Build Value Perception, then Harness It
In B2B, the interaction with salespeople should feel like a consultation because the sales folks should not only be familiar with their products (goods and/or services), but have intimate understanding of their customer's (think client's) business as well. The sales folks need to build up the customer's understanding of how their products deliver value and then capture as much of that value in negotiations as possible.
Salespeople As Customer Advocates?
What I've been hearing from executives is that they feel their salespeople all too often say they need to give price cuts instead of holding their ground and keep fighting for an equitable return on the value provided. Here's a list of behaviors to watch out for:
- Sales folks sell by comparing prices with competitors
- Throw-in services to close the deal
- Say "Our prices are too high!" when they lose a deal
- Close deals by lowering prices
- Lower prices to get more business
- Focus on revenue when making a sale
Optimal Sales Behavior
In order to make a sale, sales folks will have to look at how they are delivering customer value (product value minus price) as compared to the competition; but they also need to understand the businesses costs to ensure an equitable return for the sale (price - product cost). The following behaviors can help do this:
- Sell by comparing cost-of-ownership with competitor products
- Use supplementary services to generate additional revenue
- Say "Our method of communicating value needs work!" when they lose a deal
- If prices are lowered to close the deal, pieces of the product are taken out to lower cost
- Consider profitability when making a sale
Ideas to Incentivize B2B Value Capture
In an ideal world, the salespeople will see that using value calculators should make the sales cycle easier. Selling as a value consultant is a different way to close deals for sure. So how do you transform your sales folks into value consultants? The answer of course is to make changes to their compensation plans...., which may not be easy. The weighting on profitability needs to be increased relative to volume and revenue. This can be difficult for management to accept because they might fear that this will affect market share. But ultimately, isn't it better for a business to have market share AND profitability?
Involve salespeople early in the development of value calculators to help them get comfortable with this methods of sale. Pilot the value calculators throughout a couple of sales cycles with "friendly" clients. After a few small wins, document the process and have new salespeople join the newly developed value consultants in the field to observe the process and continue the training by doing some role-playing. The business can also develop a small group of specialists who understand the value consulting model and who are trained to be able to find additional value that could be captured. The end goal.... a value capture culture.