I’ve been toying with an idea on how the buyer thinks about price, cost, and value.

First, we all know the seller’s logic. It’s focused on sustainable business formula.

value > price > cost

Nothing new there.

But the buyer’s formula isn’t as neat. At all.

I think for the buyer, cost is always greater than price.

Because price is just the money out the door. Then there is everything else they have to do to make your work actually work.

Meetings. Explaining things internally. Coordinating people. Effort. Fixing inputs. Buying other things to support your thing. Using political capital to get approval.

And then carrying the process.

If it works, that’s great. But also kind of table stakes.

If it doesn’t work, it’s on them.

So the real cost to them is price + everything they have to do (buyers activities) + exposure.

And even that still it’s not everything. Because then there is this layer that’s either unclear, or not explicitly said: risk tolerance.

What I mean here is even after considering the money, time, effort, friction, there is still a risk that the outcomes promised are not achieved. At some point the buyer is asking: “Do I actually believe this is going to work?”

And it’s not binary. It’s probabilistic. They’re deciding whether to take on the risk. Whether it feels like a safe bet (i.e., enough upside) or risky one (i.e., too much downside).

For some buyers that could mean 2x return. For others it might be 10x. Because some don’t want to look stupid. And others don’t want to gamble.

So if we look at the buyer’s view, maybe we should stop thinking about price to value. Instead think about pricing against what feels like a safe bet to that person, relative to the total cost.

That feels much closer to reality than the sellers logic.

Right now I’m using this for value framing tool. Helping clients get inside the mind of the buyer to better understand:

So these sales, discovery and pricing conversations are built on sophistication and clarity.

It’s a working idea. Maybe it’s not even novel. But it’s been useful enough in my own thinking that it felt worth sharing.

I sketched it out below just to see it visually.

I’ll explain the sketch quickly.

The status quo line. The buyer does nothing (with you). No money out the door, no additional effort or capital spent. Outcome must be achieved elsewhere.

The price tag. This is the obvious one. It’s the money given to you (the seller) in hopes of achieving the promised outcome.

The buyer’s activities. This is everything the buyer and/or their teams must do in addition to paying you. Whatever must happen on their side for your work to succeed. There is a lot of overlooked cost here.

The probability of successful outcome (and risk tolerance line). These form the risk/reward equation. This is the internal dialogue: ‘what are the chances I believe the seller will deliver?” This is perception. The risk tolerance line separates the risky bet from the safer bet.

The outcome. The promised result. The thing the buyer hoping your work creates.

And the three lines on the right.

The price line is the literal amount paid.

The cost line is the sum of the price and buyer’s activities up to the point where the bet feels safe enough to take. Because a risky bet costs something too. It’s energy, attention, emotional capacity. It’s drag on the next opportunity (and the next).

The value line is the total upside available if the promised outcome is achieved. And to get more granular. Perceived value exists where it feels like a safe bet. And realized value exists where the outcome is actually achieved.

…ok that’s enough explaining…

This must be what goes through the buyers mind. Not always consciously. More like the shape of what their feeling and thinking. All while the seller’s brain is fixated on pointing to the price and outcome achieved, often ignoring the nuances in the middle.

Which is probably why buyers say no to obvious value (on paper).

Consider the buyer’s perspective a bit more. Make them feel sophisticated. Frame the value within the context of everything they’re taking on. You can even lay it out, all cards on the table if the situation calls for it…so you both know the stakes.

Thank you for reading.

Be well. Talk soon.

— Peter

P.S. This is probably a good one to read next.

P.P.S. If this is the level of detail you want to bring to your services, pricing, and value mechanics, grab some time here. Better framing tends to find better budgets.