Adding Value not Cutting Price

Last time we talked about why your customers buy from you.  And concluded that price was not a good reason because it starts you on the road to bankruptcy.  Add value instead and hold you price or even increase it to position yourself as a premium provider of your product or service. You can add value by understanding how your customers use your product and make changes so that your product or service fits more smoothly into their process.

I had a firsthand experience of adding value a number of years ago when I was the chief electrical engineer of a major consulting company.  I was tasked with decreasing the costs of the drawings we were providing to our clients to construct their facilities.

Now, here’s a key point.  You would think that our client was the utility that hired us, the ultimate client, to design their facility.  And you would be right.  But that was not our only client.  The contractor that was doing the electrical work was also our client and was the client that first used our drawings to construct the power plant.  The company that hired us, the ultimate client, would use the drawings to perform maintenance and trouble shooting when the plant was operating.

My management, the partners who owned the company, felt that the wiring drawings we were providing to the contractors and our ultimate clients were adding great value and they didn’t want to change them even though they were  the drawings that cost us the most to make.

When I got involved I sat down with the contractors and asked them what they did with our wiring drawings. They told me that they gave them to a junior electrician to convert to wire lists because they wired the plant from wire lists not drawings.  Then the put them aside or threw them out because they were of no value to them .

We could make wire lists at a fraction of the costs of wiring drawings and those lists fitted into the contractors process without him having to perform addition operations on them.

Then our senior projects engineers told me that our ultimate clients would never accept a new type of drawing we were proposing to accompany the wire lists that would have all of the wiring for a service on one drawing.   We showed our ultimate client who would have to operate and maintain the plant when construction was complete that with the current drawings he would need to collect about 35 wiring drawings to trouble shoot a simple electrical valve.  All of the information he would need for this task was contained on one of the new drawing type we were proposing.  The ultimate client like this a lot because it would significantly reduce the time of his maintenance workers to do the work.

So by asking our customers (remember you may have multiple customers – customers of your customers)  how they viewed our current products compared to our proposed product we were able to reduce our costs by 50% and provide both of our customers with a product that fitted into their processes with minimal effort on their part.  This added value for the customers, reduced our costs and increased our profitably. Just by asking and not assuming that we knew better than our customers what they need for their jobs.

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