See associated Greenbank Open Workshop - Overcoming Price Objections
This topic is becoming the Holy Grail for many of our clients, especially in the current competitive marketplace, where all too often it seems that the power is with their buyers. As a result, price discussions happen all too early in the sale - before the sales person has the chance to build value. The result? Commoditisation of their services, knee jerk discounting way before the negotiation really starts and subsequent margin erosion.
The issue goes deeper than the current price-sensitive market though - surprisingly we have found that many B2b salespeople have no firm idea what their customers actually find valuable!
To address this, many of our clients are equipping their sales teams with the skills, knowledge and, importantly, confidence, to have real business conversations with their clients, armed with thought-through value propositions tailored for different roles and sectors.
One client has neatly described their aim of "building a sales culture that encourages sales executives to think like business 'consultants', with a real curiousity in what our clients do.."
In other words our clients are essentially 're-framing' the whole sales relationship - from salesperson to trusted problem solver, from the first conversation, in order to reduce the importance of price as a decision criterion.
Our own work in this area is supported by the work of James Anderson, particularly in his book:'Value Merchants', where he identifies a number of key activities needed to successfully achieve this transformation..
The Issue - Price Wars
Anderson proposes that it's not just customers viewing services as 'commodities' that causes the issue - suppliers actually compound the problem by emphasizing sales volume over profit, and encouraging salespeople to get the deal at any cost. Like Anderson, we have also found that remarkably few companies have made systematic or methodical efforts to understand the true value of their products and services to customers. Once you know what your customers value of course you can then demonstrate and document how your own product and services can contribute to this in a meaningful, tangible way.
Identify economic benefits
Anderson recommends a simple exercise. Identify the points of difference you can offer that deliver clear value to the customer. Then conduct research to make the value proposition as definitive as possible.
Anderson talks about Value Word Equations and 3 steps to build this:
Step1 - clarify the economic benefit: How will your customers' business benefit from using your product - in the private sector this normally means increasing revenues or saving cost. For public sector clients it can be delivering against targets. Make sure this is the end business result that a senior executive would buy into and put numbers against it -and ideally what the client has already told you!
Step 2 - pin down a technical advantage: What technical benefit do you give your customers that will enable them to achieve the economic benefit? E.g. better management information, less duplication, better skilled staff etc...
Step 3 - emphasise your unique service - what you will do that no one else will? E.g. dedicated project management, regular progress reports, free enhancements etc...
If you can't identify these 3 steps for a business opportunity than it's a great prompt for what to do next - go speak with the client, ask some great questions and find out!
Similarly, in our own work with clients, we encourage salespeople to develop a visual A1'value map' wall chart for each sales opportunity, which forces them to identify the specific, tangible business needs a client has and how their solution can meet these needs better than their competitors. By getting salespeople conversant with using these new value selling tools they can steer conversations away from price from the very beginning.
It's not easy to change salespeople's approaches
Anderson reminds us that getting salespeople to change is not easy and needs to be tackled from the top down. E.g. Change your company's emphasis from revenue to gross margin and reflect this in your salespeople's pay. Accredit salespeople as Certified Value Sellers and pay them accordingly. In short, develop a company culture that acknowledges and rewards 'Value Merchants'.
From our own work, we have found this mindset is not only useful to get the deal - it also helps you maintain margins during the negotiation phase. In our negotiation workshops, we teach that emphasising the precise, measurable value you are providing clients (rather than the cost) can really strengthen your position and give salespeople the confidence to avoid deep discounts.
Book title: Value Merchants by James C. Anderson 2007
Other links:
http://dollarization.blogspot.com/
http://blogs.hbr.org/kanter/2010/05/seven-hints-for-selling-ideas.html
Great post Ian