By Mack Hanan, Peter Karp
Offers a brand new method of promoting that emphasizes no longer competing at the foundation of the simplest cost, however the optimum price i.e. demonstrating to present and searching for what you offer that utilizing your services or products will both lower their expenses or enhance their sales. disbursed by means of Gale. Annotation
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Extra resources for Competing on Value
William Gates of The Microsoft Corporation speaks for this product-based point of view when he says that "consulting services are a natural extension of our personal computing offerings" rather than the other way around. As a product person, he is comfortable in touching his customers first with his software, even though it has much less value both to them and to him, rather than counselling with them on the superior values from its application to their businesses. The supplier who is closest to the customer is number one in the value chain.
Yet ABLE is clearly receiving greater value. Unaware of his value as ABLE's supplier, he has sold the performance features and benefits of his information system on the basis of their price, not their value. At the same time, he is also losing the opportu- Page 14 nity to upgrade his sales to business ABLE on the basis of their proven value. Not knowing value, and therefore not being able to price it or sell it, has led to four negative results in this typical scenario: 1. Business ABLE will probably not increase its investment with its supplier because it does not know how valuable each added dollar of investment can be.
There are two possibilities for making your value count the most: 1. If the customer has low unit margins and therefore generates his big-winner profits primarily by turnover, you will have to add value to his abilities to take orders, produce, ship and deliver, and collect his receivables with the maximum cost-effectiveness. 2. If the customer has low turnover and therefore must generate his big-winner profits primarily on margin, you will have to add value to his capabilities to differentiate his product or, more likely, his applications, support, and service skills.