Have you ever met a salesperson who didn’t claim to sell ‘value’ in one form or another? I doubt it.

Value for money, value added services, value selling, value proposition - the list is endless. But how many salespeople really know what their customers would define as ‘value’? And more importantly, how many can precisely identify what kind of ‘value’ their customers are willing to pay a premium to receive?

The issue is that ‘value’ is a very subjective term and this can be problematic for the salesperson and the client alike if there are differences in its definition. It was this ‘grey area’ which prompted Huthwaite, a world leader in sales training and effectiveness to undertake international research on the subject.

The primary aim of the study was to clarify the concept of value from a customer perspective and also to investigate which sales strategies result in clear competitor differentiation based on the value that is being offered.

The research uncovered some critical insights into the importance of expertise versus cost in the sales process and also into the skills required to effectively drive value in an increasingly commoditised landscape.

A Study into the NEW Definition of VALUE

In 2004, global data was assembled on several thousand seller-buyer transactions across a wide variety of product and service driven industries including Banking & Finance and Telecommunications.

In each of these transactions, the customer had reported that in an effort to purchase a particular product, service or bundle of capabilities, they were faced with a group of competitors seeking their business who all looked the same.

In terms of the subsequent buyer behaviour, a curious common characteristic was revealed.

When these buyers were faced with a range of competitive offerings which all looked the same but were differentiated on price, in 100% of cases, the customer in these transactions did not select the low cost offering .

You must admit, this seems like pretty odd behaviour. Why would you pay more to receive a product or service when an alternative competitor offered exactly the same for less? Well, the below case study provides some insight.

Case Study1 – Major Manufacturing Company, USA

In 2004, a large manufacturing organisation in the United States was faced with a number of telecommunications solutions in a competitive tender which all looked same Insert “very similar” for same .

The result was that they selected the provider which was significantly more expensive than its competitors.

Huthwaites analysis uncovered that the reason for this decision was that the seller was offering value which was so important to the customer that price ceased to be of primary importance.

Firstly, the successful salesperson positioned themselves as a broker of capabilities by reviewing the customer’s total telecommunications infrastructure and equipment.

Secondly, throughout this process the successful salesperson provided more precious value by uncovering some previously unrecognised problems in the customer’s capability to handle future data requirements via their existing strategy and supplier.

And finally, the seller provided an unanticipated forward looking solution using their new technology which resulted in the elimination of key capital costs from the customer’s balance sheet and significantly reduced administration and management of related non-core assets. This involved the customer outsourcing the ownership and management of this infrastructure to the seller.

The research clearly identified that when a customer elected to pay a premium for something, they invariably reported receiving value in another form which was more important.

So for Huthwaite, this strongly suggested the need to re-define and investigate what customers really meant when they reported receiving ‘value’.

Analysis uncovered three general value drivers which were time and again taking precedence over cost.

The 3 Value Drivers

1. The Seller revealed an Unrecognised Problem that the buyer was experiencing and helped them understand it in new and different ways

2. The seller helped the buyer to arrive at a better unanticipated Solution than they would have on their own.

3. The seller served as a Broker of Capabilitiesacting as an advocate for the client as opposed to being simply a vendor of products and services.

Further analysis of the transactions uncovered that if a seller offers a customer one or more of the above Value Drivers, they are likely to see the following behavioural changes in the customer:

• Price will become less important to the customer
• The customer will erect barriers to the seller’s competitors

What becomes clear, is that it’s no longer enough to have a great product at a highly competitive price; sellers now need to trade on their expertise and become value creators.

The Challenge: Creating Value the Smart Way

So, it’s not what you sell, it’s how you sell and if expertise is the key to creating value, the important question then becomes ‘how does a seller use their expertise to benefit the buyer during the sales process?’

It’s Huthwaites position that the key is for the seller to employ a particular form of diagnostic questioning both before and during the sales process.

Asking the right questions may seem simple enough but actually creating customer value requires conducting calls which help the customer draw their own conclusions, establish value expectations and invite the seller to describe their offer and capabilities.

This form of questioning (the SPIN questioning paradigm for those who are familiar) is based on two rules of communication:

People value what they say and what they conclude more than what they are told

People value what they ask for more than what is freely offered

It’s a reality of human nature that people value their own opinions and conclusions - this is why Value Creation takes skill.

While the diagnostic questioning model warrants further explanation, in its simplest form, the kinds of questions which are most effective are those that encourage the buyer to uncover insights themselves that have direct bearing on their business and success. The below case study highlights the success a multinational software company had after training their staff in the art of diagnostic questioning.

Case Study 2 – Fortune 100 Software Company, USA

This particular Software Company were failing to meet targets and were resorting to aggressive discount selling to win business – in short, they were classic price driven sellers.

1000 of their direct sellers were trained to use diagnostic questioning to effectively drive additional value by identifying an unrecognised problem that the customer was experiencing and help them look at it in a different way (Value Driver #1). The aim was to extend the relationship with each customer so it involved more than just the software and the price. A 90 day trial resulted in an impressive average increase of $300K revenue per seller in Q4 and discounting decreased by 31%.

Summary

Unfortunately, few companies or individual salespeople recognize how dramatically their market has changed. Specifically, few sellers have recognized how value has been re-defined by their buyers. Even fewer have adapted to the new definition of professional selling.

The bad news is that most sellers are still operating under the old idea that value communication is the path to value selling and will find it increasingly difficult to break the barriers of commoditisation.

The good news is that for those who decide the make the transition, there is a unique opportunity to drive and re-define client value and in doing so capture a greater share of the market with a lower percentage of customers who make purely price driven buying decisions.

[Back to Archive]

James Fennessy is the Managing Director of Huthwaite Asia Pacific. Huthwaite, the creators of SPIN Selling®, are world leaders in sales performance research and improvement.

Phone : +61 (3) 8606 4901

Email : jfennessy@huthwaite.com.au

Website : www.huthwaite.com.au