The changing face of value in B2B sales
It's been a while since my last blog, but I'm pleased to be returning to the action with an article that I wrote for the current issue of the International Journal of Sales Transformation, which I think you'll appreciate.
It leads to the conclusion - which I suspect will come as no surprise to regular readers - that we need to stop talking about the "value" of our so-called "solutions" and start focusing on the value of our customer's outcomes...
It seems as if the phrase “sell on value, not on price” must have been around since shortly after the dawn of B2B selling, and it would be hard to argue with the sentiment. But what do we actually mean by value - and perhaps more important, how do our customers perceive value?
The value of your product
When I started my sales career, companies were keen to boast about their “value added” characteristics of their products. For the most part, these seemed to refer to features, functions or capabilities that they claimed to offer that their competitors could not.
This inevitably resulted in pointless features-driven “arms races” and spawned endless Harvey ball-based comparison lists that sought to imply that the more features you could offer, the better - regardless of the customer’s actual needs. Of course, customers soon recognised that irrelevant features often made the offering more complicated and expensive without increasing its usefulness.
The smarter customers quickly realised that when a vendor used the “value-added” phrase it actually meant “cost-added”, in that they were being asked to pay for features they didn’t need - and started using this as a negotiating tactic. Who can blame them?
The value of your “solution”
As this era drew to a close, vendors increasingly started to talk about their “solutions” rather than their products, in part in order to try and better articulate their value. It wasn’t long before almost everything was being promoted as a so-called and self-described “solution”.
You’ll probably already have recognised the flaw in this line of thinking - in that the only entity that can legitimately describe anything as a “solution” is the person or organisation suffering from the problem, and certainly not a vendor trying to sell the same old product at a higher margin.
There are two obvious conclusions to be drawn here: firstly, vendors have no right to call anything a solution unless that claim is based on a clear and deep understanding of the issue that their customer is trying to fix, avoid or achieve.
Secondly, the real-world value of any solution is directly related to the value of the problem being solved - whether that is an avoidable cost that is being eliminated, a risk or threat that is being avoided or mitigated, or a potential new revenue stream that is being enabled.
This line of thinking has driven the evolution of “solution selling” or “value-based selling” concepts, and it can still be applied to useful effect if vendors are selling their offerings on an outright purchase basis.
But this approach starts to fall down with the irreversible movement towards consuming things as a service rather than as a one-off transaction, not least because at the point at which an order is placed, any value calculation is merely a projected future benefit, rather than anything that has yet been proven.
The value of your customer’s outcomes
We now live in a world in which almost everything is being offered as a service, and where customers increasingly prefer to pay for things as a service rather than buying them outright. If you have any doubts about this, just look at the offerings that are now being promoted and consumed as a service - from aero engines to industrial equipment to almost all new software investments.
The TSIA have reported that services have grown 8 times faster than products over the past decade - and there are no signs that this trend is abating. In fact, if anything, it is gathering pace, and this has significant implications for vendors.
Even for technology-based offerings, B2B buying decisions are increasingly being led by line-of-business operational units rather than the traditional “technical experts” in IT and elsewhere. Year-by-year, desired features and functions are becoming less important in the overall decision and approval processes than the confidence that the desired business outcomes will be achieved.
When prioritising which investments to make in an uncertain world, your customers are looking at the combination of strategic relevance, tactical urgency, and rapid time-to-value. Rather than lengthy, risky, multi-year projects with matching payback periods, customers are looking for quick wins and value that rises proportionally over time with usage.
In other words, in our current and future business climate, it’s not the projected value of your products or even your so-called solutions that matters - it’s the value your customers actually achieve through their real-world consumption of your offerings.
There’s another important implication of this trend: in the “good old days” of transactional sales with large upfront invoices, vendors could usually count on being profitable from the point the initial invoice was raised and paid for. Not anymore - in most typical scenarios, customer acquisition costs mean that vendor offerings are now only become profitable once the customer chooses to expand and renew their usage.
Offering your “solution as a service” can, of course, help to open the door. But your long-term profitability as a vendor is now dependent on the visible and proven value your customers actually derive in practice from consuming your products or services, and their willingness to continue doing so.
And that, in turn, places a far greater emphasis than in the previous waves of B2B selling on understanding, influencing and actually achieving the business outcomes your customer is looking for. Classic “need discovery” tactics that tend to focus on required features and functions simply won’t suffice. Only an emphasis on business outcomes will deliver the value that both you and your customers are looking for.
This transition is not something that can be achieved by the salesforce acting in isolation, although you can certainly take the lead. At the end of the day, becoming customer-outcome-centric has to be a company-wide commitment:
- Executive Leadership needs to ensure that the entire organisation is aligned around understanding and achieving the customer’s expected business outcomes and exceeding their expectations
- The development organisation needs to create products and services that make it easy for the customer to achieve their expected business outcomes with rapid time to initial value
- The marketing organisation needs to deeply understand the business issues your customers are trying to fix, avoid or achieve and position your organisation as trusted experts and advisers
- The customer success function needs to ensure that the expected business outcomes are in fact achieved and that the value is recognised
- The support organisation needs to make it easy for the customer to achieve their outcomes and proactively eliminate any obstacles that be standing in their way
- All other functions need to ensure that your organisation is easy to do business with...
And, of course, your sales organisation needs to inspire your colleagues by demonstrating that you are capable of understanding and influencing the specific business outcomes each customer is seeking to achieve and by creating the confidence that these outcomes will be achieved.
That - in my opinion - is where the future of value in B2B sales lies, and it suggests that you have an important and potentially vital role in leading the transition. Are you ready for the challenge?
By the way, if you're not already a subscriber to the International Journal of Sales Transformation, you can find out more here.
About the Author
Bob Apollo is a Fellow of the Association of Professional Sales, a founding contributor to the International Journal of Sales Transformation, a recognised Sales Futurist, an active member of the Sales Experts Channel, and the driving force behind Inflexion-Point Strategy Partners, the leading proponents of outcome-centric selling.
Following a successful corporate career spanning start-ups, scale-ups and market leaders, Bob now works as a strategic advisor, mentor, trainer and coach to ambitious B2B sales organisations - teaching them how to differentiate themselves through their provably superior approach to achieving their customer's desired outcomes.