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Maximize profitability – sell value and manage price expectations

By on Mar 5, 2012 No Comments

To maximize profitablity, your sales force needs to do more than sell product – it must create value and manage price expectations. That’s a double barrel challenge that’s easy to say, but difficult to do.

Let’s explore the first part of the challenge – creating value. Unfortunately, this notion of value has been talked about so much, by so many that the concept has become a bit fuzzy. So, let’s step back and explore three important fundamentals related to selling value in B2B markets.

  • It’s not product-centric. It is helpful to remember that products have no inherent value. Products possess features; they do not possess value. Value is a relative idea that is all about fit – the fit between the customer’s needs and your solution. If the product does not address a customer need, then it has no value to that customer. This is why developing an understanding of the customer and the customer’s business is such a big deal. Implication for the sales team: in order to create value, you must focus on connecting the dotes between your solution and what matters to the customer.
  • Value is situational and positional. What value means to any person holding a particular position is different for every organization. And individuals holding different positions in the same organization have differing views of value. There are some commonalities, of course, but there are also differences. Understanding those differences is what enables the account executive to effetively sale value and differentiate themselves from the competition. Implication for the sales team: there are no generic customers – how you sell value must be customized to the individual.
  • Value migration is common. Whether you analyze it from the perspective of the individual, a company, or an entire industry, the expectations about value tend to be dynamic in nature. Business history is rich with examples of companies that had very viable value propositions but failed to accurately judge the shift in the market’s value expectations, subsequently ending up with a business model that was no longer responsive to their customer base. Implication for the sales team: be an early warning mechanism for “value migration.”

The good news: creating value is not about some rare talent that only the chosen few possess – it is about learning a set of skills. Three skill sets are fundamental in this regard are:

  • Asking questions. A consistent finding from social science research is as follows: in successful sales calls the sellers ask more questions than they do in unsuccessful calls, and the buyers talk more than the sellers. Unfortunately, most sellers ask too few questions and end up talking more than the customer. Interestingly enough, when these same sellers are questioned about it, many report that they talk very little and ask lots of questions in their calls.
  • Listening. As an old philosopher once said, “A good listener is not only popular everywhere, but after a while, they actually know something.” While most people involved in sales have come to agree that asking questions is a key skill set, many still underestimate the contribution of good listening.

It’s important not only to listen, but also to make sure the other person knows you’ve listened and have understood what they have said. Think back. You can probably remember one of your customers thinking after the call, “I’m not sure that guy really understands the importance of what we were talking about,” or “I think she’s really smart, but I don’t think she quite understands our priorities

  • Establishing credibility. It takes time to establish; it’s a cornerstone for success and it can be lost in the wink of an eye. The ability to establish credibility is a fundamental skill in selling value because without it a whole lot of other things become much harder to achieve.

Let’s now turn to the second key component for maximizing profitability – managing price expectations.

Recently there was an interesting article in the Monitor Perspectives entitled – Stop Reacting to Buyers Price Expectations: Manage Them that explored this topic.

The authors noted: “A customer’s decision to buy something at the offered price, or not, depends upon more than the tradeoff between benefits and price. It also depends on customers’ expectations, and their experience with how the following question is answered: how might our behavior influence the prices we have to pay?”

Unfortunately many sales people sell in a fashion that gives buyers a whole lot of reasons to believe that if the buyer just does this or that, they will be rewarded with a vey nice price break. As the authors suggest: “Periodic predictable discounting is just one of many ways that sellers under-mine their pricing power by making decisions for short term sales gains that adversely affect buyers’ future behavior.”

The answer to managing customer expectations does not rest with the individual sales rep. This is not a training issue – it is a policy issue. The senior sales leadership needs to establish policies that relate pricing to customer value and the cost of doing business. And, requests for pricing exception must be managed, as a policy change issue not a price discounting issue.

As the authors so insightfully commented: “The process for developing good policies involves treating each request for a price exception as a request to create a policy change that can be applied repeatedly in the future. The more requests, the more likely it is that the pricing policy is in need of review.”

As a sidebar if you are interested in an engaging in-depth discussion about selling in a way that maximizes profit, take a read of Mark Hunter’s new book High-Profit Selling.

Check out other posts on sales effectiveness at the Sales Training Connection.

©2012 Sales Horizons™, LLC

Republished with author's permission from original post.

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