How to Understand, Create and Deliver outstanding customer value – and get paid for it!
By Mike Wilkinson of Axia Value Solutions
If you’re anything like me, you will be familiar with the discount default. Whenever there’s any downward pressure on pricing the first thing that is done is to discount. Down goes your price taking your margins and profit along with it.
If you are a Sales Director, a Sales VP or a professional seller I’m sure you recognize this all too well. I work all over the world in a wide range of businesses and I can tell you that the discount default is alive and well!
The problem is that once you get into the discount mindset it’s difficult to get out. Your customers grow to expect a discount and your products and services become increasingly at risk of being commoditized. The type of customers you start to attract are exactly the ones you don’t generally want – low margin, transactional, price driven customers who seemingly don’t appreciate the real value you can deliver.
For most of us this is not a route we would choose. But stopping discounting is not easy. The problem though, doesn’t start with discounting. It starts much earlier in the sales process. Not all business is good business, so in looking at potential opportunities, two questions are essential:
- Do we want it?
- Can we realistically win it?
If you can’t answer yes to both of those questions, why are you pursuing the opportunity at all?
Once we’re happy we are working on good quality opportunities the next stage is Value Discovery. All too frequently this is either done inadequately or not done at all. My experience is that too many sellers focus on product first. They love to talk about what they can do before really understanding what the customer needs doing! Dr Tony Alessandra sums it up beautifully:
“Prescription before diagnosis is malpractice!”
Without a detailed understanding of the customer and the things that are important to them it is difficult to focus on value and value delivery.
Understanding the customer, their strategy, customers, products, objectives, challenges, and people is an essential foundation to the sale. The more you know about your customer the more opportunities will appear and the better positioned you will be to take advantage of them – even when, initially, all may seem lost.
One of my clients visited a potential new customer. On meeting the procurement manager his opening comment was “There’s no way you’re going to beat the price I have got right now”. Great start! Undeterred he asked what price the potential client was paying. On hearing the answer, he had to agree, there was no way he would even begin to try and match the price he had negotiated. However, the customer did agree to have someone show the sales person around the plant. Three months later that same customer signed up to my client at a price almost three times what he had been paying. Why? Because the seller had been able to demonstrate significant cost savings that his solution could deliver over and above what he was getting from his current supplier. He had been able to understand the customers business and business challenges and demonstrate real value.
This is a problem for buyer and seller. The buyer thought he had got a fantastic deal – a price that he didn’t think anyone could beat. But low prices sometimes come at a high cost, and in this instance the cost was particularly high.
For the seller, without understanding both the customer and the power of value, overcoming low prices can be hard and there is the constant downward pressure on your prices.
Discounting to win can have a major impact on your business. As profits and margins come under pressure, money for on-going investment becomes scarcer, you develop a reputation as a cheap supplier. Price buyers are not loyal buyers, the minute you aren’t the cheapest the risk is you lose the business.
Once this sort of pressure builds up in the business it is the route to sleepless nights! Client relationships tend to become confrontational because every conversation is around price. You constantly have to battle to win new business to replace the business that is lost on price and the whole thing becomes an interminable treadmill. Downloading the value selling checklist is a good place to start addressing these sorts of issues.
The problem is that it is all too easy to simply discount to win. This springs from an understandable desire to win business (sometimes at any cost). But not all business is good business. Failing to understand your potential value and to be proud of what you do and the prices you charge is a short cut to low margins and low profits. You don’t want business at any cost. As a client once said to me, “we don’t want more business, we want better business”.
The purpose of this hasn’t been to scare you to death! But it has been to raise the issue of value and how important it is to understand just what it is and how understanding it impacts on your business. Instead of operating on a discount default, it’s time to change to a value default. Downloading the value selling checklist is a great place to start.
Imagine a time when the relationships you have with your clients – the clients you choose to deal with – are cooperative and constructive. When price is not the issue, coming up with effective solutions to business problems and adding value to the customer is. When you can sleep more soundly at night because you know you have a sustainable business built on sustainable clients.
The Value Selling Expert
M: +44 (0)7802 702051