With relatively few exceptions, most companies want to be seen to be focused on value, rather than price. You can understand why: in most markets there is only space for one or at most a very few “cost leaders”.
You can see the trend reflected in the number of organisations that claim to have a “value added” strategy. But these positions are often adopted without any clear understanding of how they actually create genuine value for their customers.
More often, their “value added” claims are really intended to justify why they are entitled to charge a premium for extended feature sets and capabilities, most of which only a minority of customers actually end up using.
The rest are left feeling that they are probably being asked to overpay for things that they don’t actually need…
It’s no wonder – in the absence of genuine differentiated value – that customers are so keen to negotiate the price down before they are prepared to move forwards. And it’s no wonder that so many sales people – faced with the risk of losing the sale – are tempted to cave in.
The only value that matters
We can claim that we offer value. But at the end of the day, the only party that can actually determine what is and isn’t valuable is our prospective customer. And slickly spun generic “unique value propositions” (the very concept is an oxymoron) aren’t going to help us.
We need to understand how each potential customer organisation (and often each function and each key stakeholder within that organisation) defines value in their terms, and how our solution could enable them to generate that internal value.
But before we do, and remembering Kahneman’s findings about loss aversion, we had better understand what staying with their current situation is likely to be costing them.
Given that – according to Sales Benchmark Index and other authoritative sources – losing to a decision to do nothing is now a more common outcome in complex B2B sales than losing to a traditional competitor, we had better start by understanding the negative value associated with a decision to stick with the status quo.
The four vectors of value
When it comes to determining the value of change, our customers have four key considerations:
Impact on cost
How much unnecessary expenditure will they incur if they were to decide to stick with the status quo, compared to the money they would save if they were to recognise the need for change (and, more specifically, adopt our solution)?
Impact on revenue
How much potential revenue might they lose if they were to do nothing, compared to the incremental revenue they could expect to generate if they were to agree to change?
Impact on risk
What avoidable risks might they be exposed to if they were to carry on as they are today, compared to the risk factors they could reduce or eliminate by adopting our proposed solution?
Impact on goals
What corporate, departmental, functional and personal goals could be compromised if they refuse to change, compared to their ability to achieve these goals faster and more reliably if they were to approve our project?
Rational and emotional considerations
Many of these value factors can be expressed logically – and most investment cases require a rational justification – but many of them have an emotional dimension as well, and this can have a significant impact on decision-making.
Not value-added, but value-aligned
I think it’s time to ditch the “value-added” mindset – at least when it comes to its current most common use in justifying unnecessary solution complexity – and think instead about being value-aligned.
This, of course, requires that we deeply understand what our customers and the key stakeholders that drive their decisions regard as being truly valuable. And it requires that we understand and help to expose the costs, risks and limitations associated with their current situation.
It requires that we selectively align the most valuable aspects of our purpose, approach and capabilities with the things that our customer – individually and collectively – regards as being most valuable to them.
Valuing your proposals
If you’re at all concerned about whether your sales organisation is as effective as it could be in communicating genuine value, you need look no further than a cross-section of your latest sales proposals.
Do they all clearly articulate what the prospect has agreed are the inevitable costs and risks of inaction, were they to decide to stick with the status quo? And do they clearly and credibly articulate how the prospect has agreed that your proposed solution will enable them to reduce cost, increase revenue, eliminate risk and enable them to achieve their goals?
If not, both your proposal and the customer’s project are at risk. Maybe the proposed project is genuinely of little value, in which case you should have qualified out far earlier. Or maybe the value of the project is being undersold, in which case you run the risk of losing (to no decision, or a smarter competitor) an opportunity you should have won.
And all because your sales people failed to align the business value of what they were offering with the critical business needs and priorities of the customer. I can’t think of a better reason to get focused on the only value that matters – the things that your customer finds most valuable.
