This week I found myself once again talking to a client about the challenge of competing in a market where all the customer seems to care about is price. Once again we fell back to exploring the notion of value. For so many salespeople, who are selling a product that isn’t the cheapest in the market, the challenge is always how do you convince the customer to pay your price?
What value do you offer?
It doesn’t help that most salespeople seem to have no idea what sets them apart from the competition. When you ask them they look at you blankly. Fact is; if a customer is making their decision on price then that probably means that they can’t see any difference between the different offerings in the market either. So price is the only differential. And the cheapest wins. Hence the race to the bottom.
Of course the customer may see your offering as superior so they are prepared to pay more for your offering. But at the same time they will still want to negotiate a good price, even if it isn’t the main factor. Here is where it really pays to know your value. Do you know how much your solution is contributing towards either the customer’s ability to cut costs or grow revenue? Or are there other value variables at play? Value is a multi-faceted affair. It can be financial, functional, emotional, or even relational. Sometimes you can quantify it, other times you can’t, even in business situations.
What makes a good #valueproposition?
Research by my colleagues at Sheffield Hallam University/Shake Marketing and by myself at Huthwaite International has revealed that 73% of companies don’t have an effective value proposition. When I ask most sales people to give me their value proposition they look at me blankly (again!). Then they might trot out some bland, generic statements generated by the marketing department. But have they explored the specific value that this particular customer will get from implementing their product? In most cases not.
So what does an effective value proposition look like? The research at Huthwaite and Sheffield Hallam identified these key characteristics:
1) It needs to demonstrate an outcome for the customer.
2) It needs to show how you can deliver an outcome for the customer in a way that nobody else can.
3) The more you can quantify the customer benefits the better.
4) The more tailored it is towards the customer’s specific needs the more it will resonate.
Here’s what a generic one looks like:
“We can help manage your project from beginning to end”.
Here’s an alternative:
“Our approach to project management and handover means that we achieve 95% completion rate within budget compared to an industry average of 65%, thus saving you millions in additional project costs and significantly reducing the amount of stress and work involved.”
Defining your value
But I can hear you saying. How do you get to those figures? Most customers won’t tell you what value you are delivering. This is where the customer intelligence machine needs to kick in. How many sales people go back to their customers and evaluate what value they are getting from the contract? How many work together with the customer service/delivery side of the business to gather data on the impact they are having? The data is there. You just need to know what to look for and how to get it. Sometimes even an anecdote will do. Anything that you can use to extrapolate the potential overall value to the customer can add weight to your value proposition . As long as you have sound rationale for your proposition the customer is likely to respond positively.
Different strokes for different folks
A key aspect of a value proposition is that what is of value to one person is not necessarily of value to another. So the sales person needs to be able to vary the value proposition to meet the needs of the customer.
Where you have different decision makers involved in a deal you will also need to think about what each person values. The value proposition that will resonate with an Operations Manager is likely to be quite different from the one that will resonate with the Finance Director. Because what matters to them is different. The challenge for the salesperson is how they can adapt their value proposition to resonate with these different key players in a way that still makes them stand out from the competition. This is what you might call #agileselling, or even #adaptiveselling.
The four views of value
We can define four different views of value.
The proposed value is what the seller puts forward to the customer during the buying process.
The expected value is what the customer expects to get when they sign the contract. The seller probably doesn’t know what that is.
The perceived value is what the customer believes they have received over the life of the contract. The seller almost certainly doesn’t know what that is.
The true value is what is actually created during the life of the contract. Nobody probably knows what that is .
Value also comes in different forms. It’s not just about cost-savings or revenue growth. Value can be emotional, relational or even experiential.
Keeping your value proposition current
What’s important to recognise here is that the customer’s perception of your value may vary over time. Value propositions need to adapt over time to stay current and relevant. There is nothing worse than a value proposition that doesn’t reflect what customers really value about a business.
This week the UK retailer John Lewis offers a good example of this. As they posted woeful profit figures analysts were quick to point out that their slogan “Never knowingly undersold” was potentially hurting them more than it needed to. It is true that this slogan generates a feeling of reassurance and trust amongst John Lewis’s customers. But as a customer myself it’s not what I value most about John Lewis. It’s how helpful their staff are every time I go into their shop or call them up. Their value proposition lies in how they look after their customers and how they make their customers feel. And whilst I want to get the best price there is also a premium I am happy to pay to get that service and sense of being in safe hands.
Death and rebirth
So does the John Lewis slogan still really resonate with what their loyal customers value the most? Possibly not. Just because something has served you well for years does not mean to say that it’s not ready for a rebirth. Just like nature. Every year nature goes through a cycle of death and rebirth. Recognising that things can’t stay the same for ever is another key aspect of agile/adaptive selling and creating value propositions. You have to keep revisiting them and making sure they are still current and relevant for your customers. Even better; using your market intelligence to see what is coming over the horizon and creating a value proposition that gives your customers a competitive advantage in the future, as well as today . And making sure that you can monetize it and capture value for yourself as well.