The Year in Value: What We Learned from Top Industry Trends

In our view, this was the year many companies finally started to understand a solid trend: if sellers and marketers want to be successful, they must speak the language of value with buyers.

If you’ve been following research and reports for the last few years from the major industry players, then the need to focus on value is no surprise. Consider the following key statistics that have influenced thought leadership in sales and marketing.

  • A CEB study of more than 1,400 B2B customers across industries showed that buyers have made up to 57% of a typical purchase decision before talking with a salesperson. (Other industry analysts, including IDG, DemandGen, and Forrester, have put this figure even higher, at around 70%).
  • Sales is consistently losing deals not to competition but to buyer inertia — a CSO Insights study conducted this year among 1,200 B2B organizations found that 26% of forecasted deals were reportedly lost to “no decision.”
  • In a survey of 230 decision makers, Forum Corporation reported that 33% of buyers would prefer to buy from someone who understands how to add value rather than from someone they already know and trust.
  • In a Gartner survey of about 500 IT buyers, the number one most influential marketing activity was proven to be “direct interactions with providers.” However, the report notes specifically that these buyers wanted to talk with “industry and technical experts” — and not with salespeople.

All of these trends highlight a common theme: buyers are looking for value. That means that sales and marketing teams must learn how to communicate value at all stages of the buying cycle. Before they can close deals, they must create engaging and educational experiences for buyers. These experiences have to be tailored to the prospect and must take into account the prospect’s business challenges and needs

This is something we’ve written about before, and is obviously a huge shift from the days when sales controlled the flow of information. Cold calls, meetings with customers in the field, and static marketing campaigns are all becoming examples of outmoded activities for salespeople and marketers.

We think it’s safe to say that the actual jobs of sales and marketing teams are not going anywhere. But the buyer’s journey has shifted, which means the job of sellers and marketers must shift as well. We’ll explore those implications more in an upcoming blog post about what you need to be successful in 2014.

What’s your takeaway about selling and marketing from 2013? Share your thoughts in the comments section. 

Five Steps to Make Labor Savings Real in Your Business Case

If you want to influence your prospects and customers, your best bet is to create a business case to show how they can reap value from your offering. However, if the business case includes labor savings as one of the value drivers, you will often get push back from your prospect. It’s sometimes difficult to get buy-in for a number of reasons:

  1. Labor savings are often spread out among many employees and, therefore, receive the label of “soft benefits” that delivers no real economic value.
  2. Companies can only realize labor savings by taking some action (e.g., reducing headcount, not hiring more employees, or reassigning employees to other duties) that requires them to overcome the status quo.
  3. Sometimes the labor savings you’re proposing might create special hurdles internally for the prospective buyer (e.g., selling a solution that reduces IT headcount to an IT department can be tough).
  4. Companies have been promised productivity gains before, but rarely have seen the results (usually due to not taking the required action described above or lack of measurement).

These factors don’t have to stand in your way, however. The approach I advocate enables you to have a productive discussion with buyers around labor savings and build a defensible business case. Here’s how I suggest you proceed:

  1. Don’t use a broad brush and say something like, “We can cut ten percent of your workforce.” Rather, be specific and appropriately categorize the labor savings by role or work process. It’s better to say, “Our solution can save you three full time equivalents (FTEs) in your billing department.”
  2. Make sure that the buyer understands the size of his or her problem (i.e., how much is the issue costing the company) before you show the anticipated savings.
  3. Don’t force projected savings on your prospect. If possible, use an industry benchmark or case study as a starting point. More important, spend time communicating with your prospect until the two of you agree on an achievable savings. Taking the time to commit to this deeper level of engagement can help you establish credibility.
  4. Use what we at Stratavant call a “productivity capture factor.” This factor is a percentage with a value between 0 and 100 percent. It is used to provide a conservative estimate of the projected labor savings. Here’s an example. If the total projected labor savings are $500,000 and the productivity capture factor is 80 percent, the “new” labor savings becomes $400,000. This adjustment acknowledges that even if one hour of time is saved, it doesn’t mean that the one hour will be used to reduce payroll costs, avoid hiring another person for an hour, or be spent on some other value-added activity. In actuality, some of that one hour saved may be used by the employee to surf the Web or engage in water cooler talk. The productivity capture factor helps you proactively address that reality. When having this discussion with your prospect, keep these quick tips in mind:
     

    1. A lower factor should be used when the labor savings are made up of a little bit of time saved per worker spread across a large number of workers. Though saving five minutes a day per employee across 1,000 employees may add up to a large savings, it’s hard for an organization to realize that entire savings.
    2. A higher factor can be used if the labor savings come from hourly or contract workers as it’s easier for an organization to achieve those savings.
    3. A higher factor can also be used when the labor savings are concentrated in one role or job class.
    4.  

  5. Implement a ramp rate factor if your business case contains more than one year’s worth of savings. The ramp rate lets you tell your buyer that labor savings don’t happen overnight. Companies need time to orchestrate employee separations or retrain employees, so it’s better for you to tell your prospect that labor savings take time to come to fruition than make a promise that’s unrealistic.

Below is an example of these five steps at work. The labor savings benefit is quite focused (i.e., sales/marketing labor spent preparing business cases). The size of the problem is shown in row [i]. Row [j] illustrates how much the solution in question can reduce the size of the problem. Row [l] is the productivity capture and row [n] is the ramp rate. (For a larger view, click on the image).

Labor Savings

By adopting these five steps, you will have a credible way to include labor savings in a business case. And with labor savings in your business case, your offering delivers a more compelling value proposition to buyers.

Have you ever tried any or all of these steps? Share your comments below.

Lessons from Jack Welch about Market Opportunity

For much of his tenure at GE, Jack Welch’s famous mandate to every business unit was to be either number one or number two in their market. If you weren’t meeting that standard, you were replaced.

As you might imagine, the leaders of business units that weren’t a leader in their industry got crafty. Since they couldn’t find ways to grow market share (or at least not fast enough to retain their job), they started to redefine their markets in ways that allowed them to be either number one or number two.

What happens when you’ve redefined the market so that you are number one or two?  Often you end up having 40 or 50 percent share of the market. One major side effect is that you limit your market opportunities. By defining the market too narrowly limits your ability to identify new opportunities that are outside of your narrow definition. Overall growth shrinks.

Legend has it that at one point the GE Nuclear business claimed to have 100% of the control room business in new facilities despite the fact that a new facility hadn’t been built in the US in 20 years.  At that point Mr. Welch realized that he needed to change the mandate. Instead of being number one or two in the market, he wanted to see a market definition for each business where they had no more than 10 percent market share. He recognized the need to open the company to new growth.

I would contend that neither definition alone was adequate; you should actually have both definitions.  The small definition will enable you to monitor your core business for threats and overall health of the business.  The larger definition will help you to identify opportunities for growth.

The takeaway for any company is to think about how you define your market and how that is (or isn’t) contributing to your ability to grow. The question is, where does that potential exist?

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