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Transcript of Selling Value Not Price Article
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SELLING VALUE,NOT PRICESix Keys to SalesStrategy Execution
by Paul HennesseyExecutive Vice President
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Launching Your Go-to-Market Strategy
Is Not the Same As Implementing
It SuccessfullyEvery day, sales leaders announce go-to-market strategies
designed to improve bottom-line performance. These initiatives,
often launched with great fanfare, include:
Price increases
Margin optimization programs aimed at reducing
discounting and costly giveaways throughout the sales
and service cycle
Launches of new, premium-priced solutions
Introduction of new multi-step sales process models
New and better contracting processes
Initiatives to speed up sales cycle time from first contact
to close of business
Unfortunately, management often discovers that launchinga new
strategy is not the same as implementingit successfully.
Its Not the Strategy
Its the Execution
Whats wrong? The strategies are sound. The management
consultants reports are thorough and compelling. The products
are differentiated. The marketing materials communicate the value
clearly. The PowerPointpresentations are stunning. The salesmeetings are motivational. The sales teams account plans
are complete.
And yet in company after company, the investments in creating
customer value dont translate into expected results.
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Pricing is far and away
the most powerful profit
lever that a company can
influence The pricing
lever is a double-edged
sword. No lever can
increase profits more
quickly than raising
price a percentage point
or two, but at the same
time nothing will drop
profits through the floor
faster than letting price
slip down a percentage
point or two.
Michael V. Marn
Partner, McKinsey & Company
The Price Advantage
Whats Missing?
What does it take to implement a go-to-market strategy that meets
or exceeds the expectations of its creators?
Too often, companies invest large amounts of time and money in
strategy, but not enough in executionat the point of customer
contact. Although companies correctly assume that sales strategy
is critical to closing more business, even the most comprehensive
sales strategies wont succeed unless the skills to executethem are
embedded and operationalized by salespeople every day.
Closing the Execution Gap:How Agreements Transform
Sales Strategy Into Sales Results
Think about it. Strategy is whatto do; execution is howyou do
it. Sales strategy is the game plan, but execution is the game
itself. Too often, corporate leaders are frustrated; they find an
unacceptable execution gap between the articulation of their
go-to-market strategies and the successful execution of those
strategies with customers.
And what is the key to closing the gap between articulated
strategy and successful execution? In todays tough buying
environment, being persuasive is not enough. Knowing who
to call on is not enough. Having a complete account plan is
not enough. Knowing the features and benefits of your solution
is not enough.
The key is whether your people can craft Pivotal Agreements
throughout the sales cycle that move them towards rather than
away from your companys go-to-market goals.
What separates the highest performers from the rest?
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In any company there are a few high performers who execute
better agreements than the others, and who are therefore better
able to implement their sales strategies more successfully. And in
the same company are many managers wishing they could get the
other members of their sales team to perform like those highperformers. Unfortunately, effective agreement-by-agreement
sales execution is the exception, not the rule in most sales
organizations, and replicating high-performer behavior is therefore
a major undertaking.
High Performers:
Think DifferentlyBehave Differently
and Get Better Results
BayGroup International has explored the critical issue of sales
execution for more than two decades. Starting with research at the
Stanford University Graduate School of Business, and refined with
two decades of corporate implementation success at major global
corporations in multiple industries, BayGroup International has
discovered that high performers:
Know instinctively that crafting better agreements (with
both customers and fellow sales team members) is the key
to profitable execution of their account strategies.
Understand (in a way others do not) that a relatively few
Pivotal Agreements drive revenue and margin growth, and
that many of these are made early in the customer
engagement process.
Think differently about executing those Pivotal Agreements
during the sales process, utilizing a simple but effective
set of guiding principles to help them sell value, not price
to their customers, and as a result close more business,
more profitably, in less time.
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YOURCOMPANYHASASTRATEGY.CANITEXECUTEIT?Executives know that success of their go-to-market
strategies is critical to improving shareholder valueand
that failure can quickly cause problems with investors
and analysts.
Consider the facts:
According to Bain & Company, all companies mustgrow to survive, but fewer than one in five corporate
growth strategies are implemented successfully.
Robert Kaplan and David Norton, the authors ofThe Balanced Scorecard,report that 90 percent
of corporate strategies fail.
An Ernst & Young study called Measures thatMatterSMdemonstrated that-more than
35 percent of the valuations and buy decisions
made by institutional portfolio managers are based
on non-financial measures, and that the most
important of these factors was the ability of
management to execute strategy. The ability to
execute strategy rated higher than market share,
innovation, management experience, andeven
the quality of the strategy itself.
The message is clear. Most corporations have well-
formulated strategies. The winners are those that focus
on successful execution.
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Key to Execution Success:
Focus on the Fundamentals
The average sales professional sees their job as one of
persuasion, helping the customer decide whether to do
business with their company. They see the critical agreement
as the final contract negotiation, which usually occurs at the
end of the sales cycle.
High performers take a radically different perspective. They
see their job as not only helping the customer decide whether
to do business with their company, but just as importantly
howthat business will be conducted. They know agreements
made throughout the sales and service cycle are crucial to
implementing profitable account strategies.
These high performers typically plan their sales strategies
by focusing on the Pivotal Agreementsthey must build to be
successful, and use six fundamental principles as they do so:
They position their solution advantageously
Skilled salespeople create a value-oriented
environment for building agreements by positioning
their products and services effectively. When faced
with customer price pressure, for example, high
performers are more likely than others to frame
the discussion in the most favorable light. When
pressure for price concession arises, they then guide
the discussion back to this value-oriented position
rather than giving in to the customers demands.
As an example, imagine two competing salespeople,
Tim and Susan, whose companies are launching
new software products. Both encounter customer
resistance to the premium prices charged for their
new solutions. Susan is more successful than Tim
in maintaining value-based pricing.
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During the sales process, Tim has positioned his product
as superior on a competitive, feature-by-feature, price
versus performance basis. Susan, on the other hand, has
positioned her competing product as a solution to a high-
profile strategicproblem: the successful implementationof a high-profile corporate cost-reduction program.
When the customer applies pressure to lower prices, Susan
is more successful than Tim; she positioned well at the
beginning of the sales process, and is now able to more
easily deflect price pressure by reminding her customer of
the value of her solution in helping him achieve a critical,
strategic goal. Tims positioning focused on price and
performance, so he is now less successful in avoiding early
discount discussions.
They set and communicate high targets.
In sales, those who ask for more typically get moreand
those who set low targets typically underachieve.
Unfortunately, too many salespeople have low aspirations,
either because they are afraid to lose business or because
they dont feel confident overcoming price objections. They
say to themselves, This sale is about price and not valueso I had better share my best and lowest price early in the
sales process.
The results of this behavior are damaging to profitability,
andto the customers perception of value. When sales
professionals lower their targets, they close unprofitable
deals, and in the process prompt the customer to
conclude: The value of that companys product isnt
what they say. After all, look at how quickly they dropped
the price!
High performers realize that, If you dont ask for it, youll
never get it. For example, they know that there are almost
always non-price negotiables
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worth asking for from customers such as referrals,
marketing assistance, longer-term buying commitments,
and information on future purchase plans. By setting high
targets in these areas, they are able to ask for (and get)
more during the sales processand also ensure that ifthey dohave to make concessions during the sales process,
they receive real value in exchange for them.
They manage the two-way flow of information intentionally
Many sales negotiators leave money on the table because
they disclose too much, or gather too little, information
during negotiations. Often they are indecisive about
managing the flow of information, or simply unaware
of the consequences of their actions.
For example, some sales professionals share valuable
information on price flexibility, internal deadlines, and
free extras with their customers at the wrong time. They
might, for instance, say something like: Wed be willing to
customize that at no charge, and theres plenty of capacity
at our factory to do it right away. In hopes of closing the
business, the salesperson reduces their power to close
profitable business by disclosing too much.
Why do even experienced sales professionals make this
mistake? Because they believe that sharing an abundance
of information during the sales process helps them appear
responsive to their customers. Instead of impressing their
customers, however, this kind of data dumping simply
encourages the customer to identify product features they
do not need, and then demand lower prices, faster delivery,
or better payment terms.
Skilled sales professionals are intentional about theirstrategy for both givingand gettingimportant information
during the sales process. By doing this they protect the
companys interests, maintain positive relationships with
their customers, and ensure that the customer perceives
the maximum value in their proposed solution.
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They assess and exert power effectively during the
sales process
Most salespeople feel that their customers have most of
the power in the buy-sell process. This often translates into
low confidence, lack of conviction about the value of their
solutions, and a willingness to concede too quickly on
price, service, or contract terms.
High performers realize that it is human nature to believe
the other party has more power than they do in tense
sales situations. They are more successful because they
start with a different, more effective mind set. They tell
themselves: I probably have more leverage than I think;
I just need to find out what is really going on in this
situation to uncover my truepower position. With this
empowering belief, and through good planning, they build
their own leverage: the power to execute their account
strategies successfully, profitably, and quickly.
They uncover and satisfy underlying customer needs
At some point in most sales cycles, customers exert
pressure to reduce price, speed delivery, adjust a contract
term, or agree to unreasonable service levels. Skilled sales
professionals expect this, and also know that there are
often hidden needs driving the customer: to look good to
their boss, to protect their job, or to hit a key deadline.
Customers may saythey want a deeper discount, but really
feel that your products real value lies in its ability to meet
these underlying needs through its quality, reliability,
service, or support.
In some cases customers do not know what they need, and
fall back on price reduction as the one item they know they
can demand with confidence from the sales representative.
In these situations skilled sales professionals can actually
increase the perceived value of their companys product
by asking more and better questions to help the customer
discover needs they originally didnt know they had.
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As one savvy sales
manager said: Any
salesperson can close the
business by giving things
away. The real selling
starts when the sales rep
stops giving in and starts
shaping the customers
perception of value.
In short, high performers dont respond to customer
demands with concessions, but rather with an exploration
to deepen and broaden the underlying needs driving the
customers decisions. By understanding the customer
motivations better than the competition, top salesprofessionals can identify creative, low-cost trades of
value that build long-term customer loyalty, and protect
company profits.
They exchange value strategically throughout the
sales process
Its a sad fact: Many salespeople give away too much to
their customers, too early in the sales process. As a result,
margins erode, discounts increase, and costs of service
escalate. This sometimes happens because they lack
confidence and skills. They are uncomfortable with the
natural tension of the sales process; they feel that by
giving in to the customer they will close deals more
quickly. The result: costly, unnecessary giveaways.
Why does this happen? Most salespeople believe that
the customer is always right. They feel that by quickly
giving the customer what they want (usually a better
price) they can make that customer happy. In fact, the
opposite is usually true. At best, this behavior simply
encourages the customer to keep asking for more.
More typically, conceding too quickly creates customer
frustration, distrust, or anger: I cant believe they
dropped the price so quickly; their product must not
be worth what they say it is if theyre willing to give in
on price that fast.
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As one savvy sales manager said: Any salesperson can
close the business by giving things away. The real selling
starts when the sales rep stops giving in and starts shaping
the customers perception of value.
Top sales professionals know this. They instinctively know
that a key to creating value is exchanging value throughout
the sales process. If concessions are needed, they make
them slowly and reluctantly, and get something of value in
return for each concession they make. They believe in the
value of their product, and tell themselves, If Im going to
give in on price, Im going to either cut the scope of our
product offering, or get something of greater or equal value
back from the customer.
By focusing on these six fundamental principles, high performing
sales professionals are better than most at transforming their
companies go-to-market strategies into profitable sales results.
Managements Challenge:
Sales Execution Skills
Are CounterintuitiveThese six principles of sales execution are powerfuland also
logical, easy to remember, and infused with common sense.
So, why isnt common sensecommon practicein most sales
situations?
Put simply, many sales professionals, and their managers, hold
beliefs about selling that work against profitable execution of their
sales strategies. Many of these mindsets are reinforced in the sales
training they receive.
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These beliefs are mirrored in common sales wisdom such as:
The customer is always right.
My job is to satisfy the customerwhatever it takes.
We partner with our customers.
If the customer is feeling uncomfortable, my job is to
take the tension away.
Close the dealwe refuse to lose.
As motivating as these clichs might sound, they tend to
encourage the opposite of profitable sales behavior. In fact,
the right way to execute high-margin account strategy is often
counterintuitive. The best approach is often the oppositeof a
salespersons natural, instinctive reactions.
Developing the Execution Skills
of Your Sales Team
What is the best approach to developing the execution skills
of your sales team?
BayGroup International has distilled the key lessons from two
decades of corporate experience into an approach that delivers
measurable bottom-line results. We partner with our clients to
execute comprehensive, management-driven initiatives that:
help your people see the critical connections between their
execution skills and the implementation of your corporate
go-to-market strategy;
embed account planning and sales management disciplines
that result in optimal sales strategy execution;
provide skills and tools to help your sales team plan for
more effective sales strategy execution;
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help them understand that their intuitive sales behavior
can lead to costly mistakes that erode profits and sales
performance;
enable them to apply new skills, concepts, and tools
to actual sales situations, so time spent in training has
immediate payback back on the job;
reinforce effective behavior through live application
meetings, ongoing management coaching, online tools,
and other targeted communications; and
motivate continued focus on successful strategy execution
with periodic reporting of results to management.
Using an approach like this, you can dramatically improve the
productivity of your sales team; help them build stronger
relationships with customers; and ensure revenue and margin
growth for your company.
Paul Hennessey is Executive Vice President of BayGroup: a global performance
improvement firm that helps corporate leaders execute their go-to-market
strategies quickly, profitably, and with high impact. He oversees the firms
marketing, research, and development efforts, including the research project
described in this article.
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About BayGroup InternationalBayGroup International is a global performance improvement firm that
helps corporate leaders reach critical profitability, cost containment,
and team effectiveness goals quickly, with high impact. The firm helps
its clients improve individual performance, organizational profitability,
and shareholder value by:
Ensuring that key business initiatives demonstrate significant ROI
Helping implement corporate strategies successfully; and
Building planning and execution skills across the organization
for creating profitable agreements, both internally and externally.
Leveraging online technology to improve individual and team
performance.
BayGroup International implements strategic projects that includeresearch, highly relevant performance improvement activities, and the
tracking of results. Our work in client organizations is supported and
reinforced through executive leadership communication campaigns,
management coaching processes, and online performance support tools.
Our proven approach to performance change has helped clients achieve
desired business results, and improve the ability of key employees to
build better agreements with:
Customers, especially when competitive sales pressure
threatens profits.
Suppliers and other outside parties, whose increasing costscan erode the bottom line.
Internal team members and between individuals, where failure
to handle tough, contentious issues can threaten quality,
customer service, restructuring, and other strategic initiatives.
Strategic partners, where poor agreements can threaten the
success of mergers and acquisitions, as well as other mission-
critical alliances (in areas such as distribution, research and
development, and marketing)
By partnering with BayGroup International, clients achieve significant
improvements in human performance and millions of dollars in
bottom-line results.
Since its founding in 1980, BayGroup International has built a select
client list of major global corporations, focusing on the technology,
telecommunications, pharmaceuticals, transportation, consumer products
and financial services industries. Our consultants have worked in North
and South America, Asia, Europe, and the Middle East. We serve our
clients from offices in major cities around the world.
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To find out more about BayGroup Internationals
approach to improving bottom-line results through more
effective sales strategy execution, please contact us:
2200 Larkspur Landing Circle
Larkspur, California 94939 USA
www.baygroup.com
BayGroup Internationa l. All rights reserved. SVNP White Paper_05032012