Why Value Based Selling Is So Successful

by Jim Heffernan

light bulbs

Value-based sales is a popular term that gets thrown around an awful lot these days. Many major companies claim to provide this service to their customers while citing different reasons for why their particular organization has the best value. From tech support to delivery speed, from warranty policies to company reputability, there are many factors that a company will claim makes them a “value-based seller.” 

What is Value Selling? 

If you go online and search for the keywords “value based sales” or “value selling,” you will be practically bombarded with articles about how the process works or what value selling really means. For example, Sequeira Consulting’s website defines value based selling as an approach “built on quantifying the impact the service makes on the customer’s financial performance,” a definition mostly suited for business to business (B2B) transactions because it points out the mutual benefits to both the service provider and the client in financial terms. In an article for SalesResources.com, Dave Kahle defined the “value” in value selling as something “defined by the customer, not the supplier,” a definition more in line with the traditional “the customer is always right” mode of thought prevalent in the customer service industry.

In truth, value selling is all of the above and more. In both of the above examples, the emphasis is on what would best serve the needs or wants of the customer, not the price of the service given. Even though a B2B transaction is usually negotiated with both sides looking squarely at the return on investment (ROI), that ROI consideration is only a part of the value being sold to the customer. When a salesperson uses value selling techniques to identify the needs of the customer and highlight how those needs are met by the product being sold, the customer becomes more invested in acquiring that product. When a customer is invested in acquiring a product, that customer is much less likely to allow the transaction negotiation to become stuck or fall through. This applies equally to both B2B and private consumer transactions.

How to Make Value-Based Sales Work for You 

By refocusing the discussion between buyer and seller from price to value, the seller can mitigate the risk of lengthy, time-consuming debates and haggling sessions over the cost of the product and keep the buyer from attempting to discount the product to a price which makes it virtually unprofitable.

Using a simple example, a new start-up business is moving into an office and needs to buy light bulbs in bulk because the office was supplied with defective bulbs that burned out within a month. The sales representative of the bulk light bulb company offers the customer high-quality bulbs that are both long-lasting and energy efficient, but it would cost $500 for enough bulbs to fill the office and the buyer only budgeted for $350. If the seller were to drop the price, the light bulb company would barely make enough profit to justify the sale. Cheaper bulbs would burn out too quickly, and the buyer is now wary of “bargain” brand pricing because of the defective product from earlier.

Here is where value-based sales techniques can really shine. The sales rep, knowing that the customer wants the better-quality bulb, can establish the long-term value to the buyer. Even though the initial price of the bulbs is just a little above the customer’s assumed budget the seller can stress the long-term benefits of the high-efficiency bulbs. In this instance, the sales rep would inform the customer about the value of not having to replace the bulbs for up to four times as long as the standard product, thus curtailing the need to continuously budget $350 per year just for new lights, or even mention that the high-efficiency bulbs use half the kilowatt hours of their lower-price counterparts, reducing monthly energy costs. By helping the customer understand the measurable value the product will deliver to his business, the customer will feel less compelled to haggle.

The reason value-based selling works is because it takes into account the needs and wants of the customer to create an approach that best influences the customer’s purchase decision. If a sales rep can create in the customer the impression that the product being sold is indispensable to his or her needs and that the value of the transaction more than justifies the price, that is value-based selling.

Value-based selling engages customers and creates a buying situation where the customer is less focused on price and more anxious to start realizing the benefits This allows sellers to successfully close transactions more often with better profit margins and saves time that can then be dedicated to more customers.

Identifying and addressing a customer’s needs with a product and guiding the customer into recognizing the value of that product is the way in which such involvement builds a healthy, stable relationship between buyer and seller. Buyers who simply receive a product that is cheap without being made aware of the value that they are receiving from the seller will quickly switch to another supplier if they find a cheaper source of the product. Why? Because, without the sense of investment in a product that is supplied by a value-based sales approach, the customer is only focused on the cost of obtaining the product and not the value of what they are getting.

However, when a customer has been invested in the seller’s product through a discussion of the value that is being given, they will consider more than just the price of a competitor product before making a decision to abandon their current supplier. If the seller can keep the customer convinced that their product is a better value overall, they are able to keep the customer’s business without having to sacrifice profits by dropping the cost of the product.

In Conclusion 

Ultimately, value-based selling is successful because it provides customers with the understanding that they are making worthwhile investments of their money. Good value-based sales techniques are tailored to the needs of the customer, making them understand why they are buying a quality product for the asking price. Value selling resolves potential customer issues with pricing and prevents the stalling of important deals and the wasting of precious employee man-hours. The rewards for masterfully exploiting value-based sales techniques are well worth the investment for any company with a product to value.

Jim Heffernan

Jim Heffernan is Sales Performance Consultant at Miller Heiman and President of Insights53. This post appeared originally on the Insights53 blog and is published here with permission. 

 

[Image via Flickr / kennymatic]

Articulating Value for the Complex Solution: Tips from the Sales 2.0 Conference

by Kayleigh Bush

Last week I was lucky enough to attend the Sales 2.0 Conference in San Francisco. Among all the speakers, I found Jeff Thull’s presentation the most compelling.

At Stratavant, we create solutions that help our customers articulate the value of their complex B2B solutions to their own customers. So Jeff’s presentation topic, “Unquantified Value: The Greatest Threat to Profitable Sales Results,” was right up my alley.

As the author of Mastering the Complex Sale and Exceptional Selling, Jeff has built a reputation for being a thought leader for sellers and marketers, particularly when it comes to relationship management for businesses engaged in complex sales. (He has designed and implemented business transformation and professional development programs for companies like Microsoft, IBM, HP and Georgia-Pacific, as well as many fast track, start-up companies.)

As Jeff pointed out (and as we’ve talked about on this blog before), the percentage of sales pursuits that end in “no decision” is high, and win rates are dropping. Whenever the customer is not motivated to solve their own business problem, Jeff said there are three possible causes:

1)   Your solution has no value.

2)   The process and tools to quantify the new potential impact of your solution are not effective.

3)   Your field organization is unable to execute effectively.

As Jeff sees it, a multi-faceted and complex solution creates a complex decision-making cycle for the customer. In other words, when customers are unable to make a decision, it’s typically because they have difficulty understanding and differentiating the complex solutions that the market is presenting to them. They’re unsure about their ability to successfully change and achieve expected value. Jeff theorized that this is exactly why so many deals are being lost to “no decision.” As he said onstage:

“What often looks like a sales problem is actually an organizational challenge. Uncertainty is what’s defeating decisions. Value clarity will defeat uncertainty. If you can provide a higher level of certainty in a world that is very uncertain to them, you’ll have a considerable competitive advantage.”

For those not familiar with the Sales 2.0 Conference, it is a chance for sales and marketing professionals to gather and improve their strategies with the ever-changing culture and technology of the business world along with the resources to help. People got really into it posting pictures and insights at the conference. Even I got involved.

I met some incredibly dynamic sales experts there and enjoyed my first experience representing Stratavant at an industry event. I am hoping that this post will get a good conversation going around value. Please join the discussion!

Do you agree deals are being lost to “no decision” because customers do not understand the value of offerings in the market? Share your thoughts in the comments section.

Are You Wasting Your Investment in Lead Generation?

Danilo Rizzuti arrowsEach year InsideSales.com conducts an audit of lead-response patterns among 14,000 companies to see how quickly and effectively they respond to Web-based inquiries. (They define response time as “the period between the submission of a Web lead and the first contact attempt by a company representative.”) Here are three major takeaways from their Annual 2014 Lead Response Report:

Takeaway #1: U.S. companies are spending more on lead generation, but they are not improving in lead response times.

While companies increased lead-generation expenditures by 82% between 2005 and 2009), just 37% of these companies responded to Web leads within an hour. Meanwhile, 24% took more than 24 hours to respond. [Harvard Business Review]

Takeaway #2: Many companies are wasting their investment on lead generation.

Of the 9,538 companies that received a “test lead” as part of the Lead Response Report, 47% did not respond at all. Forbes has estimated that B2B companies spend between $30 and $200 per lead generated by marketing. As the Lead Response Report points out, any delay in response times to those leads is a waste. “It is highly likely that company executives do not realize the potential return on investment (ROI) gains that can occur with improved lead-response management.” [Forbes]

Takeaway #3: Many companies are giving up on leads too quickly.

InsideSales.com research indicates that sales professionals, on average, call leads 1.3 times before giving up. Results from the Lead Response Report indicate that the median number of contact attempts (for those companies that responded at all) was 1; the average was 2.2. Ken Krogue, president and co-founder of InsideSales.com says salespeople should be making between 8-12 follow up calls in order to be successful. [KenKrogues.com]

We probably all agree that it’s better to follow up sooner rather than later to inbound marketing leads. Years ago I learned this lesson firsthand, before marketing automation was even a thing. After we sent an email blast, I called a lead who was still viewing our Website by using a real-time email tracking program. His first question was, “How did you do that?” At the end of our chat he asked me to send a proposal; we closed a deal the following week.

We routinely tell Stratavant customers who purchase our Value Calculators that they need to follow up within five minutes to a Web lead. That’s how much response time matters. When you consider how much inbound marketing has grown, response time might even matter more. It is unlikely today that I would even be asked how I knew whether or not someone had visited our Website, because most companies are using tracking tools and many customers have come to expect that kind of custom and immediate response.

Customers take it for granted that we’re watching their online behavior and responding accordingly. Not only that, but I would venture to say that their attention spans are shorter. I can remember calling on someone within hours after he visited our Website and he had no recollection of it.

Lead response times are just as important as lead generation. If your account teams complain about junk leads, ask them how quickly and persistently they’re following up. It could be that with some simple adjustments in process and behavior you could realize the full potential of your investment in lead generation.

How quickly do you respond to leads? Have you ever closed a deal because you responded within minutes to a Web visitor? Share your thoughts in the comments section.

[Image via freedigitalphotos.net / Danilo Rizzuti]

Which Matters More to B2B Buyers, ROI or NPV?

We recently wrote about the correct usage of the term ROI in a B2B sales event. A great follow-up question we received was, “How do I know what to show my customer, ROI or NPV (net present value)?” Let’s take a look.

We’ve already looked closer at ROI, so let’s spend a moment on NPV. Net present value is important because it measures the incoming cash flow from an investment over time, and converts that cash flow to today’s dollars. To quote Investopedia:

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative.

Your prospects are concerned with the potential profitability of their investments, so if you want them to spend money with you, NPV is something you should be prepared to discuss. (As a side note, we’ve previously discussed why preparing a business case is critical to sales success. We also wrote about how to inspire confidence in your proposal. Those are two initial considerations before you even get to NPV.)

Now, let’s imagine your prospect is comparing your offering (Investment A) to an unrelated investment opportunity (Investment B). The NPV for Investment A is $3,760 and for Investment B it’s $2,949. Remember, NPV measures the cash flow over time from an investment and converts that cash flow to today’s dollars. (For those of you scoring at home, we used an eight percent discount rate in this example.) So, you’re feeling pretty good because your investment opportunity provides a higher NPV.

But what if I told you that the ROI for Investment A is 21 percent and the ROI for Investment B is 1,025 percent? ROI is a simple metric that suggests the rate of expected return for every dollar invested in a project. Now you are thinking, uh-oh, my offering’s ROI is much lower.

Let’s introduce a third metric, payback period. Payback period tells us how long before the cash flow from a project turns positive. In our example, Investment A has a five-month payback period and Investment B has an eight-month payback period.

Which Matters More, ROI or NPV?Present your business case and let it stand on its own merit. The evaluation of the financial indicators is going to vary from prospect to prospect. One prospect might focus on the payback period because they want to know how soon they are going to get back their investment. In this case, the prospect would favor Investment A. Another prospect may be risk-averse and focus on finding the highest ROI with lowest project costs because they are thinking how much capital they’ll lose if the investment doesn’t deliver the benefits. This favors Investment B.

The only guarantee is that if you don’t quantify the value of your solution for prospects, none of the above will matter because your deal will never merit serious consideration.

Do you always give prospects a business case? Are you comfortable with concepts such as ROI and NPV? Share your thoughts in the comments section.

Test Your Credibility as a Sales or Marketing Professional

Last week we published some thoughts from RainToday editor Michelle Davidson, who offered three great points about what buyers want from sellers and marketers. The very first point she made was that buyers want to deal with knowledgeable sales and marketing teams. As she stated, today’s buyer has no need or patience for a sales pitch. They want answers, analysis, and advice.

Image via freedigitalphotos.net / samuiblue

Image via freedigitalphotos.net / samuiblue

This is a message we are passionate about and feel it cannot be stated often enough: trust in B2B selling and marketing is built on credibility.

In the past, knowledge mostly meant knowing everything about your product or solution (as well as that of your competitor). And credibility was about how you acted — prospects preferred to buy from vendors who were helpful, honest, and delivered on their promises.

Those things still matter, of course. But credibility today now encompasses knowledge of a more sophisticated nature. As I wrote in a blog post last year, I believe buyers now take for it granted that you’ll include a business case as part of your sales pitch or proposal. I believe credible sellers and marketers are those who can answer “yes” to the following questions:

  1. Do you understand your prospect’s business challenges and do you have tools to help you express those business challenges in financial terms?
  2. Do you understand how to highlight business/financial challenges the prospect has but might not be aware of?
  3. Can you demonstrate an awareness of how the prospect’s options (buying from a competitor, doing nothing, or buying from you) compare to one another?
  4. Can you talk about ROI knowledgably with the Chief Financial Officer and/or CEO?

Beyond looking for integrity in all the traditional realms, buyers today trust vendors who can demonstrate this level of business acumen. Today, you must help prospects see their problems, envision solutions, overcome internal objections to investing in your solution, and achieve measurable results. That is how we need to start thinking about credibility as sellers and marketers.

How well do you score on the credibility scale? Share your thoughts in the comments section.

Fit your Business Case to Sell to Small Companies

During one of my recent client presentations, I got an interesting question: do you still need a business case when selling to smaller companies?

I’ll always be a big proponent of a business case. However, you need to adjust your approach if you’re selling to smaller companies (which I’d define as any company with less than $100 million in annual sales, that lacks a formal hierarchical management structure, and/or is owned by one person or just a few individuals).

We’ve written before about how it’s important for sales professionals to understand some key financial metrics so that they can talk about them intelligently, know how their offering improves their customer’s income statement, and make sure they present the right financial metrics to the CFO. However, a smaller company probably has a less formal and less hierarchical organizational structure. A detailed business case is still a critical component of the selling process, but be aware that the final decision maker may be the company’s founder or a group of family members rather than a CFO.

You also have to be careful about the implications your offering might represent to a small business versus a large business. For example, your solution might enable your prospect to reduce labor costs. However, if the business owner employs his brother-in-law, he may or may not be so interested in investing in a solution that would allow him to lay off a family member.

You still want to talk about how much it’s worth for the prospect to solve his or her business challenge. But you want to be sure you find out about the kind of trade-offs this person is prepared to make. In some cases, the small-business owner might want to allocate funds to buy his kid a new car rather than buying a system that might help his business. In this case, the decision is personal, so you’ll want to talk about the financial benefit in a way that takes those trade-offs into account. For example, you can talk about the payback period and show the owner the amount of time he would have to defer the car purchase if he invested in your solution now and how much he will be better off after the purchase. Another example is that the owner may be looking to make a sizable investment now to reduce his tax liability now in exchange for a longer-term benefit. You’ll have to conduct some discovery to find these trade-offs, but it will be well worth your effort.

This is what we mean when we say that value is specific to each individual customer. And, as we’ve said before, the way you talk about value fluctuates depending on where you are in the sales cycle. When a company lacks a structured management team, think about how you can narrow the scope of your conversation around value. When composing your business case, simplicity is probably better. For example, maybe you will get a better result if you focus less on a complex financial metric such Internal Rate of Return (IRR) and more on payback period, which is a concept that many people already understand.

The bottom line is that you need to realize that the conversation that tends to get traction with a larger customer might not be the same for a smaller business. Know your prospect’s needs, and tailor your business case accordingly.

Do you adjust your sales conversations based on the size of the company you’re selling to? What are the differences you notice? Share your thoughts in the comments section. 

Five Reasons Hosted ROI Calculators Trump Excel Spreadsheets

When prospects come to your website, do you make it easy for them to see how much money you can save them? Do you have ways of clearly showing on your website how much more revenue you can help them generate?

Moreover, when your sales reps actually get to interact with prospects, are they well equipped to show the value of your solution in dollars and cents?

Whether for lead generation or closing deals, many sales and marketing teams have generated spreadsheets using Excel to illustrate the value of their solution or product. However, spreadsheets pose a number of problems — in the worst cases, these problems result in prospective buyers moving on to the next vendor’s website or dropping out of deals altogether.

An online ROI calculator built using a dedicated platform can help you avoid these challenges. Consider the following reasons spreadsheets fail and why hosted ROI tools are typically superior.

1. Salespeople dislike overly complex marketing assets. Whenever sales reps think a spreadsheet looks too complicated or dense, they usually opt to leave it by the wayside rather than incorporate it into their selling process. This is a waste of marketing dollars and needlessly leaves reps unable to illustrate your solution’s value. Consider the complexities in the image below, which is from an internally-created ROI calculator shared with me by one of my clients, a $1.2 billion technology company. One of the reasons they came to me is they were looking for a simple, attractive user interface to overcome sales resistance, an example of which is also shown below.

Spreadsheet SummaryROI Tool Summary2. It is difficult to create compelling summary reports within spreadsheets. Again, from my same client, the images below show the difference in presentation. Prospects today expect reports that not only look professional but also are easy to share with colleagues.

Spreadsheet ReportROI Tool Report3. Spreadsheets are notoriously error prone and difficult to maintain. This is one of the biggest reasons spreadsheets tend to fall into disuse. By contrast, ROI platforms are centrally managed and maintained, and thereby eliminate version control issues, outdated data, field modifications, and unauthorized usage.

4. Prospective buyers question the credibility of spreadsheets created by vendors. Generally speaking, ROI calculators created by third parties are viewed as more trustworthy than homegrown spreadsheets.

5. Spreadsheets are not mobile-friendly. Mobile devices limit the user’s ability to access and easily view spreadsheets. Contemporary ROI tools are designed to accommodate all types of devices.

Changes in B2B buyers’ behavior and the ubiquity of mobile devices have converged to make spreadsheet-based ROI tools passé. What’s a savvy B2B marketing and sales organization to do then? Many companies decide they’ll build a tool on their own. However, based on my experience, this usually incurs internal costs that can be far higher than simply contracting with an established vendor that creates ROI tools. My recommendation is to find a vendor with an ROI platform that can easily deploy, maintain, and update your ROI tools. This will allow you to drive the most incremental revenue and to do so with a cost effective budget.

What are you doing today to show prospects the value of your solution? What are the pros and cons of your approach? Please share your experience below.