In 1955, a Spanish artist took a blank 45 by 58-inch canvas worth about $400 today and put about $50 worth of oil paint on it. Today the painting’s intrinsic value is about $450 plus the labor cost, so let’s be generous and call it $10,000 (it doesn’t matter). The painting recently sold at auction for $179 million. Before we look at how the value of this painting skyrocketed, let’s look at some information about the picture.
The painting is called Women of Algiers (Version O) and was painted by Pablo Picasso. Picasso’s fascination inspired it with the 19th-century French artist Eugene Delacroix and is part of a 15-work series Picasso created in 1954-1955 designated with the letters A to O. It has appeared in several major museum retrospectives of the artist.
The value proposition
Why would someone pay so much for a painting? There are at least five reasons:
- The purchaser believes in the “bigger fool” theory of investing. This means that the buyer is confident that when it is time to sell, someone will be willing to pay even more than he did (the bigger fool).
- The purchaser is newly wealthy and wants to show off his wealth and impress friends and associates.
- Because of his price, the new owner gets an overwhelming feeling of self-satisfaction and pride because he can write such an extensive check for one intangible item.
- The purchaser likes looking at it.
- The purchaser wants to fill in a collection for future giving
For whatever reason, the new owner found incredible value in this painting. And he is not alone in this reaction.
Another example of differing values for the same item
I am a fan of the American and British versions of Antiques Roadshow on PBS. In these shows, people bring their possessions to experts for appraisals. As part of the interview, the owners are asked, “how much did you pay for it” or “how much did your great-grandmother pay for it” or the like. I often hear, “I picked it up at a garage or estate sale for $10.00 (or something like that).” Then the appraised value turns out to be over $10,000! In other words, one person valued the item 10,000 times the other.
How does this apply to business?
The primary lesson is that different organizations and people in each organization place another value on the same thing. That is why commodity items sell based solely on price – no differentiation is used to create unique value!
When we create new services or products, we have to segment our current and potential customers based on the attributes they value most. Some will appreciate the ease of use, peace of mind, flexibility, or one organization responsible for an extensive process. Once we identify the whole spectrum of attributes and their relative value, we can narrow our specific set based on satisfying the maximum number of customers and prospects. This phase, and even the actual implementation phase, can be easily compared to documenting the customer’s value in dollars and cents terms and training your customer-facing people to properly communicate the appropriate value to each person he talks to during the buying cycle.
The process of determining what prospects and customers need and then demonstrating how your solution satisfies these needs is called consultative selling. Unless all the people talking about your solutions (products and services) with customers and prospects practice consultative selling, they will be quickly shut out from the opportunity to provide a quote.
And remember what the great hockey player Wayne Gretzky said,
“You miss 100 percent of the shots you never take.”
No quote, no order, no customer!
Be thoughtful as you educate all your salespeople about your new selling strategy!
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization migrate to value selling, please contact us or check out some of our free articles and white papers here.