COMMENTS
Though I know close to nothing about sports contract negotiation, I agree with you on the fundamentals: Appreciation for value seems to be returning.
I primarily work with startups. In my experience, one red flag for me is when entrepreneurs (that are buying stuff) wear the "I got the cheapest price possible" as a badge of honor. This is dangerous thinking.
I would support your argument that most businesses (and business owners/managers) are *much* happier selling to customers that are seeking value than those that are seeking the lowest price.
In my experience, *every* time I've sold to someone that was "price sensitive", it ended up being both demoralizing *and* unprofitable.
Dharmesh, you bring up a good point, about what happens when you sell to someone based on price versus when you buy from somone based on price. Most (not all) companies have the same experience, with the deal, transaction or account just not being worth the hassle, given the lack of profit built in. Dave.
Great post Dave. It definitely resonates with us. We did some reflecting last quarter on how we can improve our ability to bring on the "right" customers. Our solution was to raise prices and increase the financial barrier to entry for our product. It worked like a gem. The strategy forced our salespeople to find value-based buyers and position the product accordingly. The customers brought on have drastically improved. Price sensitivity from our prospects definitely pushes them closer to the unqualified pile than the customer pile today.
Now for my guess on the factors. Tough question. I have a strong suspicion that the buying behavior of the salesperson has some influence.
Mark - that is factor #1! If your salespeople look for the best deal, they'll be the ones that can't and won't sell value because value woudn't mean anything to them. Nice job. Dave.
This is a great conversation. From a selling standpoint, we are looking at a 2-edged sword. On the one hand, we have salesfolk that will sell either on price or on value. On the other hand, we have the company, which would very much love to sell on value, but does not do a good job of communicating (to the customer or the salesfolk) what that value is.
In my mind, there are a few things that need to happen on the salesperson side. First, the salesperson on their own account CANNOT equate value to low price in their own non-work life. If they do, they will not be able to sell real value in work life. During the hiring/assessment phase, you need to ensure that weaknesses such as unsupportive buying cycle (tendency to think it over), issues over money (lower price means value) and so onn are minimized. You also need to have the prospective salesperson show you how they build a value statement during the selling conversation.
Now, lets talk a little about the company. In my world of former employers and clients, I see that so very many of them cannot build a true value statement. What many companies see as "value" is simply a manipulative statement about why they think you should trade your money for their stuff. These companies remain "product centered" as opposed to "market or customer centered". I think fully 90% of companies worldwide remain product centered, even though we have been talking about this issue since 1985 in "In Search of Excellence" by Peters and Waterman. Product Centered means - I have built my business around this cool thing that I like to do/make/whaterver. Customer Centered means - I am building my business around satisfying a need that a specific group (market) has. NOTE WELL: only a market centered company can truly sell on value.
Regardless of how cool you think your stuff is, I can find 100 other companies that offer the same thing in 0.13 seconds on Google. Unless you are thinking value, you are a commodity, and again NOTE WELL: if you are a commodity, then you have to sell on price. You might say..."we have the highest quality and on time delivery" So What. High Quality and On Time Delivery have become the price of admission - all your competitors are doing it too. For salesfolk to sell value, their companies must offer them value to sell!
Dave, you've worked with everyone, so I'll bet you and Rick have seen this: you go into a company with 5 or 6 salesguys, the majority of them are below quota, but one guy is like 2x or 3x of quota. In my experience, this usually happens because you have one salesguy that has learned to re-frame what the company line is; to actually create value for the customer, where the remaining guys have not yet learned what the actual value, to the customer, of what they do. The more naturally excellent salesguys (IMO) are the guys that can put it into the customers terms - for the remainder of your team, the company needs to support the selling effort. As a business owner, do you really want to hang the success of your company on the ability of your individual salespeople to reframe what you do in the eyes of your customer? Or do you want to provide them with the value(s) that need to sell?
Final lesson, as I step off the soapbox I just put on Dave's desk: The Company needs to build its offering Around the Needs of the Customer. If you are not doing this, you are leaving it up to your salesfolk to build a value statement for you. Is that how you want to run your business?
Thanks Dave, and sorry for the length of my rant. xoxoxo JohnOnSales
That was a long rant but you made great points - all of which are right on the money. One of the big problems, as I see it, is that many CEO's think they do have a value proposition and think their salespeople ARE presenting it but they are so, so wrong. Their value proposition sucks and their salespeople can't do much except repeat it. DAVE
This is a great post! In our business homeowners have been brainwashed to get 3 quotes. They spend weeks if not months on this process with the same result. They hire the person (Not Company) with the cheapest price. What they get is a cheap job and cheap materials. Why invest money into your house if 2 years later you have to spend more money to fix or repair the cheaper job. We educate people that your not saving that money! You get what you pay for. We have be explaining to people that the 3 bid process is the old way. This is way the industry as gotten a bad name with contractors not finishing jobs and providing poor materials and service after the job is completed. Its all because their prices are to low and they figure out that they are losing money half through the project. The new way is to interview companies and fine the best one you trust and can deliver the best value. As for your question:
Yes the sales team is trained to sell only on value and how value is better than price anyway you look at it.
Hey Joe, good comments! So what we're really talking about is being able to ask a homeowner, "when I give you my price, would you like the patch and maintain price or the love it and leave it price? DAVE
Great Topic ... I don't know the "answer", but this is what went through my head.
In the remodeling/building business...
How would we know what is important to any given individual (price/value) ?
How do we know if that person is really telling us the truth?
It takes a lot of questions to determine what is a value to them, to what level of value they desire, and how much they're willing to invest into getting that value. We do not always get it right.
Value can occur in the quality of materials, skill set of installers, professional level of delivery, flow/design/style, maintenance/warranty, the cost of repaying someone to FIX the problem created by someone else, or simply "status" of working with a great company.
If we cannot determine which areas of value are important to a prospect, how can we expect to make a sale, and in the end have a glowing customer?
Thanks for your thoughts Dale....see my comment to Joe above AND why not ask your prospect this question: "We've built our business by doing the kind of work that makes our customers thrilled at the end. However, there are plenty of companies that quote a price that thrills their customers at the beginning. Knowing that you can't have both, which would you prefer?" DAVE
Great post, Dave.
I am not sure we're going to be able to resist the macro trend of outsourcing to Asia - by simply selling value. I'd imagine that large buyers will always seek the lowest price *quality* product. And I do think Asian companies can produce quality products.
But, regardless of origin of products, salespeople and business owners still need to sell on value. So, your main point is certainly taken.
Regarding the factors... here's my guess:
As you know, value is demonstrated by asking asking the riqht questions during the sales process so that the salesperson uncovers the true problems that a prospect is facing. It's not a matter of price - high or low.
For example, Mark, Dharmesh and the rest of the Hubspot team have figured out how to deliver an an online lead generation service for small businesses (which includes a website) that is actually cheaper than the "pretty brochure website" that a local marketing agency would deliver for 10x the price and a fraction of the ROI. But, as they've learned, it's important to qualify customers not just on price. They have to actually determine whether the prospect will take advantage of the extra value that the Hubspot platform provides? Will they be able to committ the time required to get the ROI is the more important question. Will the prospect have the necessary writing, people and analytical skills to engage an audience, to generate links, to write content that suits their audience and to ultimately educate their prospects via their website and convert them into a lead. These are the more important questions for them to ask their prospects.
After that, it's a matter of qualifying the goals of the prospect. Do they want to sell 10 units more per month? Do they want to generate better qualified leads? Once the goal is quantified, it's a matter of determining an appropriate budget that the prospect can afford by asking questions about current sales volume, profitability and what other expenses will be incurred in order to grow.
Then, it's a matter of making sure that you can provide a solution that is sensitive to the budget and supports the sales objectives.
So, to answer your question: I'd say the most important factor is whether your salesperson can uncover all of these things.
In the process of doing this with prospects, I've experienced that my prospects respect me and my expertise more than my "competitors" and as a result, never ask me to lower my price.
And yes, I learned this all from Mike, Chris, Rick and Dave at David Kurlan & Associates. :)
You make a great point which is illustrated in my business by marginally succesful sales people who sell a handful of cool products, to wildly succesful salespeople who own a customers whole menu (usually around hors d'eouvres or desserts, as we are a food distributor). The profit difference between the two is huge.
The factors that I see which get in the way from being wildly succesful are commitment (are they committed to going the extra yard) buy cycle weakness (do they buy the same way, cherry picking or price shopping) and believe it or not I see need for approval getting in the way (I want to be liked and make a deal versus getting rejected). I'm sure there are more but these are my guesses.
Happy Holidays!
Chris Collias
CEO
Progressive Gourmet Inc