Value-based selling is a sales technique used to get the customer to spend based on the service they perceive to receive, instead of spending based on an hourly rate. Value-based selling is a method developed to bill clients according to the benefits they perceive the service delivers. Billing hourly is the opposite method of billing clients, which entails charging an hourly rate for the services rendered.
For example, charging $10,000 for a service a client perceives to be worth $50,000 results in a winning situation for both parties, especially when billing using the hourly rate would generate a mere $5,000 invoice. Indeed, the client pays much less than what he or she perceives the service to be worth, and the seller charges double what he or she would have normally billed using an hourly rate.
Value-based selling is about selling based on the value the services provide instead of on the costs incurred to deliver the offer. Let’s take a look at three advantages value-based selling provides.
1. Increases profits
Value-based selling quantifies the impact of the service perceived by clients and allows the seller to bill clients based on their perceived benefits. Therefore, sellers can use value-based selling to break the time barrier and to bill higher amounts than when they billed using an hourly rate.
The perfect example of using value-based selling is embodied by lawyers who use templates to write their clients’ contracts. Lawyers use the same template for all clients, but modify key elements on the template to customize the service. The modifications require very little time, and so billing using an hourly rate is not the most profitable option for these entrepreneurs.
Lawyers rather use value-based selling in order to increase profits and to provide the maximum value for their services to their clients.
2. Maximises productivity
Value-based selling is based on the premise that the amount of time spent performing a service does not determine its value. Therefore, when the notion of time is irrelevant to the customer, why bill based on it?
Time becomes irrelevant when using value-based selling because this method of billing does not depend on time. Value-based selling maximizes productivity because time is no longer a factor in the equation. Entrepreneurs therefore focus on value-adding services that maximize the amount their can charge to clients, instead of focusing on unproductive tasks.
3. Satisfies the client
Value-based selling results in higher customer satisfaction than billing based on an hourly rate. Let’s recall that the notion of time is irrelevant to the customer and that spending more time on a project than necessary does not provide additional value. Clients are most satisfied when they perceive true value in the service received. Customers are most satisfied when they experience congruence between the amount they pay and the value they receive.