True Value Creation and your Customers

By Ernie A. Cevallos

This paper is based on personal experience with the larger or major sale, and insights from the research conducted by Huthwaite. Major sales are more complex, take longer to develop, and typically involve many decision makers and influencers. Knowing how to navigate these waters and creating value is key to the success of any sales force. Indeed, the customer decides if the value is real or not. Customers have different notions of value, which are based on their particular circumstances, culture, procurement policies, leadership style of decision makers, business objectives, and ROI expectations. Different customers even in the same industry have varying degrees of value notions.


Communicating VS Creating Value

Sales forces have justified their existence by communicating the value of their products and services. If a sales rep communicated product/service information and functionality to customers, the conventional thinking deemed those actions as value creation in the selling process, because the customer was educated and learned how they could benefit by using a particular solution or service. The problem with this feature approach of communicating value is caused by the decline in differentiation between products and services. With prevalent commoditization in many industries (let me pick in particular on the building automation industry), the communicated benefits matter much less to customers. Value migrates from the solution to the price and a competitive procurement process.

So, sales forces must go beyond communicating the value of features a company or solution provides, and finding ways to create new value by thinking outside the box. To create value companies need to find ways to increase the ability to deliver “well differentiated benefits”. The problem is that a great deal of value propositions presented are canned, and unique benefits that translate into great value are uncommon. To this end, it is not enough that sales leadership commit themselves to a value creation agenda. They must know what it is that they are committed to - that is, what they must do. These obligations cannot be delegated, and action is required. Some ideas on how to work smart and establish a true value creation agenda include:

• Target and engage customers early in the sales cycle to be able to influence the outcome, and not be reactive to opportunities at the 11th hour
• Train sales force on problem solving skills and proper selling approach to diagnose problems and needs well
• Institute account management disciplines for high potential and high penetration customers
• Find ways to reduce cost though Six Sigma initiatives that include the entire value chain, and not just the supply chain
• Implement “Lean Enterprise” initiatives to further reduce costs and translate those saving into competitive advantage, or new sources of gross margin
• Web enable progress, and value reports to communicate the implementation of solutions/services
• Invest time and resources on face-time spent with customers to build better bonds
• Apply Gaps Model of Quality to services marketing initiatives to further differentiate services
  
• Train leadership on common and special cause variation to gain knowledge on value creation and the removal of high performance barriers

Matching Strategy to Customers

Having a proper model for customer segmentation vis-à-vis value creation is essential, so that resource allocation is not an impediment to selling efforts. Huthwaite makes a compelling case for how value migrates depending on the customer. So, who are transactional, consultative, and enterprise customers? That is the known unknown that even well trained and talented sales forces and managers have to figure out. How many times have you seen a heavy investment in selling effort turn out to be a losing proposition? This can be the result of misplaced attention on trying to persuade a customer with very clear ideas on a transaction, where the value is low cost and no more. Time must be taken to understand how the customer defines value, and how to generate new insights by diagnosing problems and needs. The answer at times is to walk away by recognizing that you can't be everthing to all customers, and using limited time and company resources to work on higher probability projects.

Interestingly, a failure mode of sales organizations is not recognizing that different approaches to selling are needed for different customers. The research by Huthwaite points out that when there is a value perception misfit no amount of selling skill, clever strategy, or well-crafted value proposition can bridge the gap between what a customer wants and what a supplier has to offer. In today’s environment customers demand more value than ever, so it’s imperative that a sales force must align its values with those of the customer. Sales forces must learn to further segment customers according to the way they perceive and define value.

Traditionally sales forces have survived well by dividing customers by geography, size, vertical market, or specific products and services. However, as the world of sales continues to evolve the advantages of classifying sales efforts under the headings of transactional, consultative, and enterprise is not an option anymore if you want to win more sales. A sales force that creates new value by addressing accurately how a customer measures value, or brings a new consultative element of knowledge that can help a customer improve their business metrics will be in a better position to win against a less sophisticated competitor. Unless the approach to creating value corresponds with the needs and value perception of customers, selling efforts will continue to languish in sales organizations lacking leadership to get with the times.