We know that buyers will attempt to commoditize a supplier’s offering in hopes of lowering prices and shifting risk in contract terms and conditions back to the supplier. We also know, however, that establishing value results in price premiums and risk-sharing commensurate with the return the seller expects to receive from the opportunity. For that reason, when we start working with a client we ask the company’s leadership three questions:
- What is your value proposition?
- Who owns it?
- How is value connected at the deal level?
Not surprisingly, the answers we receive invariably tell us a great deal about the companies. When we ask several executives in any one organization about the company’s value proposition, more often than not we get a number of different answers. But if an organization can’t clarify its value internally, what are the chances its sales team or its customers will be able to understand it? When we ask who owns the value proposition, the answer we usually get is “marketing.” What that means, though, is that the company’s value proposition is likely to be a fixed statement that’s written once a year and is typically out-of-date the moment it’s printed. This is where the classic “sales-marketing disconnect” comes from. And finally, when we ask how value is connected at the deal level, the answers we receive are inevitably vague. That is, even the company’s top executives don’t know how the company’s value proposition is communicated to those who are making deals every day.
The fact is, though, that defining value is actually much easier than most people think. It is essentially the way a company meets its customers’ needs better than its alternatives. In other words, it’s not based on static value statements from marketing but, rather, on real analysis that’s conducted one deal at a time, taking into account all the company’s sources of value, and focusing on the customers’ needs as well as their alternatives to a seller at the moment.
When, for example, we asked the sales team and sales leadership of one of our clients how often they thought customers executed rational analyses before stating that they were “the same” as a given competitor, the answer they gave was “Hardly ever.” In fact, we found that in this particular case, for the company’s customers to legitimately argue that it was “the same” as another supplier they would have to begin by force-ranking forty-three different decision criteria across six different buying influences. Then, keeping in mind their strategic and operational business needs for this transaction, they would have to score those suppliers against the weighted criteria to see who better solved their business problems. When we then asked our client if making the effort to understand how they scored against an alternative would give them an advantage and help the customer make a better decision, the answer was a definite “Yes.”
What's needed is internal alignment on what the company’s value actually is, who owns it and how it connects to the deal level. It creates what we call a living, breathing, value ecosystem that can be updated instantly as market conditions change. Moreover, our experience has shown that this data is well received by sales teams as it helps them solve daily, street-level negotiation problems in an extremely user-friendly way.
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