Achieving Business Excellence with John Spence

Selling Value Where None Exists

John Spence on Selling Value

In my last blog, The Big Trends From 2016, I got lots of great comments and questions. I especially liked this question and wanted to share my answer with all of you.

 

Q: How often do you find executives who expect their salespeople to sell value that does not exist? In my last two sales jobs, the real value of the product or service was not a differentiator in the marketplace. Even for the most incredible sales person, companies are not naive and they can quickly assess whether there is value in an offering or just double talk. What are the executives’ responsibilities in this situation? How often are you seeing this situation at companies?

 

A: Good question, tough answer. You have to find some way to add value above the product or service even if it is truly a commodity. I have worked with a lot of companies that had very little differentiation, and the executives wanted their folks to sell on value, but few people understood how to create real value beyond what they were selling. If you cannot figure this out, then the only thing you have left to sell on is price.

In my strategic thinking workshops, I tell the attendees that all effective strategy boils down to: Valued Differentiation X Disciplined Execution. In other words, you have to bring something to the marketplace that is unique, exciting and compelling – that your customers VERY highly value – that is difficult, if not impossible, for your competition to copy – and that you can deliver on flawlessly. Until you can discover how you, your products and/or services can meet these criteria – the only thing you have to sell is lower price, which is the fast lane to bankruptcy.

You ask above, “What are the executives’ responsibilities in this situation?” It is my feeling that they must understand their product and market well enough to clearly show their salespeople where the real value exists. If they cannot clearly differentiate their own product from the competition’s product, then a salesperson needs to ask how they can sell on value if the executive can’t even describe it. One of the big issues I see are companies that demand that their salespeople sell on value and capture a premium price in a market that truly will not support it. This is a recipe for failure and is exceedingly frustrating to the sales force. As the old saying goes, “You can’t get blood from a stone,” and you can’t sell value where none exists.

However, it has been my experience that where there is little product differentiation the only way to command a premium price is for the salesperson to add massive additional value. What unique expertise can you bring to the situation? How can you give your customer insights and ideas they could not have developed without you? What recommendations can you make to improve the customer’s business? What additional services can your company deliver that significantly increases the value of your total solution?

In other words, if the product is not a differentiator, the salesperson must be. This is easy to say, but extremely hard to do. It takes a lot of work, time, effort and energy to educate yourself at a level where you can be positioned as a trusted advisor – not a salesperson. Luckily, very few salespeople are willing to make the personal investment necessary to become a high level consultative salesperson, so if you can achieve this you will have created a good deal of job security because every company wants a salesperson who can create unique value for the customer that drives high margins.

I hope you found this of value.

Comments

  1. Value of a product is very important. You must know what is its value before you sell and why you have to sell it.

  2. Salespeople tend to sell a product but that’s not enough.
    A customer will need a product/solution but what they really want is a solid trusted consultant and a solid trusted company to back that product/solution up. Our products are more expensive in the marketplace and we have a ton of competition in the internet/news/EHS space but we continue to succeed because we don’t just sell a product (on price)…it comes with a whole package so the value presents itself.

  3. Outstanding answer to an intriguing question. Thank you, John, for this insight. I agree with your points 100%. I do, however, have something to add.

    You write, “Every company wants a salesperson who can create unique value for the customer that drives high margins.” This is patently true, but few sales executives know how to create an environment where their salespeople are able to discover and develop their own unique approach.

    Most sales executives have come up through the ranks, and are in their positions because they were successful salespeople. Very many times their attitude is, “If it worked for me, it works for you!” Which of course ignores changes in the market, technology, even customer base, not to mention that their salespeople are not clones of themselves (no matter how much they want them to be). Their way is, regardless, the ‘right’ way.

    The key to success in your perfect answer, therefore, is to have a sales executive who understands that every salesperson needs to develop their own particular approach to becoming that trusted adviser, and provides the resources, space and encouragement for them to do so.

    • I like your point Leo but we have to balance this I think. It’s the great paradox of framework and freedom. Define the boundaries and some clear absolutes to operate in and then give them as much rope to hang themselves oops I mean room to flap their wings and express themselves but then as John would always say and quite rightly hold them accountable for doing what they said they would do. With the Millennial generation arriving in droves (75% of the workforce by 2025) see http://www.flushed.co.nz We have to be on to this stuff. Sharing ideas like this is a great place to do it.

  4. Preston Kirkpatrick says:

    I’ve been thinking about it wrong the whole time.

    Real Estate is flooded with similar products. Between one Investment property and another, there can be little value differentiation. The role of the Real Estate Salesman is to help sellers sell and buyers buy. But if they can’t agree on price, how do you make the sale?

    You suggest becoming a trusted advisor through extreme personal education. By becoming the most knowledgeable in your market. Your insights become your differentiator.

    That way, people listen when you make suggestions. They take notes when you give advice. They take action when you recommend something.

    Just as I have done with the meetings that you and I have had.

    Thanks for another excellent blog post.

    Happy Holidays

    -Preston

  5. John, I think you made a valiant effort to give the questioner a diplomatic answer, but my answer would have been: JUST QUIT. If you truly think value does not exist, there is either something wrong with the company you work for or with your own thinking. If it’s the former, they won’t be able to afford your salary for long. If it’s the latter, maybe sales is not for you.

  6. John,
    In every market only one sales force has the best product. Sr Mgmt. owns the responsibility to ensure the company (not the individual sales people) creates and owns a differentiating story. Clients desire outcomes that drive their business success and that is all about selling ideas, not things. Those ideas encompass the entire client experience that is way more than just what the product/service does. How the team engages, how the solution and the company behind it is evaluated, how deployed and how time to value is accelerated etc. Unless no one is actually using the solution and gaining value from it then that story does exist! It must be pulled out and documented for consistent use across all client touch points and made part of the sales process. The struggle for most companies stems from capacity (it is no ones day job) and lacking a proven approach to extract it and turn it all into sales enablement material that drives visibility and accountability.

  7. Hi Jack and John, I think there’s sometimes scope to add an edge beyond that of the raw product or service. I know the examples are old, but think Dominos (speed) and McDonalds (location) – neither had anything to do with the core value of “food”. Yet they grew fast, and remain successful businesses. If the OP was selling consulting services, what physical products could augment the service (eg, software, training materials, subscriber access to non-public material)? If it was physical products, what services could go alongside (eg installation/ commissioning, benchmarking, annual support)?

    In my last role we provided designs for expensive process equipment. We added in training, process control tuning, fabrication inspections, commissioniong services, and annual support. I know it sounds basic but we found that noone else actually did this stuff as a package. We profited handsomely.

    We realised that clients often interpreted their needs into a series of point solutions and then approached potential suppliers for each. Initially, we were just one of these point solutions in the client’s eye, but we did what we could to change that. So – if the OP thinks of their product/ service as just the point solution their client asks for, there could be an opportunity lost.

    One other point. The OP could use this as a chance to inform his executive team of the bigger opportunity of a systems/ package approach. They may so focused on running the business they may not be even aware they are just offering a range of commodities!

    • Jeremy Chiam says:

      This won’t work for products that doesn’t require services or see no value in the service added.

    • Mark, well said and absolutely on point. I would just add (and this is no knock on you) that these ideas have been around for at least as long as Theodore Levitt first wrote about the idea of the augmented product and the potential product way back in 1980. I borrowed from Levitt to create the Total Solution Table in my own book, Bottom-Line Selling, back in 2002.

      It amazes me that there are still so many salespeople who should know better but don’t. (But then, that’s how I make a living, so I’m not complaining.)

  8. Jeremy Chiam says:

    Hi John,
    Thanks for your advice and it is a sound one though difficult like you say. Its really impossible to get blood from a stone unless we squeeze it until it cuts our hand but then its our own blood, isn’t it? When we are selling a product that doesn’t require service or the service is not perceived by customer as valuable, we are adding cost to our sales without gain. Consultative sales generally works on products that add value in solution, when the value & service is not require, consultative sales doesn’t work. For product that is a commodity, the revenue model is volume and we can’t move volume without being at the market price and we can’t sell beyond market price regardless of differentiation. We either go for market share or margin. One trade-off the other. There is a market belief, Good – Fast – Cheap. Good & Fast can’t be cheap. Good & Cheap can’t be fast. Fast & Cheap can’t be good. There will always be trade-off. Hence it is important for the executive or the company has to decide which trade-off to take for their products in the market. We live in a imperfect world and it is quite impossible to find a perfect solution despite how positive trainer or thinker like to believe or tell people. When in Rome, we have to do what the Rome do. Sometimes, trying to differentiate will only make us the odd one out. We either has to be a Technology Leader, Cost Leader or Niche. There’s no product that has all. Only when we know who we are, then we can draw out the right strategy to sell in the market.

    • I think South West Airlines might challenge the Quality, Cheap and Fast theory which is a bit like Grandfathers old axe. It’s true but not gospel and it might be difficult but with an engaged army it is incredible what can be achieved.

  9. Todd Staples says:

    You left out one of the biggest pieces to the formula John. The true definition of value is Segmentation x Differentiation. Only by having both well defined will you have something to scale into a disciplined sales plan.

    • Todd, you are very close to the equation I used to teach what it takes to create a truly effective strategy: valued differentiation X disciplined execution.

      You have to bring something to the market that is unique and compelling – that your target customer very highly values – that is difficult if not impossible for your competition to copy – and that you can execute on flawlessly for every customer.

      If the product can’t do that – that a salesperson has to do something personally meets those criteria.

  10. “if the product is not a differentiator, the salesperson must be” as usual John you are on point. I have trained and managed many sales people before and my standard response is if their client doesn’t think they are worth paying a little more for then ‘they’ simply aren’t worth it or offering anything different themselves. Shift the conversation off the products value and onto the sales persons value. The great Tommy Hopkins once said that people buy on emotion and justify or back it up with logic. I think this is usually correct in my experience and regardless of the size or type of purchase. I will agree however that some tendering processes purposefully are arranged to avoid any emotion or personal connection with a sales person and only the very ‘special’ sales people wriggle around these processes as best as they can rather than cry foul or fall victim to it. I heard another smart man talk about ‘Moments of Truth’ and ‘Owning the voice of the customer’. It is shear arrogance to pre decide what a customer likes, wants, needs or will be willing to pay for. Only they the customer have this inside of them and it isn’t often articulated. Great sales people are brilliant at ‘connecting with’ and getting inside the customers worlds and helping them to voice what really matters. Marketing departments hate this stuff and top sales people love it because it reaps huge rewards when we focus our attention on skillfully opening our customers up and not to ‘throat ram’ our latest greatest product but instead fit solutions to genuine and often latent needs. I’m on my soap box now but we arrogantly think we know what individual customers value. Throw away any preconceived ideas and get to know our customers and discover with them what really matters. It will yield you at least a 10% margin above the going rate and send your referrals skyrocketing. Merry Christmas, I hope you enjoy the Christmas present.

  11. Bernard Otis says:

    First let me say that the message of this article makes perfect sense. Having said that Ithink the first thing any “Revenue Generator” (that is really what every person in any organization is and should be called) needs to understand is that youcannot sell anything to anyone. Your role is to provide good information to your client upon which they can make informed decisions.

    Having said that the way to control the revenue generating process is to do the folowing If the question of price comes up at the beggining of the conversation simply tell the client that your are very competitive but before we dicus price I need to know exactly how our product/service addresses your needs, and then proceed to ask questions about the firms business . Second always ask 3 questions 1. What does your current vendor provide that you really like? 2. What does your vendor not provide that you wish they did provide? 3. Do you have a special relationship with your current vendor? The reason for question # 3 is to be certain their is not a family relationship-that may sound silly, but you would be surprised what answers you get.Finally I personally do not like the term “Value” I much prefer to tell clients that we are very competitve and once I tell you all about our produts and service and how they will benefit your firm you will recognize that fact.

    • Bernard, thanks to you, and to everyone else here, for adding outstanding comments that have truly added a ton of value to my article. It’s great we can have a robust conversation that benefits everybody!