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Competing On Value by Mack Hanan and Peter Karp

Competing On Value by Mack Hanan and Peter Karp

Book Review – 5 Stars

“Competing on Value” by Mack Hanan and Peter Karp is a terrific book that was published in 1991.

Please don’t let its age put you off because the advice it gives is timeless. Some of the examples are dated but the message comes through very clearly.

Competing On Value is a sales book, pricing book and marketing book all rolled into one.

The concept of economic customer value is well established in the more specialised sectors of marketing and pricing. When “Competing On Value” was published, I believe that the concept of fixing your price on the value (or gain) your customer made from buying was very new.

For too long businesses have been encouraged to base their prices on their costs by using cost plus pricing. It costs £10 and you want 50% margin, the selling price must be £20.

Or alternatively prices are based on the prices used by competitors. That’s necessary if you sell a commodity that’s the same but you shouldn’t be selling commodities because there needs to be some kind of product or service differentiation to give you pricing independence.

The Core Idea Of Competing On Value

The book is targeted at business to business selling and focuses on the only two reasons that purchases should be made:

  • Increasing sales revenue
  • Reducing cost

It’s simple when you put it like that.

Features are old hat.

Emotional benefits are important in consumer based marketing but for B2B, “show me the money” is the blunt message of the book.

“A customer who knows your value will have no trouble affording it because he knows it represents a good investment” is the basic message.

I like this quote from the book for putting the idea on selling on customer value into perspective.

“If you do not know your value, you cannot price it. If you cannot price it, you cannot sell it. If you cannot sell it, you will be reduced to selling the products and services that contribute to it. Your prices will reflect their costs instead of their values.”

Personally if you are in a B2B market, I recommend that you remember the people who make the decisions are still human and prone to an emotional bias. Yes emphasise the economic benefits as recommended by the authors, Mack Hanan and Peter Karp, but also work with the emotions of the buyer.

The phrase “Nobody every got fired for buying from IBM” supported their high prices for many years.

There are only five chapters in the 141 page that Competing On Value covers:

  • The value strategy
  • Know your value
  • Price your value
  • Sell your value
  • Control your value

I suspect that to hard bitten salespeople who have mastered 47 varieties of manipulative closing techniques,  reading this book feels like stepping into the strange world of the accountants but I think it is excellent.

The essence of selling is to find the problem and then to help the prospective customer understand the difference between the costs of the problem and the benefits of the solution.

If you are able to do that with clear numbers and present a compelling comparison between buying and not buying then you are well on the way to helping the customer to buy. If you can then legitimately show that your product or service has a better value to price relationship than your competitors, the customer has the logical reasons to buy.

Since to understand the value opportunity in the customer’s business, you will have taken him through a selling process based on consultative selling  you have already established rapport and trust so the emotional needs of the buyer are also met.

The buyer will trust you and have confidence that your solution will meet its promises and save costs or create extra revenue.

Rating of “Competing On Value” by Mack Hanan and Peter Karp

I rate “Competing On Value” with 5 stars.

It is highly recommended for businesses who sell to other businesses who are interested in putting a value and price on the extra benefits they bring to customers.

Buying Competing On Value” from Amazon

Competing On Value is available from Amazon.com and Amazon.co.uk (affiliate links)

For some reasons, the reviews are mixed.

While other books have picked up on the pricing on value idea, I haven’t seen it explained better.

Paul Simister is a business coach who helps business owners who are stuck, get unstuck. If your business is based in the UK, you can have a free Business SOS consultation with me.

There are many thousand of business books, you can see the full list of my reviews at Business Books Reviews by Paul Simister. I’ve also narrowed these down to a list of the 12 Best Business Books For Business Owners & Entrepreneurs.

 

 

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