It’s Time to Learn the Value of Everything
The concept of value is central to your sales strategy, and both buyers and sellers need to understand what that really is, argues Marie Crespo.
“So sorry I am late, Dorian. I went to look after a piece of old brocade in Wardour Street and had to bargain for hours for it. Nowadays people know the price of everything and the value of nothing.”
Although written over 120 years ago, this quote from Lord Henry in Oscar Wilde’s The Picture of Dorian Gray is remarkably prescient: it neatly captures the dynamic tension between buyers and sellers, and price and value. It is especially apt in summing up the problems faced by sales organisations in today’s healthcare and pharma market – a market that has only recently been weaned off sales force-led transactional sales and is now learning to make ‘grown-up’, value-based decisions.
However, one problem is that, in too many instances, neither salespeople nor buyers truly understand the concept of value. While progressive organisations are starting to challenge conventional approaches on both the buying and the selling side – they understand that it is not how much a company pays, but how much long-term value they derive from an engagement that is important – too many are stuck in a time warp.
The dinosaurs remain focused on classical negotiation technique which emphasises trade-offs and concessions as a tactic to squeeze the lowest possible price from a supplier (if you’re the buyer) or to defend margin (if you’re selling). This zero-sum game ensures that a win for the supplier automatically means a loss for the buyer. That’s business, you might say, but it would actually be better for both parties to pool their talents: rather than fighting over a bigger slice of the pie, they should work together to bake a bigger one.
Sounds idealistic? Well, it actually makes sound business sense: various studies have found that organisations which make buying decisions around value (as opposed to a simple cost-driven approach) tend to have a higher net operating margin – around 35 per cent higher, in fact.
Of course, this relatively new approach demands that procurement professionals at least embrace the long-established concept of total cost of ownership (TCO) and move on to consider additional factors which determine the best value for goods and services. Equally, it requires a higher calibre of sales professional as part of the mix – one who can identify and apply sophisticated value propositions across a range of often quite different organisations and circumstances.
So, how do we define value and address it from a sales perspective? Determining value is all about picking the best option that fits the need, a simple example being the choice we might make between two catering establishments: both will feed us, but we might opt for a local sandwich bar to supply a working lunch but choose a Michelin-starred establishment for that special anniversary dinner. Clearly, depending on circumstances, the decision criteria go well beyond price into issues of location, convenience, speed, comfort, ambience, the quality of the food and drink, and deriving long-term value from one’s relationship!
Thus, value takes into account criteria defined by the buyer to ensure ‘optimum benefit’ minus the buyer’s total costs. Importantly, these benefits should include business criteria such as how a supplier can help increase a customer’s revenues, reduce risk, working capital or fixed capital investment, and other factors that enhance profitability. Benefit might also encompass issues like improved market opportunities, social responsibility, responsiveness and flexibility, in addition to the all-important TCO element.
"Strategic Selling delivers the potential for significant revenue gains but let’s not forget it is one of the most complex proactive sales approaches."
This value-based approach to procurement correspondingly requires a specific style of selling from suppliers, founded on extensive business and market knowledge, and with the ability to understand and communicate financial as well as product-centric concepts and solutions. The two senior sales roles most closely linked to this approach are Solution Selling and, at the pinnacle, Strategic Selling. Both require the ability to create and apply robust value propositions tailored to the requirements of each individual customer.
Solution Selling is the most complex form of reactive or customer needs-based selling. Operating at C-suite level, it encompasses the ability to craft a complete, high-level and complex solution to meet a customer business need where the way forward for the business has already been determined by the customer.
Also operating at C suite level, Strategic Selling moves beyond Solution Selling: it is an even more complex and demanding role based around the ability to proactively identify and position, for the customer, a way forward in the face of a current or imminent business problem, where the customer has yet to identify how to resolve that problem. Indeed, customers may not even realise they have such a problem at the time a true Strategic Salesperson first approaches them. More worryingly, your own organisation may not become aware of a Strategic Salesperson working for the competition, until it’s almost too late and a large slice of the pie has been stolen!
Strategic Selling delivers the potential for significant revenue gains but let’s not forget it is one of the most complex proactive sales approaches: it requires skills more akin to those of a business analyst than classic salesmanship. These rarefied salespeople require sympathetic management because it is their job to ‘think outside the box’; and, because they are so familiar with operating at main board level, they may frequently understand more about high-level business concepts than the typical sales manager – which can create friction.
For a whole host of reasons – because good individuals are hard to find, they cost a lot to employ, and they have the potential to be disruptive in a traditional sales organisation – it is important for employers to understand the role thoroughly and select the right individuals, preferably with the help of an assessment tool specifically designed for the job. It also pays to assess the individual whose role it will be to become the Strategic Salesperson’s line manager, both in terms of management ability but also in relation to specific Strategic Selling Skills: excellent general management ability is what’s required, not just the capacity to be a good sales manager.
How can you tell whether they’re on track?
Lead times in strategic sales are inevitably lengthy. So, once a Strategic Salesperson is on board it is sensible to be aware of early indications of success or failure. We recommend looking out for signs that such individuals are researching and creating the relevant value propositions, along with the people to take them to, long before there is even any consideration given to their engaging the customer.
At the same time, it is vital for the organisation to support such individuals with a sympathetic environment designed to help them succeed. It is essential that they are handled in the right way: organisations have even been known to set up special operating divisions to accommodate such elite sales individuals while minimising the scope for disrupting the regular sales force.
If successful, the revenue gains from a strategic sales approach will become apparent. Inevitably, thoughts then turn to maximising the return from each new strategic account. This is where Account Managers and Key Account Managers come into play. I will be considering their role in next month’s column.
Sales Force Excellence and Value Propositions are a core focus of our flagship event this year, eyeforpharma Barcalona 2013. Click the link for more information.
To contact Marie Crespo for further information on this topic email firstname.lastname@example.org
Since you're here...
... and value our content, you should sign-up to our newsletter. Sign up here