What Do Buyers Want from Sales and Marketing?

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Image via ddpavumba / FreeDigitalPhotos.net

Today’s post is by Michelle Davidson, Editor of RainToday. It appeared originally on RainToday.com’s Rainmaker Blog and is published here with permission.

We know what buyers don’t want from sales and marketing. They don’t want hard sales pitches. They don’t want long presentations that have no value. They don’t want to talk to a salesperson unless it’s on their terms. They don’t want impersonal marketing emails.

What do buyers want? Here’s a look at a few things at the top of their list:

1. Buyers Want Knowledgeable Salespeople

For the most part, buyers are independent and like to self-educate, says Josiane Feigon, author of Smart Sales Manager. They want to conduct their own research, learning about an issue and possible solutions on their own time and in their own manner. They don’t need salespeople or professionals to pitch their services; they need people who can answer their questions, analyze the situation, and offer advice.

Buyers “are desperate for salespeople who are bright, are smart, are intelligent, [and] are doing their homework. They want a virtual relationship or even a social relationship with those types of salespeople,” Feigon says in her podcast interview, “Buyers Don’t Need Traditional Salespeople Anymore.” “So, really the message is salespeople must become a lot smarter, a lot leaner, [and] much more equipped to meet this customer on their terms.”

Andrew Sobel goes further and says buyers want advisors. They want people who will collaborate with them as well as educate them, he writes in his article, “Is the Trusted Advisor Still Trusted?”

That means you must:

  • Be empathetic
  • Put buyers’ needs first (even if it means saying no)
  • Have big-picture thinking so you can see trends and connect them to their business

Advisors “go beyond ‘professional credibility’ and build deep personal trust with their clients. They have great integrity, put their client’s interests first, and are immensely reliable and consistent,” Sobel says.

Such trusted relationships reduce risk, he says. They reduce the risk of misunderstandings, delivery problems, and missed deadlines.

“Clients know this and value it because we live in a world that’s more fraught with risk than ever,” he says.

2. Buyers Want Multimedia Marketing Materials

Buyers’ preferences run the gamut when it comes to marketing materials. Some have fully moved into the online world where they want to see everything on their laptop or mobile device. While others like traditional print marketing, and others respond well to a mix of both.

So, if you think the traditional brochure has gone the way of the dinosaur, you are mistaken. It plays an essential role in a multi-faceted marketing strategy.

A brochure “has staying power and a readability that’s greater than a blog or social media site,” Bruce W. Marcus writes in his article, “Are Printed Brochures Obsolete?” ”And unlike a blog or a website, which can be read only on a computer or mobile device, a brochure can be read anywhere—no Internet connection needed.”

It can’t, however, be the keystone of a total marketing effort, Marcus warns. But when combined with other marketing activities, it can be powerful and offers a “strong overall impression of a firm.”

And when done well, a brochure “can demonstrate a firm’s most valuable asset—its skills and intellectual capital—and serve as a catalog that describe a firm’s capabilities, facilities, expertise, or point of view,” he says.

3. Buyers Want You to Make It Easy for Them to Make a Referral

A pleased buyer is happy to make a referral for you, but you have to make it easy for them to do so. They already have more than enough to do; don’t give them anything more.

That means staying away from questions such as “Do you know anyone who would be a good fit for our business?” or “Who can you introduce us to that would make a good client for us?”

“While those questions seem obvious, they’re useless because they’re too broad,” says Colleen Francis in her article, “A Pragmatic Way to Ask for a Referral.” “Almost always, the response you’ll get is, ‘I don’t know, but let me think about it.’”

Then usually they go back to what they were doing and forget about your request, she says. It isn’t intentional. They just have a lot of things going on, and they don’t have the time or energy for extra work.

“To successfully acquire referrals, you must fundamentally change your requests,” Francis says. “First, do the work for your client. The best thing to do is go to the client equipped with the names of people and their positions or the companies to which you want to be introduced. Then ask for that specific introduction.”

Michelle Davidson RainTodayAs Editor of RainToday, Michelle Davidson oversees all of the articles published on the website and produces the weekly newsletter, the Rainmaker Report. She also produces the site’s weekly podcast series, Marketing & Selling Professional Services, and the site’s webinars. Prior to joining RainToday, she worked for several years as Editor in Chief of various websites at TechTarget; she also worked as a copy editor at magazines and newspapers, as a book project editor, and as a reporter. Contact her at mdavidson@raintoday.com or @michedav.

Understanding Your Impact on a Customer’s Income Statement

We’ve said this many times: before you can deliver value, you must first demonstrate to the customer that you understand their business challenges.

Knowing the fundamentals of an income statement can really help you in this regard. Unless you understand its components (maybe not fully, but at least to some extent), your conversations with customers are probably still centered on marketing-speak and you haven’t yet gotten to the level of talking about a true value proposition.

An income statement is simply a financial statement showing how much money the company made during a certain period of time (usually a month, quarter, or year) and what the company’s revenue and costs were. Here is the basic flow of an income statement (sometimes called the P&L):

Sales Revenue

Subtract Cost of Goods Sold (CoGS), which would include things like:

 

  •             Materials
  •             Labor
  •             Other Direct Costs

 

Cost of Goods Sold subtracted from sales revenue tells you your Gross Margin.

Now subtract all of the following expenses (collectively known as SG&A)

 

  • Sales
  • Marketing
  • Research, Development & Engineering (RD&E)
  • General expenses
  • Administrative expenses

 

Once these items are subtracted, you’ll end up with net profit.

If the company is public, an income statement will be published in its quarterly and annual reports (this is by law). The top line of the income statement is how much the company made in sales (revenue). The bottom line is the company’s earnings (profit). For simplicity, we are going to ignore the corporate level concerns like income tax, interest, and other corporate expenses.

Let’s take a closer look at some of these terms.

Cost of goods sold (CoGS). This is simply the direct costs incurred by the company to produce and/or deliver whatever they’ve sold. This amount typically includes the cost of materials and direct labor costs. If your product can lower your customer’s raw material costs or production labor costs, you can impact the CoGS.

Gross margin. Gross margin, also sometimes called gross profit, is simply the company’s sales revenue minus its cost of goods sold. Often the gross margin is expressed as a percentage and calculated as: (sales revenue – CoGS) / sales revenue * 100.

If your offering helps your customers increase sales revenue, the increase in gross margin is how you would quantify the bottom-line impact of increased sales (since your customers gross margin dollars would increase as sales increased). The calculation you should use is simple: increase in sales revenue * (1 – CoGS %) = gross margin dollars.

SG&A. This stands for Sales, General, and Administrative. These are costs the company incurs as part of doing business and is otherwise known as “overhead.” Things like telecommunications charges, IT, office rent, and consulting services (for example, legal representation) would go into SG&A. These costs are independent of any goods you’ve sold, because you pay overhead no matter how many units you sell (or don’t sell). If your solution lowers data center cooling costs, then you are impacting your customers’ SG&A costs.

Net income.

If a company’s leaders want to improve profitability, they have three basic options.

Increase Revenue

1)    Increase the volume of what they sell.

2)    Increase the price of what they sell.

3)    Create a new product to sell.

Decrease CoGS

1)    Reduce the cost to produce the product.

2)    Reduce the cost to deliver the product.

Decrease SG&A

1)    Reduce marketing cost.

2)    Reduce selling cost.

3)    Reduce R&D (or engineering cost).

4)    Reduce administrative cost.

5)    Reduce other overhead cost (including IT).

So, how does it help you to know what’s in a company’s income statement? For one thing, it helps to show the prospect that you understand where their company is financially. For another, it sets you up to talk about your offering in the context of whatever their financials look like. If your offering cannot impact the prospect’s income statement in a positive way (aka, by helping them do one of the three things listed above), then you haven’t yet figured out how you can deliver value to this customer. If that’s the case, you need to figure out how you can impact their financials or move on to another prospect.

How do you leverage financial statements when talking with customers? Share your thoughts in the comments section. 

The ROI of Winning an Oscar

OscarOne of the coolest things (in our opinion) about ROI is that you can calculate it on almost anything.

In the B2B world we obviously use ROI calculations to show our prospects and customers what they’ll gain by investing in our solution or offering. Recently – and just in time for the Oscars – we came across an interesting post from Forbes showcasing a list of actors that deliver the best return on investment for movie studios. Although it’s common to see lists made of actors that command the highest salaries, it’s slightly more unusual to see someone thinking from the perspective of ROI. Here’s the methodology they used:

Taking a star’s pay on a film, and the movie’s estimated budget, box-office receipts and DVD sales, we calculated a return on investment number, and then averaged the numbers for their last three films to get an overall return.

By this reckoning, Forbes placed Jennifer Lawrence third on the list, noting that she yields a return of $68.60 for every $1 she was paid. They also note that actors that accept smaller paychecks actually increase their ROI. (This is why Emma Stone ranked #1 on the list.)

You might assume that an Oscar winner would command a higher salary, but this separate Forbes post indicates that the equation isn’t so straightforward. In fact, winning an Oscar is not a good indication of higher salary earnings.

This is another good example of how there’s more to value than just price tags and budgets. Value is always in the eye of the beholder. To some, going home with a gold statue holds infinitely more value than a multimillion-dollar paycheck. As Forbes notes, actors who put a premium on winning an Oscar sometimes agree to lower paychecks for the chance to work on films that offer lower budgets but higher artistic credibility. To them, the trade-off in salary is more than worth it.

The same principles apply in the business world. Just because a solution is more expensive than anything else on the market does not guarantee that the customer will see a higher ROI. In fact, a higher price makes it more difficult to show a higher ROI. Conversely, the cheapest solution is not necessarily the best value. As we pointed out in a recent post about differentiating from your competition, value is relative not to what you paid for the solution but to what the next-best alternative is. Value encompasses price, plus the cost to deploy and maintain your offering, costs in other areas, and the impact on the customer’s revenue. All of those elements need to be taken into consideration when calculating ROI.

We’ve not yet been asked to assemble a value calculator for a Hollywood studio, but I’m sure it would be fun to try.

What do your customers value? What are some of the trade-offs they make in the name of value? Share your thoughts in the comments section. 

What Matters Most to B2B Customers?

If your most valuable customer had the chance to buy from another supplier, would they?

Of course not! You have the best product on the market. You have the best brand recognition. Your prices may not be the lowest around but you have a rock-solid relationship with this customer. You would walk through fire for them. No way would they leave you for a competitor, right?

Now let’s think about the customer’s perspective for a moment. Imagine, for example, that you’re a purchasing manager at a big industrial company. One thing you buy is widgets. In fact, you’ve purchased widgets from the same supplier for the past 15 years. This supplier has worked with you to alter specs when you needed them altered. This supplier has never raised the price of widgets beyond what you deemed reasonable. When you forecasted badly a few years ago, they didn’t up-charge to expedite a couple of shipments. Twice a year, they come out to visit you and take you to your favorite restaurant. In short, you have a great relationship with this supplier.

Now imagine that you get a call from someone you’ve never heard of, in a place 11 time zones away, and this person tells you that his company can supply you with widgets at two percent less than what you currently pay. Do you spend a lot of time investigating that supplier?

Probably not.

Your reasoning is simple: your existing supplier already takes very good care of you and, more important, is a known quantity. Does this other supplier have a support team that speaks your language? Do they understand your definition of quality? Will they ship on time to meet your production schedule?  Will they stand behind their product? Will they still be in business five years from now? With a new supplier, there’s always risk. A two percent savings in price is often not enough to justify that risk, and it probably will not turn a purchasing manager’s head.

Now let’s imagine you get a similar call, from a different supplier. But this time, the supplier says they can offer widgets at a price 20 percent lower than your current price.

Do you spend some time investigating that supplier?

Of course you do.  You’ll probably start with 15 minutes of online to research the company. You might try to find out if they make widgets in your size range or ask if they’d be willing to foot the bill for you to visit them on-site.  If their claims appear to stand up, you might even order samples and run them through your quality control tests.  In short, no purchasing manager worth his calculator can ignore a chance to save 20 percent.

There are lots of situations in the B2B world where brand, relationship, and reputation may stand up to a two percent price saving. But not many will stand up to a 20 percent price savings from a competing supplier, at least without some deeper analysis.

This is why it’s so important to think about value not just in terms of having a great relationship, “best product”, or brand recognition. Think about the sum total of what you offer. That includes all things that go into a customer’s experience: service, pre and post-sale support, technical support, or just knowing you’ll be there when they call with a technical question two years later.

Your value is always defined in relation to each customer’s specific needs, but it’s also defined relative to their next-best alternative. Just because you’re catering to an individual’s preferences (flying out to wine and dine them) doesn’t necessarily mean you’re providing value to their company that will keep your business relationship intact in the face of an aggressive low-cost competitor.

What matters most to your customers? Share your thoughts in the comments section. 

The Value Lifecycle: Generating Demand for Your Solution

This is Part III of a five-part series about the life cycle of value in B2B selling and marketing. This post examines Phase 2 of the Value Lifecycle: Demand Generation.

Last week we talked about value as it relates to pricing. In Phase 2 of the Value Lifecycle, our understanding of value shifts slightly.

Value phase II

Your aim in Phase 2 is to establish the total cost of the prospect’s current business problem (or problems). That cost could be represented by money the customer is currently spending needlessly, and/or revenue the customer is currently missing out on. As we often explain to our clients, shining a flashlight on the size of a prospect’s problem sets you up to illustrate to the prospect how much value your solution can create for them.

Let’s look at a simple example. Say your prospective customer has a process in place for posting new job openings. This process is paper-based and requires three people to manage it. The labor cost to employ those three people is the size of the problem. Now let’s say your company has a solution that’s electronically based and only requires one person to manage the process. Not only would the customer save the labor cost of two employees, they’d also save on spending money to buy ink and paper. That’s the value created by your solution.

These kinds of cost savings scenarios can exist almost anywhere for customers. Your solution might reduce rent, labor costs, IT support costs, etc. Or your solution might, for example, impact revenue by increasing the number of sales leads or improving an online store’s uptime. No matter the specifics, the general question is, “How much is not implementing our offering/solution costing you?” and/or, “How much revenue are you losing because you lack our offering/solution?”

A key metric in Phase 2 is cost-to-delay per month. That’s the total value of the problem over the period of time (and, again, could be represented by potential revenue lost, unnecessary costs, or both). A month is usually a nice time frame, but you could also quantify the problem in weeks or years. Essentially, this calculation allows you to tell the customer, “Every month you don’t solve this problem, it’s costing you X amount.” Again, this is a way to create a sense of urgency around solving the problem.

Note that Phase 2 analysis doesn’t take into account what your competitors are offering and how you compare to their solution. In the demand generation phase, you’re mostly concerned with what the customer is currently doing today. Why? The way you measure value changes based on where you are in the Value Lifecycle. In Phase 2, you’re not concerned with proving how you’re unique and different – that comes at a later stage. Your primary concern at this stage is to get the prospect excited about solving their current problem.

In Phase 3 you can start to explore the question, “Why should the customer buy from us,” (instead of either doing nothing or buying from your competitor). We’ll explore that concept in next week’s post.

What’s your biggest challenge in quantifying your prospect’s problems? Share your thoughts in the comments section. 

The Value Lifecycle: Establishing Your Value in the Market

This is Part II of a five-part series about the life-cycle of value in B2B selling and marketing. This installment explores how to establish the value of your offering.

Value Lifecycle Phase I

Although value in a B2B context is always about dollars and cents, value and price are not the same thing. When marketers start the process of setting a price for a product or solution, they usually look around to see what the competition is charging, and then they set a similar price. Or they look at their costs and tack on an acceptable margin.

That’s the wrong way to look at things. You need to first do the hard work to understand the value of your offering.

Value starts with looking at the economics of the customer and doing a pro/con analysis of your offering against their next best alternative. Sometimes that’s a competitor’s offering. However, it’s often “do nothing” or pursuing a homegrown solution that’s created internally.

If you add up those pros and cons (your value elements), you can establish the value your offering creates for a customer based on what you do differently. That value should be measurable in currency and should be specific to each customer (or segment). Once you do this analysis, you can set price. Here’s the formula: the maximum price you can charge is the value you create minus the value of the next best alternative, plus the price of the next best alternative. However, you cannot charge the maximum price, because at that price the customer has no incentive to change, because at that price you are leaving no value for your customer. You need to share some or even a significant majority of the value your offering creates to incent customers to buy and sustain your market.

As an example, let’s look at the B2B marketing and sales enablement tools that my company sells. Part of the value we create is additional leads and more closed deals. While our competitors may not be able to offer customers as many incremental leads and closed deals, they still offer something along those lines. The big value we create over our competitors is our consulting services — not only do we create the tool, we help our clients define and communicate the value of their offering in terms their customer will understand and accept. This not only makes the tools more effective but also gives our clients an inherent time-to-market advantage. Our pricing strategy is to then capture some of this incremental value we create vis-à-vis the next best alternative, which can be either “do nothing” or a competitive product (a competitive product could include an internal homegrown tool).

In our view, all marketers should spend time doing this analysis, but figuring out incremental value is a difficult task. That’s why many marketers take the easy route and set a price based on how much it costs them to make their product, or they take the competitor’s price and simply charge a 10 percent premium or discount. But neither of those things helps you establish your value, nor does it allow you to capture an optimal share of that value.

Phase 1 is all up to the product or marketing manager, but these decisions will heavily affect the sales team later in the value life-cycle when trying to find leads and close deals.

Next week we’ll explore Phase 2, demand generation.

Has your company/team performed an analysis like this to determine your value? What are some lessons you’ve learned about value and pricing in your career? Share your thoughts in the comments section. 

Getting to a Successful Close: The Four Phases of Value in Sales and Marketing

This is Part I of a five-part series about the life-cycle of value in B2B selling and marketing. Part I is an introduction and a summary four phases of the value life-cycle.

Whether you’re in sales or marketing, it is obviously in your best interest to understand what value you offer to customers. What most sellers and marketers don’t realize is that value has different meanings depending on where you are in the marketing/sales cycle. The “value life-cycle” has four distinct phases (listed below) – as you’ll see, different phases require input from different roles in the company.

Stratavant Value Lifecycle

Stratavant Value Lifecycle

Phase 1: Establish Offering Value (and price)

Initially, a marketing/development team defines value and sets price for a new offering. The common mistake here is that marketers set the price based on what the competition is charging or, worse yet, based on their own cost – not based on the value they create relative to the competition. During Phase 1 you will always be measuring value against the customer’s next best alternative (often a competitive offering).

Phase 2:Demand Generation

At this phase, marketing aims to project to the customer a picture of how your value can help them relative to what they’re doing today. At this point in the value life-cycle, you are trying to “shine a flashlight” on how much the problems that you can solve are really costing them. During Phase 2 you are measuring value against their current state.

Phase 3: Competitive Differentiation

At this point, sales (with support from marketing) needs to show the customer why their offering provides more value and is a better fit than competitive offerings. In Phase 3 you are showing that the total value your creates – throughout the life-cycle of the solution – is higher than the total value created by the next-best alternative (aka, a competitor). This is often referred to as TCO, or Total Cost of Ownership.

Phase 4: Business Case & Cost Justification

By Phase 4, the sales team is actively trying to close a deal. A cost-justified business case is key to convince a financially minded approver (often a CFO or someone from finance) that an investment in your solution is in their economic best interest.  During Phase 4 you are showing the Net Present Value (NPV) and Return on Investment (ROI) of investing in your solution (as we’ve written before, this is why it’s important to understand financial terms and communicate intelligently with CFOs). This type of analysis compares their current state of cash flow against what their cash flow will be after they invest in your solution.

How you think about value should change based on which phase you’re in. Phase 1 is strategic marketing, and the meaning of value is very different from Phase 4, during which sales is talking with the customer. The way you think about value at each phase will have an enormous influence on your ability to successfully position your product in the market and keep deals moving through the pipeline until they end in a successful sale.

While most people in sales and marketing do think (and talk) a lot about value, they don’t necessarily think about it within this framework. We’ll explore each of these phases more in four upcoming blog posts.

A final note: the word “value” is always about dollars and cents in the B2B world. If you can’t lower the cost of doing business for your customer and/or find a way to help them increase revenue, you’re not offering value and customers shouldn’t buy from you.

How do you think about value for your offerings? Do you have tools that help you to show value across the various stages of the value life-cycle?