Price Versus Value
Blogs Mike Jacka, CIA, CPA, CPCU, CLU Jan 23, 2019
You are sitting in your annual budget meeting, having provided an estimate of internal audit’s expenses for the coming year. Those responsible for ensuring the appropriate use of organizational capital review your proposal with intense scrutiny. An impassioned discussion follows in which the great and powerful budget wizards look for ways to reduce spending while you argue for the resources necessary to accomplish your mission. In the heat of this battle, do you understand you are not arguing about the price of internal audit, but rather about internal audit’s value?
When it comes to selling something, even internal audit’s services, price is an important factor in the final buying decision. But focusing on price alone obscures the real consideration behind the buying decision — the perceived value received for that price.
Take, for example, the purchase of a diamond. Beyond issues of quality, some buyers value brand and status. The exorbitant price of any item at Tiffany’s is as much about the blue box as it is the bauble within that box. But of course not all buyers need the fancy name cachet — for some, a gem from Discount Dave’s Diamonds, Dinnerware, and Dinettes will suffice.
When it comes to internal audit services, few (if any) organizations will pay the extra premium for the Tiffany’s of internal audit. (This is not quite as true when it comes to external audit providers, but that is a discussion for another time.) Nonetheless, if those stakeholders have even a smidgen of understanding about internal audit, neither will they want the equivalent of a purchase from Discount Dave’s.
This reality brings to mind a fundamental truth about the marketing of internal audit: The only commodity we should be selling is the value we provide. And one of the most telling moments related to the success of that sales pitch is budget time. Budget discussions can become mercenary in nature, focusing narrowly on how much money the department will spend, how much it will be given, and how much will be taken away. And if internal audit sits in those meetings and argues price, it will almost certainly not succeed. Sure, it may win that particular battle, but it will lose the long-term war of defining and defending internal audit’s value.
Budget time is the ultimate moment of truth for any internal audit department. It is when the dialogue must change. Even as other departments argue dollars and cents, internal audit must focus the dialogue on internal audit’s value, followed by what the stakeholders, clients, and customers are willing to pay.
We cannot sell on being low-priced; instead, we have to sell on being the best value.