Substitute Value Comparison
Compete against 'Free' or 'Do It Yourself'. Calculate the Total Cost of Ownership (TCO) to prove your premium price is actually cheaper than the alternative.
My Solution
Alternative / Substitute
Total Cost of Ownership (TCO)
Better value than the "Cheap" alternative.
The True Cost Reveal
You save the customer $90.
Sticker Shock vs Reality
Your sticker price ($100) is higher than the substitute ($0), but your Total Cost is lower.
The Hidden Burden
The substitute carries $200 in hidden friction/labor. This is your sales wedge.
Effective Value
You are essentially selling time/risk reduction at a discount.
Execution Steps
Name your product and the substitute (e.g. 'Excel Spreadsheet').
Enter the 'Sticker Price' for both.
Quantify the 'Hidden Costs' (Labor, Risk, Maintenance, Error Recovery).
The chart reveals the True Cost. Use this visual to win B2B deals against 'Good Enough' alternatives.
Pro Strategy
- If you are selling automation, your competitor is usually human labor. Calculate: Hours Saved x Hourly Wage = Value.
- Highlight 'Risk Cost'. What is the cost of a spreadsheet error? If it's $10k, your $500 software is insurance.
- Use this in sales decks. 'We cost $100. Excel costs you $200 in wasted time per week.'
Core Concepts
Total Cost of Ownership (TCO)
The purchase price plus the costs of operation, maintenance, and labor over the asset's life.
The 'Free' Illusion
Open source or manual processes look free but have high labor costs. You must make these costs visible to justify your price.
Shadow Competitors
Competitors that aren't other companies. e.g. Excel, Interns, or 'Doing Nothing'. These are often the hardest to beat.
What is Substitute Value Comparison?
This tool uses a TCO (Total Cost of Ownership) comparison model. It stacks the visible price (iceberg tip) against the invisible costs (underwater) to reveal the true economic reality. It frames your price as an investment that reduces total expenditure.
Best For
- • Sales enablement vs 'Homegrown' solutions.
- • Marketing against 'Free' alternatives.
- • ROI Calculators on landing pages.
Limitations
- • Requires customer buy-in on the value of their time.
- • Estimates are subjective.
- • Ignores switching costs (friction of moving to your solution).
Alternative Methods
Value-Based Pricing Calc
More detailed breakdown of positive/negative drivers.
ROI Calculator
Focusing on the return rather than the cost savings.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Marketing Agency
Client wanted to hire an in-house junior ($50k/yr) instead of agency ($80k/yr).
Showed hidden costs: Recruitment ($10k), Training ($5k), Software ($5k), Taxes/Benefits ($15k). True cost of Junior = $85k.
Meal Prep Service
$10/meal seemed expensive vs $4 groceries.
Quantified 1 hour of shopping/cooking/cleaning at $20/hr. True cost of cooking = $24.