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A Crucial Decision to Drive Your Profit Formula

by Doug Davidoff | Feb 5, 2012 2:07:00 PM

I often talk about how salespeople and companies can Move Beyond Price to put the focus on what your products/services are worth instead of what they will cost.  As part of the process, I explain that price is really a signal, telling both buyer and seller how the other values of the proposition being put forth.

The implications of The Drought we find ourselves in as we continue to emerge from the deep recession puts more pressure on sellers to justify their prices and margins.  Sellers must be able to answer a very simple, clear question:  Why should a buying organization give your products/services a favored status, allowing you to earn higher prices and margins?

Increasingly sellers are failing to have compelling answers to this question.  In my experience, the underlying reason for this is because sellers are either unwilling to put forth the effort to offer propositions that are truly different and better than others, or sellers are merely afraid to make a compelling promise.

Companies have a crucial decision they must make:

    • Do they want to focus their profit formula on enhancing and growing margin? or
    • Do they want to focus their profit formula on growing volume faster than anyone else?

Companies that choose the former must go further and ensure that their value proposition connects more deeply with their customer’s businesses.  They must find and/or enhance their ability to make their customers more efficient and effective.

Companies that choose the latter must aggressively eliminate costs within their organizations so they can continue to deliver their products and services faster, cheaper and better than their competition.

Either road is difficult, but today, more than ever, you must make a choice.  Straddling these two approaches is simply becoming too precarious and risky to sustain.

To get you started, here are two articles I just read that show how other companies are meeting this challenge.

    • In the recent filing for Facebook’s public offering, founder Mark Zuckerburg shares the Facebook philosophy with what he calls The Hacker’s Way.  Every entrepreneur should read this (regardless of how you feel about Facebook or Zuckerburg).  My favorite quote in the piece: We don’t build services to make money; we make money to build better services.

What choice are you going to make?