These companies do great work and deserve to get paid for all that value they deliver to their customers, so why do these great companies tell their clients to keep much of the margin they have so richly earned?
High-value companies train their teams, design process, manage against quality metrics all in order to deliver those great benefits that make more money for their clients and hopefully for themselves. So where does this disconnect between doing great work that is unique and telling the client PLEASE PAY ME LESS THAN MY WORK IS WORTH!!!???
Regardless of the work delivered (after the sale is made and the contract is signed), there is that early stage of every relationship where expectations are set.
What is it that companies do to set the expectations day one and keep telling that story up to the day the contract is signed that results in this low margin result?
Let’s see what we can learn by looking at 3 technology companies’ websites:
- Gateway – “Just what you need for productivity, entertainment and mobility.”
- Dell – “The power to do more.”
- Apple – “Performance and design – taken right to the edge.”
Gateway builds computers, and they are happy to tell the world “WHAT” they do. Gateway computers are “Just “WHAT” you need for productivity, entertainment and mobility,” and they sell them to you at a very reasonable price.
Does Gateway believe no other computer company’s products help with productivity, or provide entertainment or can be mobile? They are describing themselves with same terms every other computer company in the world also claims.
When you tell people “WHAT” you do the prospect has to guess “why they care” (most won’t work that hard) and they hear you are a commodity player. When the buyer hears you are a commodity player you better be prepared to compete on price.
Dell gives you “The Power to do more,” and their website delivers the power for customers to make decisions about technology, financing technology, integrating the technology, maintaining that technology and evolving all of these things through a long-term relationship. Dell is in the “HOW” business. “HOW” allows the customer to manage a complex buying process with the confidence to acquire complex technology so you can be productive, entertained and mobile, plus Dell understands the buyers need for a simpler way to buy.
Dell gets more margin than Gateway since the world believes Dell’s “HOW” makes sure they get higher productivity, better entertainment options and greater mobility from Dell.
Apple believes – Performance and design matter, and it must be taken right to the edge in order to give the customer the greatest experience possible. When the customer wants productivity, entertainment and mobility for computers, IPads, IPods, IPhones, etc. they reach out to Apple because performance and design matter to the buyer.
Apple understands “WHY” people select brands as part of their life, and Apple becomes their choice for all forms of productivity, entertainment and mobility. In addition, the buyer wants to pay more to be able to say to the world they too believe in performance and design and will go as far as they need to (pay more, stand in line and change out all their old technology) to be part of the Apple community.
Near 100% of small and medium-sized businesses spend 100% their time and effort (before the sale) communicating about “WHAT” they do. They tell the world they write software, paint houses, do great printing or hundreds of the things that are exactly the same “WHAT” as their competitors. After they get the sale, they are surprised when the buyer doesn’t understand that they are really a high value partner worth additional margin. It is often only after the customer dumps the current high value vendor for a lower price that the customer experiences the difference in value. So they return to the high-value provider but they still want the original low-margin price.
Let’s do an experiment – first think like a customer and then go look at websites in an industry. What if the names were changed on the websites, would it be possible to tell the differences between the companies value based on their “WHAT”? When “WHAT” is all the website talks about how would you decide which “vendor” to negotiate price with?
If a website, an advertisement, a proposal, a trade show display all talk about “WHAT” you do, don’t be surprised when your customer pays you a commodity price and margin since they can’t tell the difference based on your “WHAT”.
Those small and mid-sized companies that really provide great value need to communicate with a buyer focused “WHY” because “WHY” tells the value story. At least talk about the “HOW” in every communication from sales presentations, to websites to PowerPoints to proposals. Compared to talking about “WHAT” your message about “WHY” and “HOW” will increase margins, wins, and repeat business. Most important the buyer will thank you for understanding what they value, and they will become your partner for a very long time.