True Value Creation And Your Customers - An Alternative To Close More Sales

Communicating VS Creating Value

Sales forces have justified their existence by communicating the value of their products and services. If a sales rep communicated product/service information and functionality to customers, the conventional thinking deemed those actions as value creation in the selling process, because the customer was educated and learned how they could benefit by using a particular solution or service. The problem with this feature approach of communicating value is caused by the decline in differentiation between products and services. With prevalent commodification in many industries (let me pick in particular on the building automation industry), the communicated benefits matter much less to customers. Value migrates from the solution to the price and a competitive procurement process.

So, sales forces must go beyond communicating the value of features a company or solution provides, and finding ways to create new value by thinking outside the box. To create value companies need to find ways to increase the ability to deliver "well differentiated benefits". The problem is that a great deal of value propositions presented are canned, and unique benefits that translate into great value are uncommon. To this end, it is not enough that sales leadership commit themselves to a value creation agenda. They must know what it is that they are committed to - that is, what they must do. These obligations cannot be delegated, and action is required. Some ideas on how to work smart and establish a true value creation agenda include:

Target and engage customers early in the sales cycle to be able to influence the outcome, and not be reactive to opportunities at the 11th hour.

Train sales force on problem solving skills and proper selling approach to diagnose problems and needs well.

Institute account management disciplines for high potential and high penetration customers.

Find ways to reduce cost though Six Sigma initiatives that include the entire value chain, and not just the supply chain.

Implement "Lean Enterprise" initiatives to further reduce costs and translate those saving into competitive advantage, or new sources of gross margin.

Web enable progress, and value reports to communicate the implementation of solutions/services.

Invest time and resources on face-time spent with customers to build better bonds.

Apply Gaps Model of Quality to services marketing initiatives to further differentiate services.

Train leadership on common and special cause variation to gain knowledge on value creation and the removal of high performance barriers.

Matching Strategy to Customers

Having a proper model for customer segmentation vis-à-vis value creation is essential, so that resource allocation is not an impediment to selling efforts. Huthwaite makes a compelling case for how value migrates depending on the customer. So, who are transactional, consultative, and enterprise customers? That is the known unknown that even well trained and talented sales forces and managers have to figure out. How many times have you seen a heavy investment in selling effort turn out to be a losing proposition? This can be the result of misplaced attention on trying to persuade a customer with very clear ideas on a transaction, where the value is low cost and no more. Time must be taken to understand how the customer defines value, and how to generate new insights by diagnosing problems and needs. The answer at times is to walk away by recognizing that you can not be everything to all customers, and using limited time and company resources to work on higher probability projects.

Interestingly, a failure mode of sales organizations is not recognizing that different approaches to selling are needed for different customers. The research by Huthwaite points out that when there is a value perception misfit no amount of selling skill, clever strategy, or well-crafted value proposition can bridge the gap between what a customer wants and what a supplier has to offer. In today's environment customers demand more value than ever, so it's imperative that a sales force must align its values with those of the customer. Sales forces must learn to further segment customers according to the way they perceive and define value.

Traditionally sales forces have survived well by dividing customers by geography, size, vertical market, or specific products and services. However, as the world of sales continues to evolve the advantages of classifying sales efforts under the headings of transactional, consultative, and enterprise is not an option anymore if you want to win more sales. A sales force that creates new value by addressing accurately how a customer measures value, or brings a new consultative element of knowledge that can help a customer improve their business metrics will be in a better position to win against a less sophisticated competitor. Unless the approach to creating value corresponds with the needs and value perception of customers, selling efforts will continue to languish in sales organizations lacking leadership to get with the times.

Fighting the Perception of Commodity

How do you find your value proposition when everything you do and everything you sell seems to border on being a commodity because everybody is trying to do the same thing to create competitive advantage?

"Oh, but we're different. We sell our World Class Service."

Right ……………………….

How many distributors do you know that don't say they have world class service. Many say that servicing the customer is their core competency. If they truly do have world class service, service is not their core competency it's what they are doing to create and maintain that level of service that is their true core competency.

That being said, finding your value propositions in the midst of identifying your core competence can become quite difficult. A widget is a widget no matter where you buy it. Isn't it? Why should the customer pay more to buy it from you? That's the critical question. What value do you provide that makes your widget different, your company different, you personally different? If the answer to those questions solve a problem for your customer, create opportunity for profit for your customer or provides improved efficiencies then you may have found your value proposition.

Put some real thought into what you are actually doing for your customers. A fellow NSA colleague likes to say "Kodak doesn't sell film – they sell magic moments and BMW doesn't sell cars – you buy a "Driving Experience". You need to think about your business and what you really do for your customers in those terms.

The Commodity Perception

If you can't separate features and benefits from the real value you create for your customers, you will not overcome the "Commodity Perception". Remember, if you can't overcome the commodity perception, then price becomes the major determining factor your customer will use in his buying decision. On the other hand, if you can identify your real value propositions and make them clear to your customers by providing solutions, price is rarely an issue.

Value added must become not only a common term but it must become engrained in your sales culture. Every decision you make should consider the question WIIFMC? (What's in it for my customer)
Take a good look at your own business and at your competitors. What do you offer that adds value to what you sell? Ideally, it will be added value that your competitors cannot easily duplicate in their own offerings, and it will not add to the cost of the basic product or service. It will be based on your true core competencies.

What is a Core Competency?

This is one of the more confusing terms used in wholesale distribution today. The reason it is confusing is simply because it is very difficult to really identify exactly what your company's core competency is. If you don't struggle with that, congratulations, you are in the minority.

A core competency is something that a company can do exceptionally well and that meets the following three conditions specified by Hamel and Prahalad (1990):

1. It provides customer benefits and is valued by the customer

2. It is hard and expensive for competitors to imitate

3. It can be leveraged widely across many products and markets.

A core competency can take various forms, including technical/subject matter know how, a reliable process, and/or close relationships with customers and suppliers (Mascarenhas et al. 1998). It may also include product development or culture such as employee dedication. It can include tribal knowledge.

Coyne, Hall, and Clifford (1997) proposed that "a core competence is a combination of complementary skills and knowledge bases embedded in a group or team that results in the ability to execute one or more critical processes to a world class standard." So—does your skill, knowledge, system, relationships or process represent your core competencies?

The answer to this question lies in the results produced by that process, that structure, that technology or those skills and relationship equity. The product or service must be perceived to be superior to the competition by the customer – not you.

The difference between "Core Competency and Value Proposition" simply stated is that your core competency is what creates your value proposition and your value proposition is what creates your competitive advantage.

"Perceived value drives customer expectations and performance value drives customer satisfaction."

It may require a bit of thought and effort on your part to identify your core competencies and develop value-added relationships for your customers, but it will create competitive advantage in your market. It may eventually mean the difference between keeping and losing valued customers when someone inevitably offers to sell a product like yours at a lower price, but without added value.
How Do We Sell Our Value Proposition?

• Separate selling from problem solving

• Take all of your industry experience and knowledge to understand the customers need

• Present alternative solutions—define your value propositions in terms of WIIFTC and let the customer decide

• Apply your knowledge and experience to the customer's pain as if it was your company.

Value can be added through process, technical support, design assistance, inventory management, cost effectiveness, training and leveraging your core competencies. However, to create real competitive advantage you must have a sales force that understands and executes best practices that focus on profitable growth and increased market share. That does not mean that every sales person has to be a super star but it does mean that your sales people have to understand value added, your value propositions and be able to teach the customer the difference between price and cost. Answer the following questions as thought stimulators.

1. Can you educate the difference between price vs. cost? What makes the low price –high cost?

2. How committed are you to your industry?

3. How well do you know your customers objectives

4. How adept are you at identifying pain

5. Are you more concerned with your employer's success than their own? Your customer's success?

6. How well do you accept personal responsibility for failures?

7. Do you know the five largest customers of their five largest customers?

8. What are the 3 largest sources of pain in their lives?

9. What are your customers' key profit and growth drivers?

10. What are you doing with that knowledge?

11. How would the customer describe your efforts to improve their business?

Discuss these questions with your sales manager in a brain storming session or during one on one coaching sessions and you may uncover opportunity for improved results.

E-mail rick@ceostrategist.com if you would like a copy of the characteristics of the professional sales person and other sales tips.