What is the Value of Your Reputation in B2B?

value reputation B2B

Years ago, people used to say that, “No one ever got fired for buying IBM.” Because IBM had such a strong brand and reputation, it was considered a no-brainer to purchase their offerings — if you were the purchasing manager, an IBM product would always make you look good to your colleagues and managers. Whether or not that was actually true, the belief existed that IBM was the best. Therefore, IBM enjoyed great sales and strong customer loyalty.

If you’re like most sellers and marketers, you truly believe in your company and your offering. You might also believe that customers buy from you on the strength of your reputation. Clearly, having a great reputation is a good thing. But we always encourage marketers to push deeper and talk with customers to find out what defines your reputation. Sometimes that requires asking customers several times, in several ways, what they value about your company and your offering. For example, the dialogue could go something like this.

Marketer: Why do you buy from us?

Customer: Because you have great reputation. 

Marketer: What does that word, “reputation,” mean to you?

Customer: We trust you.

Marketer: What specifically do we do that you trust?

Customer: You always deliver on time.  

Marketer: And how does that impact your business? What would happen if we did NOT deliver on time?

Customer: We’d have to carry more inventory or we’d have to delay production of our product. Both of those options would create more expense for us.

As you can see, in this case “reputation” is another way of talking about this company’s ability to help a customer save the expense of carrying more inventory or delaying production. That’s a measurable business impact. Here are some other examples of business impacts that might be code for “reputation.”

  • Your company has a global footprint so you can support the customer wherever they are.
  • Your company has a good support network so you can reduce the customer’s downtime.
  • Your offering lowers the risk that the customer’s product will fail.
  • Your company can offer services that help the customer perform faster or more efficiently.

Why do marketers need to define the business impact of “reputation?” What happens if, one day, a competitor calls one of your longstanding customers and offers to deliver a product of equal value for twenty percent less than what the customer is currently paying you? For a twenty percent price cut, the customer is probably going to take a meeting to learn more. In this case, knowing the business impact of “reputation” will probably help you make a convincing case to the customer to keep their business with you.

Here’s another example. Let’s say a customer tells you repeatedly that they “trust you,” and you never dig any deeper to find out what that means. One day the customer decides to move operations to Canada and they call to tell you they’ll be using a local distributor instead of your services. When you ask what happened to trust, they say, “We trust you to ship locally — you’ve always done a great job with that, but now that we’re moving, we want a local supplier.”

If you can’t get to the business impact of “reputation,” you’re always at risk to an uncontrollable shift in operations or a competitor’s lower price. If you want to figure out what your reputation means to customers, start with a hypothesis. Ask yourself what value you deliver. If you were not around to supply your product or service, how would the customer be able to perform for his customers? Talk with customers and continue to ask, “Why?” or “What does that mean to you?” until you have a clear sense of the value you deliver.

Do you understand the value of your reputation? Share your thoughts in the comments section.

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How to Stop the Price Discounting Spiral

spiral price discounting

One of the oldest tugs of war between salespeople and customers is price objections. A moderate level of back-and-forth on price is to be expected. But in some companies, a rampant culture of price discounting takes hold and starts to create other, bigger challenges.

Let’s first look at some examples of common circumstances that often lead to price discounting.

  • It’s the end of the quarter and the sales team is not going to meet sales goals.
  • There’s an economic dip in your industry and sales have been sluggish for an extended period.
  • There’s a structural component to the compensation plan that rewards discounting.
  • Some element of your pricing plan is confusing for reps and/or prospects.
  • You have a surplus of inventory that’s about to become obsolete or otherwise unmarketable.
  • Your competitor is offering endless discounts and you feel you have to match those discounts to keep from losing new and existing customers.

No matter what your reasoning is, continual price discounting is going to end up creating two major problems for you.

PROBLEM #1: You will trade a temporary uptick in revenue for a substantial reduction in profit.

Almost all sales leaders are evaluated on their ability to post revenue gains each quarter. However, the more sales reps discount on price, the more units they need to sell to achieve those revenue gains. This can create an endless cycle of sales reps chasing long-shot prospects in lieu of finding high-value customers. Also, lower margin per deal. A lack of profits is going to ultimately affect other critical areas, such as research and development (R&D) and marketing.

PROBLEM #2: You will move your offering towards a commodity.

Most companies want to avoid competing on price alone. When you do this, your business becomes a ruthless race to produce products cheaper and faster. For many B2B companies, it’s nearly impossible to produce a quality product at extremely low margins. If your offering gets cheaper but shoddy, your brand will take a beating.

The other problem with selling in a commoditized market is that you are now courting and creating relationships with customers who have a transactional mindset and want short-term gain. In general, these are not the kind of customers who will remain loyal to you for years or offer much in the way of upselling or cross-selling opportunities. Key accounts and anyone willing to pay a premium for higher value will go elsewhere.

How can you avoid the pitfalls associated with price discounting? Here are three tips to get started.

1) Align your compensation plan and any incentives programs with strategic goals.

If you reward sellers purely on volume, it’s only logical for your reps to offer discounts. This is a sign of a price discounting culture, which means it’s up to leaders to take the reins and steer the company in a more balanced direction. Perform an audit of your incentives programs and compensation plan and make sure to encourage behaviors that will help you meet your strategic initiatives.

2) Train reps to talk about value.

When reps get hammered on price frequently, they need a bigger toolbox than the standard role plays on how to overcome price objections. Teach them how to strategically and systematically move their customer conversations away from price and in the direction of value. They should be able to uncover the measurable financial benefits that this customer cares about. This can then open a discussion about what the customer would be willing to pay for those benefits.

3) Invest in an ROI tool.

An ROI tool can be of invaluable service when it comes to having conversations around value. Even the act of making an ROI tool available on your website for prospects can be transformative. How so? Any prospect that takes the time to interact with an ROI tool online is already thinking beyond price and about value. This is an organic way to help your sales team center the conversation on value and sidestep common objections about price. In addition, a discussion about ROI is just more compelling than a flat price negotiation.

Use these tips and eliminate price discounting or at least keep it to a reasonable level in your organization. Your sales reps shouldn’t feel they have to offer constant discounts in order to make sales. Support them properly with the right tools and training, and you’ll soon start to see the payoff.

Do you discount price? How do you respond when customers ask for discounts? Share your thoughts in the comments section.

[Image via Flickr / luke chan]

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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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[Image via Flickr / JD Hancock]

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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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.