Don’t Make this Mistake When Value Pricing

price setting

“Can I use a value calculator to set my price for my customer?”

I hear this question a little bit less frequently than I used to. But at times people still come to me and say, “I want a value calculator so I can figure out how much to charge the customer.” I then ask, “Why?” and they say, “Well, because we are implementing a value pricing strategy and we want to know how much value the customer receives so that we can charge as close to that value as we can.” Because I know this isn’t going to end well for them, and despite the fact that I am in the business of selling value calculators and ROI tools, we never do these deals.

Here’s what’s wrong with that mindset. Customers will see through the ruse and resent you for not being forthcoming. And even if it worked one time with one customer, it’s not going to work a second time with that same customer. So now you have customers that don’t trust you and won’t spend another penny with you. (By the way, this ugliness then gets reflected back on us and is why we don’t do these deals.)

How to Set Your Price

We all want to maximize our pricing. However, pricing has to be done within the constraints of marketplace competition and competing alternatives, which include the customer doing nothing. Ideally, before you go to market you would perform a strategic analysis of your offering’s value and take into account the constraints just mentioned. However, you can conduct this exercise at any point during the product’s lifecycle. What you are trying to uncover is 1) where your offering’s value is unique, and 2) at what point your offering’s net value exceeds the net value delivered by your competition and competing alternatives. For more detail, read my earlier post The Value Lifecycle: Establishing Your Value in the Market.

When a Value Calculator Can Help You Set Price

If the customer answered my “Why?” question above with, “Well, we want to implement gain-sharing contracts and share the risk and reward with our customers,” that’s a different story. In this case, a value calculator or ROI tool can be very helpful in establishing the value of the shared risk and pricing. A gain-sharing contract can’t even get off the ground if the value dimensions and measurements can’t even be agreed upon. This is where a value calculator can come in handy – to define what’s being measured and how it’s being measured. An ROI calculator can be used to model various pricing scenarios. In general, the greater the price agreed to by both parties, the less the vendor’s upside is.

How do you set your price? What challenges do you face? Are you using gain-sharing agreements?

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The Value Lifecycle: Establishing Your Value in the Market

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See an Example ROI Tool

[Image via Flickr / JD Hancock]

When Demos Sabotage the Sale

sales demo

Demos are a fundamental part of the sales process. Not only are they a great way to engage prospects, they frequently open the door to a deeper conversation about how you can collaborate to solve the prospect’s most pressing business challenges.

That said, the demo can definitely sabotage sales — particularly for anyone selling complex offerings with long sales cycles. Specifically, the number one mistake I see is showing the demo too early in the buying cycle. Sometimes it’s the sales professional who pushes too soon for a demo. Other times, the prospect asks to see the demo, and the salesperson takes the request as a good sign and leaps at the request. Based on my experience, however, you always want to pace yourself when it comes to the demo. Here are two reasons why.

1) You might not be dealing with a decision maker.

Generally, decision-makers tend to care less about demos and more about how you can solve a business problem. In many cases (particularly in the software world), the person who wants to see the demo is the person who will actually be using your offering. If that’s the case, they’re just curious to see how it works and whether they like it.

2) You become trapped by objections about features or superficial aspects of your offering.

When prospects watch demos, you want them to be in the right frame of mind. Show them a demo too early, and they’re highly likely to focus on the aspects of your offering that they don’t like or perceive as imperfections. This is how you get caught in a web of such silly objections as, “This tool won’t work for us because that button is green and our standard is blue.”

Before you do the demo, you want to be sure you’ve laid the proper groundwork for a collaborative mindset. That means waiting until prospects are 1) aware of their business problem and how much it’s costing them and 2) are committed to solving that business problem. At this stage, they’re much more likely to focus on why your tool is a compelling solution to help them solve their challenges.

One metric I favor looking at is the demo-to-close ratio. The desired value varies quite a bit by industry but you can always measure it against other salespeople in your organization. I’d bet that top performers have lower ratios. Salespeople who throw demos around like candy at a parade are wasting their time and maybe even turning prospects off.

So, when is the right time to show a demo? Obviously it depends a bit on the nature of your solution and the sophistication of the buyer. For complex sales, I generally say that anyone who asks for a demo is likely not a decision maker and should be treated accordingly. The right time to show a demo is when you know you’re talking with someone who is interested in business outcomes rather than the features of your offering. If that’s not the case, use the right questions (for example, “Who will be involved in the decision to move forward with this? Can we set up a meeting with the team?”) to bump the conversation up the decision food chain.

What are your thoughts on the right time to show a prospect your demo? Share your thoughts in the comments section.

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Sales Enablement Solutions

[Image via Flickr / ykanazawa1999]

Is the ROI of Your Offering “Too Good to Be True?”

ROI believability

Do you ever downplay the value of your offering because you’re afraid prospects or customers won’t find the estimated ROI believable?

I’ve had many discussions with B2B salespeople who say they tone down value as soon as ROI calculations start to become “too high.” For example, let’s say a salesperson’s solution costs $1,000, and their ROI calculations show that the prospect will receive $100,000 worth of value. Feeling that the resulting 9,900% ROI is unbelievable, the salesperson will say, “We don’t really deliver $100,000 of value. We actually deliver $10,000 of value.” The salesperson believes that a 900% ROI sounds more believable to the prospect.

To me, that’s ridiculous. If you charge $1,000 for an offering that delivers $100,000 of value, yes, the ROI is certainly huge … but that doesn’t mean the ROI is wrong or unbelievable.

There is no such thing as “too high” of an ROI. If you’re delivering very high value for very little price, there are one or more factors at play.

  1. Your solution is underpriced (and you should be charging more).
  2. Pressure from competitors keeps you from charging more.
  3. Competing alternatives (other than direct competitors) keep your price down.

For example, in our business of selling ROI tools, we often promise a very, very high ROI. But one of the limiting factors in setting our price is that prospects believe that they can always build a spreadsheet of their own. In other words, a homegrown spreadsheet is usually their next-best alternative to investing in a professional ROI tool. Of course, we know their homegrown solutions won’t be as good, but that’s typically something our price will be compared against. So even though the ROI on our offering is extremely high, we can’t set our price based on ROI alone, because that likely will drive customers to pursue cheaper alternatives.

If you’re truly worried about the believability of your ROI, remember that ROI is simply a calculated number, which means that you can and should show your math to the customer. Walk the customer through the numbers, step by step, using a good ROI tool. At each step, you can ask the customer, “Does this look realistic? Is this value real and do you believe that it can be achieved?” That way, the customer can see exactly how you arrived at such a seemingly “unbelievable” number. Bear in mind that this is the customer’s business case — not yours. You’ll be more persuasive if use the customer’s own numbers (not generic numbers or examples). Also, make sure customers believe in their own numbers; that way, they’ll also believe in the value you’re estimating.

Remember, too, that your ultimate decision maker is very likely the CFO (or another individual with fiscal responsibilities). If you downplay the value of your offering to make it seem “believable” to one stakeholder, you still might get shot down when your proposal reaches the CFO’s desk, because he or she will be looking at the larger picture. Specifically, the CFO will be comparing the business case (including ROI, net-present value, and payback period) to that of other projects and making a decision on which projects to fund. If there are other projects with stronger business cases, your project may not get funding approval.

If you believe in the value of your solution, you should be selling that all day long. Don’t discount based on what you think the customer’s reaction will be. Don’t even discount if the customer comes back to you and actually says, “That’s too high of an ROI.” Do the analysis with the customer and then let the customer tell you whether or not the value is realistic.

Has your ROI ever seemed “too high?” If so, how did you deal with it?

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[Image via hywards at FreeDigitalPhotos.net]

3 Steps to Take Control of the Sale

By Doyle Slayton

control sales

Do you ever feel like you’re losing control of the conversation during a prospecting call or sales appointment? You quickly realize you better regain control of the sale, or you’re going to lose the deal.

Some prospects engage you with a multitude of questions around product features. Can your software do this… can it do that? At first, you think, “Wow” this customer is really interested! Thirty minutes later you realize… wait a minute… we’re nowhere close to getting this deal.

Here is a technique you can master to regain control of the conversation. I call it the Statement, Benefit, Probe technique.

Statement – This is simply your next statement in the course of a conversation, or your response to a question. (Transition quickly to apply the “benefit” step.)

Benefit – Build on your “Statement” with specific reasons why you’re recommending this solution to solve the problem… or share examples of ways this solution has helped other clients. (Make it quick… two to three sentences… and immediately follow with the “probe.”)

Probe – Ask a question where the prospect can verbalize their own reasons for how your product is going to help them achieve their goal. Just like that… you are back in control.

Putting it into practice:

Let’s pick a scenario… You’re working with a client who is interested in new strategies to improve sales prospecting. Their salespeople can’t seem to get enough new opportunities into the pipeline.

Your conversation with the prospect is running off track, and it’s time to regain control of the appointment. Choose your direction based on your value proposition for this specific client. In this case, you need to build value around demand generation, lead conversion, and building a sales pipeline. The client says, “We need our salespeople win new business instead of just managing current accounts. How can you help us do that?”

Statement

“In this case, we’d focus on the first two phases of our customer lifecycle management model. The first is Lead Generation and Conversion, the second is Sales Prospecting and Follow Up.”

Benefit

“The thing our clients appreciate most, is that our strategies don’t just benefit one department. We create alignment between Marketing and Sales with consistent brand messaging throughout the sales cycle, and that’s the tipping point… demand generation improves, conversion rates go up, and you start to see more new business in the sales pipeline.”

Probe

“If we help you develop this type of sales and marketing strategy, how do you see things playing out when we introduce these ideas to your team?” (Stay quiet, listen intently, and respond with either a follow up question or you next Statement, Benefit, Probe)

This technique might not come easy at first. You’ve got to be quick on your feet and make sure the client doesn’t feel like you are cutting them off. With practice, it becomes instinctive. You’ll learn to recognize when it’s time to reel the prospect in and regain control of the sale.

This post appeared originally here on the xoombi blog and is used with permission. 

Doyle Slayton xoombi
Doyle Slayton is an internationally-recognized sales and leadership strategist, speaker, and blogger. He is co-founder of xoombi, a sales acceleration company with the breakthrough software and methodology that aligns marketing, sales, and sales operations. Xoombi helps create elite performance teams that generate high conversion leads and close more new business. 

[Image via Flickr / Faramarz Hashemi]

Reimagine Your Sales Process and Become Visible to Buyers

It’s commonly accepted that the large majority of today’s B2B buying process is completed before vendors are even aware that there is an opportunity. Imagine that! Or better, reimagine what you can do about it.Buying Process Visibility

The challenge facing vendors is how to increase their visibility earlier in the buying process. We all learned the typical sales process in Sales 101. However, that’s what’s hindering success in today’s marketplace. Throw it out!

Think in the terms of your buyers. What’s on their mind? I bet they’re asking questions like these:

Is there a better way?”

“How much is what we’re doing today costing us?”

“How do I justify asking for such a large expenditure?”

Buyers are doing research and answering these questions alone; meanwhile, they are invisible to vendors. With the right approach, though, you can help answer these questions and identify prospective buyers.

Step 1: Help prospects identify their own performance gaps.

The buying cycle begins when prospects start to question their status quo. By making assessment tools available to your target market, you can help buyers identify their performance gaps and, at the same time, position yourself as a resource to help buyers solve their problems. Read how one of my clients, Halogen Software, uses this approach for demand generation and lead capture purposes.

Step 2: Help prospects understand the value of your offering.

The next step in the buying process is for buyers to ask themselves if the problem is worth solving. At this stage, buyers are starting to educate themselves about solutions and the financial impact a given solution can have on their organization. Giving prospects access to a value calculator through your website (or through a targeted campaign) is a great way to help them understand the value of your offering as it relates to their unique circumstances. Not only does this position you as an industry leader but you will receive leads that are often better qualified than those you receive from your other lead-generation activities. Another one of my clients, Nuance, uses a value calculator to raise awareness and capture leads by asking users to calculate their “hidden costs.”

Step 3: Show financial metrics that spur prospects to action.

Once buyers are convinced they have a problem and the problem is worth solving, the next logical question is, “But at what cost?” By now, prospects have narrowed their vendor evaluation to a meaningful few. To stand out, vendors must build upon the approaches advocated above and now show buyers their offering’s net value. An ROI calculator is a great way to illustrate your offering’s net value and move buyers to action. I’d guess two-thirds of my clients use this method: 1) create demand and capture leads via an assessment tool and/or value calculator and 2) close deals using an ROI calculator. Tribute is a representative example of how to use this one-two combination.

Vendors late to the party are often being played without realizing it. They see a lead come in and check the box for step one in their sales process, then check the box for step two, etc. What a waste of time! Vendors with the insurmountable advantage are those that identify buyers early and engage in meaningful exchanges around business value. It might take some imagination to accomplish this but I hope the ideas advocated above get you started.

How do you see your sales process? Is it aligned with established internal procedures created long ago? Or has it evolved to match how today’s buyers educate themselves? Share your thoughts in the comments section.

Value-Based Content Marketing Improves Lead Conversion Rates

the best

Why do B2B marketers invest in producing blog posts, white papers, reports, articles, and videos? The general aim is to attract an audience to their website so they can engage them and (hopefully) turn them into customers over time.

As I wrote last week, I believe that marketers often don’t consider ROI tools and value calculators when planning their content marketing mix, and I think this is a missed opportunity. If marketers want a high volumes of well-qualified leads, then my view is that value calculators and ROI tools can often pack a much bigger punch than other forms of digital content.

I’m not saying that traditional modes of content marketing aren’t important. But I don’t believe blogs, articles, and white papers have the power to deliver well-qualified leads in the same way that a targeted value calculator can. Someone who engages with a value calculator is demonstrating an interest in understanding the problem that you can solve for them and evaluating the economics of your solution to their business. To me, that indicates a serious buyer. Someone who wants to read a white paper might be a serious buyer — on the other hand she might just be looking for general information about that topic.

When you make a value calculator available on your site, you typically want to allow them to use it to evaluate the economics of your offering in an open fashion (not gated). In order to download the business value report generated by the calculator, though, you typically want to capture their contact information before providing the report. Someone who is interested enough in the analysis to provide their contact information to get the report is more likely to be thinking about how your offering will impact his or her business and is a more serious prospect. By definition, this person is probably a better and more qualified lead for you than someone who downloads a white paper or visits your site to read general content.

Of course value calculators are just one piece of an overall content marketing strategy. Blog posts, articles, and white papers, etc. help establish your brand and position you as an authority. (Those assets are also likely to drive more general traffic to your site.) However, I do think ROI tools and value calculators can help companies capture better-qualified leads than other types of content. If you can deliver better qualified leads to sales, then salespeople naturally spend less time chasing leads who have little or no intention of actually making a purchase. The more time salespeople can spend in conversations with serious prospects, the more likely they are to close more deals. Who wouldn’t want that?

What types of content do you include in your marketing mix? Do you use value calculators or ROI tools? Share your thoughts in the comments section.

[Image via Stuart Miles / FreeDigitalPhotos.net]

Is There Value in Your B2B Content Marketing?

Content marketing is a term that gets a lot of buzz these days, but the basic concept of capturing prospects and buyers through stories has been around for generations.

This video put together by Content Marketing World shows a full timeline of the history of content marketing, including examples. According to the video, the term “content marketing” emerged only around 2001, but the concept itself started over a century ago. The earliest example they cite is John Deere’s magazine, The Furrow, launched in 1895. (This magazine is still around, with a circulation of 1.5 million in 40 countries and 12 different languages.) The video also calls out “The Michelin Guides” put forth by tire manufacturer Michelin back in 1900 to help drivers maintain their cars and find good inns and hotels while traveling.

What is the ultimate aim of content marketing? Broadly speaking the goal is to get prospects and buyers to connect with what you have to offer through storytelling and education. The Content Marketing Institute is even more specific in its definition of content marketing:

The technique of creating and distributing relevant and valuable content to attract, acquire and engage a clearly defined target audience in order to drive profitable customer action.”

If the purpose of content marketing is not only to attract prospects but also to turn them into customers, then it only makes sense in a B2B context to focus closely on your value proposition. In other words, B2B marketers need to remember that there’s generally a big difference between the ways B2C marketers approach content in contrast to their B2B counterparts. In a previous post, “Why Branding Doesn’t Work on B2B Customers,” we made clear distinction between the “rational” world of the B2B customer and the “irrational” world of the B2C customer.

“B2C marketing efforts are frequently driven by such irrational factors as image, self-satisfaction, fashion, the need to be cool, sex appeal, etc. That’s why consumer marketing generally lives and dies by advertising. Very few consumer products or services can survive without it. Consumer ads, promotions and other image projections often establish the product’s value and create the demand for it.

The B2B world, by contrast, is rooted in the rational. Branding that appeals to irrational or perceived needs just isn’t going to work, because in the end businesses will not buy nor continue to buy things that don’t actually help their business.”

In other words, the B2B decision-maker looks for economic value when investing in a solution. While a great story might be appealing to B2B prospects, they won’t become customers unless that story can illustrate how you can help them save or make money.

Although many B2B marketers think of content marketing in terms of articles, blog posts, PDFs, white papers, video, and infographics — all great and valid forms of content that can engage prospects and customers — I don’t often hear about assets that can help a prospective customer understand the value that an offering can deliver as part of the discussion. These assets include such things as value calculators and ROI tools and I believe that they’re a critical component of a content marketing strategy if the offering is more than a standard transactional decision and constitutes a significant investment. Considering the interest the B2B buyer has in financial metrics, I think that is a missed opportunity.

What kinds of content marketing do you rely on to attract prospects and turn them into customers? Do you use ROI tools or value calculators as part of your content marketing strategy?  Please share your thoughts in the comments section.