B2B Value-Selling: A Primer
The word ‘value’ gets thrown around a lot in the marketplace. All too often, it can simply be an empty marketing buzzword without much substance behind it. While that approach may work at times for consumer sales, B2B buyers…well, simply aren’t buying it. They need a compelling financial reason to make a purchase decision.
To successfully sell to other businesses, you must be able to articulate a clear value proposition that defines and quantifies the positive financial impact your products and services will provide each customer. If you’re unable to do this consistently, you’re probably just highlighting the technical aspects of your offering with the hope your prospects will do some positive math after your sales meeting concludes (Feature-Benefit Selling). Or worse yet, maybe you’re still banking on some personal loyalty to close the deal based on a close rapport you’ve cultivated with the prospective buyer over lunch (Relationship Selling).
Adopting a Value-Based Selling approach is a game changer for most B2B businesses selling differentiated products and services in the marketplace. Countless studies have linked this proven approach to an increase in new business sales, customer retention rates, profit margins and price erosion mitigation.
To start writing marketing and sales B2b value propositions, remember the following:
Value is always measured in a currency.
Whether you’ve quantified your value in dollars, yen or pesos, to value-sell based you must be able to communicate the financial impact that your offering will bring the customer in real-world terms of that will show up on a balance sheet. This is called your Total Economic Value (TEV) Calculation. Yes, there will be math involved.
Value is always customer-specific.
The economics of each business is unique, which means that the TEV of your offering will almost certainly vary for each customer. While your marketing teams may be able to average the amount of value you bring to similar customers belonging to your targeting market segments, your sales representatives must be able to adapt these marketing value propositions to create customer-specific ones unique to each potential buyer they call upon.
Value is always relative to the next best alternative.
Let’s say that you’ve calculated the Total Economic Value of your product to be $10,000 for a prospective new customer. Is that $10,000 amount enough to win you the business from your competitor? Well, that probably depends on the customer’s next best alternative to your offering. If the customer’s current supplier provide a TEV of $9,500, the Differentiated Value (DV) is only $500 which may not be worth the switching hassle to start buying from you. Regardless of the size and amount of your calculated TEV for a customer, that calculated amount is not a stand-alone number. Customer’s will always compare your value to that of their other options, which may be a competitive offering, an internal solution or, at times, the option to simply take no action at all. The higher your Differentiated Value, the more likely you’ll get the sale.
Your internal cost structure has ZERO impact on customer value.
This concept is often the hardest lesson to learn when beginning to adopting a value-selling mindset across your commercial organization. Stated simply: to your customer, it doesn’t matter if the widget you’re selling costs you $10 or $10,000 to make. The actual value the customer will receive from that same widget remains unchanged. Don’t fall into the common and toxic habit of building a pricing strategy based on your desired margin over materials, shipping expenses, etc. (ie Cost-Plus Pricing) before you’ve first clearly identified and calculated the TEV of your offerings with your customers. Instead of negotiating around a pre-set price, first work with your customer to agree on the amount ($) of value your offering will provide. You then can and will negotiate on what percentage of that Differentiated Value (above that of their next best alternative) you and the customer are willing to share. You will, of course, need to ensure that the price you offer allows you a reasonable profit over your business costs – but that step in the value-selling sales process comes AFTER you’ve completed a TEV calculation with the customer. Quite frequently, you’ll discover that, by agreeing on a TEV with your customer first and then negotiating a value-share with a customer your margins will increase substantially over your former Cost-Plus Pricing model.