Knowing When the Price is Right

Protecting prices is all about demonstrating value. In the construction industry this can take a variety of forms.

Although the construction industry is not glamorous it is responsible for 9% of UK GDP and has a very complex decision making unit (DMU), hence a marketing challenge. Although very cost focused the industry does buy on value and recognises that a more expensive product can often deliver value in terms of greater speed of installation, lower building operating costs or longer building lifetime.

Cutting price is one way to give your customer value, but far better to focus on the relevant benefits. It is important to get past the Buyer to the people who use your product or service and understand what their needs are and how they view the benefits you can offer. By understanding the needs of all members of the DMU the benefits relevant to each can be presented. You can be certain that the cheaper alternative the Buyer will tell you about has some shortcomings; extended delivery, no local support or an untried supplier for example.

Value is made up of two broad elements – benefits and costs. The principal element of cost is the amount of money handed over. But there are other costs; disruption to the business during delivery, the uncertainty over a delivery schedule or delays putting right mistakes. Know how you can help avoid these.

Benefits are many and diverse and fall into two categories: Functional Benefits like ease of use, advice given, credit terms or the life of the product. Or Emotional Benefits which are just as important in B2B as B2C. Things like brand, familiarity, confidence in quality, acceptability to customers and easy to buy.

To identify these benefits you need to understand your customer’s business. And I mean really understand. I worked with an electric cable company where we found out that their cable was easier for electricians to strip, which saved time – a benefit to the electrician. We also found out the boxes of cables were squarer than the competitors and hence could be stacked higher in the warehouse giving better utilisation of space – a benefit to the wholesaler. In both cases the company did not know about these benefits which added to their value.

When two products are the same it is important to focus on adding more relevant value. When selling technical products this is often achieved through technical advice at the design stage. Architects have to select a vast array of products when designing a building while coping with complex legislation. Very often they will select the manufacturer who gives them the best advice and guidance. A whole industry has grown up to write and deliver CPD seminars, technical literature and explanations of the Building Regulations. Every piece of new legislation means a new opportunities to talk to a customer who is very difficult to get hold of. If you are lucky he will start using your product as a result.

So demonstrating value is key. That means building as long a list as possible of benefits and then demonstrating the relevant ones to each member of the decision making unit.

Key Points

1.    Understand the different needs of the DMU and how your product can meet them.

2.    Present relevant benefits to each member of the team to demonstrate value.

3.    Seek out opportunities to differentiate and create extra value such as by providing advice.

Chris Ashworth, founder of Competitive Advantage Consultancy provides strategic marketing services to the construction industry. He is a member of the organising committee for the Chartered Institute of Marketing Construction Industry Group (CIMCIG). First published May 2010, RIBA Insight Monthly Bulletin   View original article