How do I bring value to customers the sales process?

* Geoffrey James: What’s the biggest limitation of the way companies sell B2B today?
* Jeff Thull:
Companies are not able to connect the value they provide to specific performance metrics (KPIs) within their customer’s organization and quantify the true financial impact their solution has on their customer’s business.
Most sales people are set up to communicate value by describing areas where their solution has an impact on individual organizations. However, that kind of value communication simply serves to commoditize the solution because their competitors are telling a similar story. What’s needed is a way to connect the value of the solution in terms of its ability to impact the customer’s ability to provide value to their own customers.
The key concept is that value doesn’t exist until it’s been achieved within your customer’s business.

How do you calculate value for a B2B solution?
There are three levels of value, increasing in order of complexity.
1. Product level - easiest to calculate -
characteristics of the product.
e.g. faster, more acurate or more durable and so forth.
Almost every company expresses value in this way as it is easiest to calculate and the value is seen as similar amongst competitors.

2.How a product changes a company’s processes.
e.g. It may reduce the labor required in the process, get the process completed faster or improve the quality of the process output.

In this case, the use of the solution within one process will likely impact process steps that precede the process your solution impacts as well as the processes that come after.
What makes this more difficult to measure is that you are now impacting cross-functional processes.

3. How those process changes actually make the company better able to service its own customers, and the financial impact that ability will have over time.
This cross-functional impact has a large multiplier effect as it ripples throughout the customer’s organization.

Can you give me an example?
Sure. Suppose that you’re selling a drug like Lipitor. Most sales people would address that sales opportunity by pointing out the value that’s inherent in the drug - it reduces cholesterol. That’s the first level of value.

However, the real value isn’t in that ability to lower cholesterol, but in the impact that a lower level of cholesterol has on the patient’s health. That’s the second level of value.

The highest level of value is the experience of life that the patient has as the result of remaining healthy for longer. That value is quite literally priceless.

I think I see what you mean. Can you give me a business example?
Take document imaging and document management. In most cases, document management solutions are sold based upon competitive contracts for millions of copies at a certain amount per page - a classic commodity sale.
However, if you go into a pharmaceutical firm and analyze the drug approval process, you discover that document management tools can cut the response time on a critical process step, responding to an information request from the FDA, from six weeks to two weeks.
That translates into labor savings, but more importantly, the cumulative effect of the shorter response times means that the drug gets approved more quickly, resulting in a more profitable product with less competition.
The impact is enormous - far beyond the savings that might be generated by a slightly lower cost per page in the document reproduction expense.

Why isn’t this way of thinking more common?
I think the main reason is the historical assumption that the buying customer will calculate the value, because they “know their business.”

The fact is they likely don’t know the unique impact of your type of solution.

Secondly, the people tasked with defining value - the marketing group - tend to depend on the customer to tell them the value - I guess this will sound cruel, but it is a bit like the blind leading the blind - and it is quite inadequate even at the product level of value.

We recently had a software client where the marketing group had provided the sales teams with 24 ways that their product creates value. Our analysis showed that 21 of the items on that list delivered less than 12% of the value, the top three on their list delivered 43% of the value and 45 percent of the REAL value came from just two items… both of which weren’t even on the original list.

How does this play out in a sales situation?
When a novice sales person tried to use those value points in a sales situation, it actually made the prospect LESS likely to buy. Because the list was so long, it made the product seem complicated, and each new item on the list required the prospect to consider how that value translated upward into the higher levels of value and what they would have to do to implement or use each feature. What’s worse, the list was almost identical to the list that the firm’s competitors were using, making the firm’s product seem like a commodity that could only compete on price.

That was the novice reps. What about the experienced ones?
What we found is that the top sales reps never used the value propositions that marketing had prepared for them. Instead, they focused on the two or three value items that made sense to the customer and built a story around them, showing how they would impact the prospect’s processes, and change the way that they operated. These top reps - and it was only about 3 to 7 percent, by the way - seemed to intuitively understand how to adapt the solution message to something that made sense to the prospect.

Why don’t companies simply change their value definitions?
In many cases, the sales executives themselves don’t understand these issues. In addition, the realization that a company has been selling value incorrectly in almost always something of an indictment of either sales management or the marketing group, implying that they don’t know how to do their job.
As a result, it’s usually only when a CEO recognizes they aren’t receiving the revenue growth they should from their high-value solutions that a company is able to focus long enough to address them adequately.

Is that how you’re helping companies?
We’re working with a number of companies, typically at a very high level, helping them quantify their “strategic value impact” and create a methodology for expressing connecting that value to specific performance metrics within their customers business.
The results have been quite dramatic. The foreword of the new edition of Mastering the Complex Sale explains how a division of Shell Oil applied this “higher level” of value quantification and went from $150 million from sales revenue with 110 salespeople to 750 million in sales revenue with 44 salespeople within five years.