FAQ and Blog

Procurement teams are trained to minimize price. But price and cost are not the same thing — and confusing the two is one of the most expensive mistakes a B2B buyer can make. Here's how to reframe the conversation.  If a buyer says they need a lower price, I say, do you mean lower cost? And no, they are not the same thing. If they say they need a lower cost, I then ask them what they are measuring…. Usually, it's landed costs, and they do not look at the 400 value drivers that I do. I’ve seen this play out many times in B2B. A lower purchase price can look good on paper, but when you factor in downtime, maintenance, quality, inventory, labor, energy, and lost production, the “cheaper” option can become much more expensive. The real question isn’t, “What does it cost?” It’s “What will it cost us to own, operate, and live with it?” That’s why value selling matters. Don’t just compare price. Quantify the economic impact and make the decision based on Total Cost and Total Profit Added—not lowest price. So, are you really buying the lowest-cost solution—or just the lowest-priced one? Price is Never Really the Lowest Cost

Most value propositions fail because they describe features, not outcomes. A quantified value proposition answers three specific questions that move a buyer from interest to commitment. A value proposition should answer three questions: 1. What business problems are we solving? Be specific. Are we reducing downtime, increasing production, lowering maintenance costs, improving labor productivity, or increasing revenue? 2. What is the economic value to the customer? Do not just say “save time” or “improve efficiency.” Quantify the impact on dollars, revenue, profit, cash flow, or risk reduction. 3. Why are we different—and why should the customer believe us? Connect the value to something you can actually prove. Data, customer results, guarantees, references, or a value agreement. For example, “We improve reliability” is not a value proposition. “We can reduce unplanned downtime by improving bearing reliability, which can increase production and reduce maintenance costs” is getting much closer. The goal is simple: move from what you sell to the economic impact you create. If your value proposition does not quantify the customer’s business impact, is it really a value proposition—or just a description of your product? An exercise I always do is keep asking myself the question of “So What?” that it does or is (more reliable), what does that mean in dollars. Well if its more reliable then I don’t need as many redundant back ups (inventory), It will last longer (cost per year goes down), It increases my ability to reduce (use Contribution Margin not Sales Revenue), if I can plan the repair, it less costly in parts and people and so on

TCO tells you what something costs. Total Profit Added™ tells you what it earns. Understanding the difference is the foundation of every successful value-based selling engagement. TCO is not value. And it certainly is not profit. I see too many B2B sales teams leading with Total Cost of Ownership when they should be talking about Total Profit Added™. TCO asks: “What will this solution cost the customer over its lifetime?” Total Profit Added™ asks: “How much more profit can the customer make by choosing this solution?” This means it looks holistically at cost reductions but also at other profit drivers that are not cost reductions (increasing speed to market, reducing risk, or improving sellable product is not a cost reduction), but it affects the customer's profit. That is a very different conversation. TCO can quantify: • Purchase price • Maintenance • Energy • Labor • Downtime • Inventory • Operating costs. But the bigger opportunity is quantifying what happens because you improve those things. More production. Higher quality. Less downtime. More capacity. Lower working capital. More revenue. Higher margins. Cost savings are important. But cost savings are not the same as profit creation. If your customer is focused only on TCO or Landed Cost, you may end up defending your price. If you can quantify Total Profit Added™, you can start explaining why your price is worth paying. Price ≠ Cost ≠ Value. So, here is the question: Are you selling a lower cost—or a more profitable customer?

Discounting is a habit, not a strategy. Sales teams that learn to quantify and communicate value win more deals at higher prices — without giving margin away at the last moment. Your customers do not give you discounts. Your sales team does. And most of the time, they discount because they have not proven the value. The customer says, “Your competitor is 10% cheaper.” The salesperson says, “I can probably get you 5% off.” That is how the negotiation starts—and the value conversation ends. Instead, ask: “What is the financial impact of choosing us versus the alternative?” If your solution reduces downtime, increases productivity, improves quality, reduces inventory, lowers energy costs, or generates more revenue, put a dollar value on it. I call this Total Profit Added™. Price is what the customer pays. Cost is what the customer spends. Value is what the customer gets back. If you can prove that paying $100K more creates $500K in additional profit, the conversation changes. You do not have a pricing problem. You have a value communication problem. And the answer is not a big discount. It is a better business case.

Commercial excellence is not a sales training program, it is a systematic capability that connects value creation, value communication, pricing, and customer retention into a single operating model. Commercial Excellence is not another sales initiative. And it definitely isn't a fancy name for a CRM, a pricing project, or more sales training. Most companies look at Commercial Excellence as a collection of disconnected activities: Sales effectiveness. Pricing. Marketing. Key accounts. Sales operations. Customer segmentation. But Commercial Excellence should connect all of them. The real question is: Can your company consistently create, communicate, capture, and deliver more customer value—profitably? That requires alignment between: Marketing — Who should we target and why should they care? Sales — How do we prove the value and win the business? Value Management — What economic impact do we create for the customer? Pricing — How much of that value should we capture? Commercial Strategy — How do we build a repeatable system around it? When these functions operate independently, you get a lot of activity. When they work together, you get commercial performance. I have seen companies invest millions in sales training, CRM systems, pricing tools, and market research—and still struggle with growth and margins. Why? Because Commercial Excellence is not about having better tools. It is about having a better commercial system. And that system should ultimately answer one question: How do we create more value for our customers—and capture our fair share of it?

Procurement professionals who buy on price alone often pay more in the long run. Value-based procurement uses Total Profit Added™ thinking to identify suppliers who deliver the highest economic return.  Procurement is very good at measuring what something costs to get in the door—landed cost. But are they measuring what it costs to buy the cheapest option? Too often, procurement evaluates suppliers on purchase price, delivery, payment terms, return policies, unit price, and negotiated savings. That can look like a win on the spreadsheet. But what happens when the “cheapest” supplier creates: • More downtime • Higher maintenance costs • More inventory • Lower productivity • Quality problems • Higher energy consumption • More engineering support • Lost production Now that 10% savings can become a very expensive decision. Value-Based Procurement changes the question. Instead of asking: “Who has the lowest price?” Ask: “Which supplier can create the most profit for our business?” And then go one step further: Who has a structured methodology to identify and prioritize that value, implement it, and make sure the savings hit the bottom line? And perhaps most importantly: Who is willing to put some skin in the game? That means measuring the economics beyond the purchase price. I call this Total Profit Added™. The best supplier is not necessarily the one with the lowest price. And the highest-priced supplier is not necessarily the most expensive. Price ≠ Cost ≠ Value. Procurement should not just negotiate the price down. They should understand the economic value they are buying. And it is the salesperson's job to help them prove it. The salesperson who can quantify the economic impact of their solution is not just selling a product. They are helping procurement make a better business decision. Because the biggest procurement savings opportunity may not be getting another 3% off the invoice. It may be choosing the supplier that makes the business more profitable.