Selling Value Not Price Article

8/12/2019 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

Selling Value Not Price Article

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