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How To Leverage Value To Win-And Keep-Profitable Customers.
It's no longer enough to offer a value-added product. You must leverage your value all the way through to your customers' customers.
Is your salesforce stuck in the wrong era? It sounds like a strange question. But if they find themselves forced to compete on price to sell value-added products or services-or even if they're trying to sell solutions to problems that customers know they have-the answer is probably yes. The business and the sales profession at large have evolved tremendously during the past 50 years. Problem is, the highest percentage of sales organizations haven't kept pace with the evolution.
Many people who sell for a living are relying on methods that worked just fine in, say, the 80s, and even the 90s. But the world has advanced substantially. Products and services have grown increasingly complex, as have the business issues and problems they address. Customers have many problems to solve, many options available to solve them and are having great difficulty sorting it all out. The more complex problems and solutions become, the more similar they begin to look. We're living and working in a time called the `third era' of professional selling-but too many sales organizations are still operating in an outdated mindset. The following is a brief synopsis of the three Eras:
Era 1 (1950-1975). The early 50s saw the first appearance of literature devoted to professional selling. The role of the sales person was characterized as a "persuader." The economy was experiencing unlimited demand and a somewhat limited range of products and services. Customers were open to ideas and willing to spend. The job of the salesperson was to present a compelling story and convince the customer to buy their product. The training was based on the psychology of stimulus and response and the skills being taught focused around presenting, persuading and closing. This era fell out of favor to mainstream business as the customer "wised up" to the manipulative techniques. Granted, the Era 1 approach is alive and well today in all too many salespeople and businesses.
Era 2 (1975-1995). The economy saw more and more suppliers, globalization was emerging and customers began to have choices, not to mention an increasing level of sophistication. The role of the salesperson evolved to that of a problem-solver / consultant. The consultative, strategic and solutions approach to selling were embraced and the skills of questioning and listening were emphasized. Establishing trust and building relationships were key objectives. The problems were well understood, the solutions fairly straight forward, and the salesperson's success was tied to their ability to understand the customer's view of the problem, align their solution to match the customer's view of the problem and convince the customer that their solution was the best choice. The common form of the "needs analysis" was "what issues are you experiencing," "what do you want to happen" and "what do you need to be successful," in short, "what do you need?" The key distinction of Era 2 is that the customer was assumed to have a clear understanding of the answers to those three questions, and for the most part they did.
Era 3 (1995-???). The distinguishing characteristic of Era 3 is the increasing complexity of business problems and the solutions that address them. Coupled with an economy that is in a state of overcapacity, the customer is overwhelmed with choices and options and is looking for guidance from salespeople that frequently is not there. With the abundance of alternatives, the solutions not only look the same, in many cases they are the same. To help the customer thoroughly understand the problems they face and sort through the available alternatives, the role of the sales person in Era 3 is that of a business advisor and a source of competitive advantage. The skills that are required are more attributed to that of a process analyst and project manager and are certainly not looked for in the selling profession during Era 1 and 2. The objective of the Era 3 salesperson is to create a solution that the customer would have been able to think of or put together on their own. The professional and their team does a deep analysis of the customer's business, looks at the issues beyond the expertise of the customer and collaborates with the customer to tailor a solution. The salesperson brings a capability and process knowledge the customer does not possess.
So how does your salesforce begin to operate in Era 3? The answer begins and ends with the V-word: value. Obviously, your products themselves must have inherent value, but that's not enough. Not nearly enough, in fact. The value that you provide must be leveraged across a full spectrum of your customer's business that includes the business processes your product or service is used in and the performance outcomes those processes are designed to affect as your customer delivers value to their customers-it must enable your customer to have a unique competitive advantage and your salespeople must be able to measure the financial impact of that value.
The following are tips on providing Era 3 value to your customers:
Understand the three levels of value. There are three levels of value that coincide with the three Eras. These value levels apply to multiple industries and channels. The example of a chemical resin Georgia-Pacific provides to its manufacturing customers is used to explain the three levels:
- Level 1 - PRODUCT: Operating in Level 1, Georgia-Pacific would provide their product, a high quality resin, one that is consistent in its composition, is free of contamination, delivered on time, invoiced accurately, etc. In other words, at Level 1, the value is related to the characteristics of the product and the transaction of acquiring the product. Level 1 value is well understood by the customer and difficult to differentiate competitively. In fact, frequently it is considered a "starting point" for value, and the pricing is highly competitive. The customer perceives that the value derived from the product is simply "table stakes" and available from multiple suppliers. The customer is focusing on reductions to the price of the product to reduce their cost of goods sold (COGS). Receiving a price reduction on the product will yield a relatively small impact on the customer's overall COGS. At Level 1 the salesperson is primarily interacting with purchasing, and perhaps operations regarding the pricing and characteristics of the product.
- Level 2 - PROCESS: Value provided at Level 2 relates to your ability to impact the process that your product is used in. When Georgia-Pacific operates in Level 2, they analyze and advise their customer on how to adjust their manufacturing process. They will change the resin to allow the customer to adjust their manufacturing process. For example, they might be able to adjust the resin so that the customer's equipment could operate at a lower temperature, thus reducing energy costs. Since energy can be a significant variable cost, the value of the new resin, allowing lower energy usage, can be greater to the customer than a reduced price for the resin itself. When the salesperson is operating at Level 2, the focus is on the process their product is involved in and the salesperson interacts at the department level. They are working with operations, quality, environmental compliance, safety and a host of other departments that are impacted by the efficiency of the manufacturing process.
- Level 3: PERFORMANCE: Value provided at Level 3 relates to your ability to impact the business performance of your customer's product or service when it reaches the hands of their customer. In turn, they are impacting the high-level business drivers of their customer. By creating a resin that will change the characteristics of the customer's product, or even create a new product, they can enable their customer to open new markets or expand their margins by creating enhanced products. At Level 3, the focus is on the performance of the customer's company. They are working at the enterprise level as a strategic partner. This interaction is directed at giving the customer a competitive advantage. Add that to the productivity increase it gained at Level 2, and Georgia-Pacific has had a significant positive impact on its customer's overall business performance, an impact that is measurably beyond what can be done by offering the customer a lower price on their product.
Assess the value level you're offering your customers. Now that you understand the three levels of value, take a good, hard look at your own company. What are the sources of value you provide your customers? What are the uses of that value within your customer's organization? Are you stuck at Level 1, in the commodities game, with your customers focused on your prices and placing enormous pressure on your margins? Are you operating at Level 2-providing professional services and process expertise that multiplies the value you bring to your customers? Or are you out in the field talking to your customer's customers, uncovering performance requirements and addressing them with innovations to your customer's products and services? When you operate at Level 3, your customer realizes that you provide a value leverage that no one else is. Your relationship is so, well, valuable to him that he sees a very high risk in switching to a competitor. Your competitors are held to a very high and specific standard of performance. You have become an integral part of their business, a source of competitive advantage. You're making their life easier and are contributing to their measurable success.
Don't let your true value be diluted by your sales force. If your R&D and marketing department is doing its job properly, the products and services your company offers are designed to impact the customers at the process and performance levels. But if the whole story isn't reaching your sales organization, or if your salespeople are still working in an Era 1 or Era 2, it's highly possible that your true value is dangerously diluted by the time the customer forms their perception. Your salespeople may be explaining features and benefits to a prospect that doesn't even know the problems he's experiencing. What your salespeople should be doing is using a diagnostic approach: "Are you experiencing the issues and inefficiencies that our research people discovered with other customers like you?" The bottom line? See to it that your sales team understands "the big picture" before they go out into the field. There's no other way to ensure that the true value of your solution-the Level 3 Value-is being properly translated and connected to your customer's world.
Make sure your salespeople are calling on the right contacts. Even if you're certain that you're offering the highest level of value to potential customers, all will be lost if your salespeople take that message to the wrong contacts. Generally, purchasing agents are interested in reducing acquisition costs-understandable, since that's how they're compensated. They are pre-occupied with Level 1. They will not likely be responsive to Level 2 or Level 3 value. Level 2 value is discussed at the departmental level. The salespeople need to work with the individuals in the customer's organization that are responsible for process efficiencies. And finally at Level 3, the discussions are at the enterprise / executive level. The conversations at Level 2 and 3 are with the people in the customer's organization that are most affected by the absence of your value.
As you might imagine, operating in Era 3-truly taking on the mindset of your customer-is hard work. It's much deeper and more complex a process than many salespeople are accustomed to. But it's the only way to gain and keep a solid foothold in a time when your customers have an endless supply of choices, one often indistinguishable from the next. And in the long run, the resources required to acquire and retain profitable business are far less than a Level 1 approach.
In Era 3, your company must serve as a secret weapon for its customer. You must think for your customers, creating revenue-building solutions that they don't have the time or the wherewithal to come up with and/or implement for themselves. And because the salesperson is the face of your company, he or she must be in the thick of the action, tirelessly working on behalf of those customers. This brave new world is a challenge for the professional salesperson, sure, but it's also a treasure trove of opportunity. So take good care of your sales team, support them and teach them well . . . they literally hold the future of your company in their hands.
Jeff Thull is a leading-edge sales and marketing strategist and valued advisor for executive teams of major companies worldwide. As President and CEO of Prime Resource Group, he has designed and implemented business transformation and professional development programs for companies like Shell Global Solutions, 3M, Microsoft, Intel, Citicorp, IBM and Georgia-Pacific, as well as many fast track, start-up companies. Jeff is a compelling and thought-provoking keynote speaker for corporations and professional associations worldwide. He is also the author of the #1 best selling books Mastering the Complex Sale, and newly released, The Prime Solution: Close the Value Gap, Increase Margins, and Win the Complex Sale. For more information contact: Prime Resource Group, http://www.primeresource.com, 1.800.876.0378.
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