solving their problem. In B2B, this usually means how much money it will make them or save them.

If the cost is too high compared with the value, you have a problem, and need to find a way to lower the cost or increase the value. As salespeople and entrepreneurs, we tend to value our products or services from a casual value standpoint which is generally more fact/feature based. However, how we sell our products in a competitive marketplace is to focus on the perceived value that the prospect has and quit thinking about it from our perspective, because we aren’t the one buying it.

 How do we actually increase the perceived value of your products or services? It’s figuring out how to show the prospect how the product solves the main problem they are thinking about. It also solves the problems that the main solution creates. That in itself is a powerful concept we’ll talk about in a future episode. So, instead of offering them the main product or service, here you go, take it or leave it, buy or not, we need to figure out ways to break it down into individual parts and build it back up into a total increased value. We do this by breaking down the individual components of the solution and showing the prospect how EACH of those parts has a lot of value in solving the main problem as well as other problems in and of itself.

Key Talking Points of the Episode:

Cost is the actual hard cost in dollars of physical materials and labor it takes to get a product or service out the doorPrice is what your company chooses to tell prospects they can purchase your product or service for in dollars or even other forms of paymentsValue is what your customers and prospects think of your product’s utility in solving their problemIf the cost is too high compared with the value, you have a problem, and need to find a way to lower the cost or increase the value

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Resources Mentioned: 

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