Think About It… the e-book version

by Todd Youngblood

It’s time for the phrase “Value Add” to be retired. It is a fundamentally product-centric concept. Management’s obsession with it (…along with that of manufacturers, consultants, industry publications and everyone else) forces sales reps into a product-centric mindset.

Let me first acknowledge that the concept of “Value Add” has had a long and extraordinarily productive life. It’s been the driving force behind the success of many a sales-oriented company. It’s the context of our best sales pitches and our reps are already trained to speak eloquently about it. I have not come to this forced-retirement conclusion easily.

A question from a rookie rep got me to thinking. He asked, “In my first 90 days on the job, should I spend more time learning about our products and the value add we put into them or about the customers in my territory?” The answer came instantaneously. I replied the same way you or any other experienced sales rep or manager would. Of course, learning about the customers is more important. Way more important. (These new guys ask the dumbest questions…)

The story the rookie told next is what gave me the jolt.

• “That’s interesting. My boss said the same thing. Then he gave me a one-page listing of the top 25 accounts in my territory showing 12 months of sales and profit along with each company’s address and phone number. He also gave me a small mountain of product brochures, spec sheets, price lists and literature from our suppliers. He really, really emphasized the importance of our value add. He said that our value add is the primary reason our customers buy from us.
• Then he surfed me through our web site. It’s really a good site. It has all the details about every single one of our products, links to our suppliers’ web sites and a whole section on our value add. That’s the best part. It explains in amazing detail all the things we do for the customer to add more value to our products. Frankly, I’m surprised we can afford to do all that work!
• Next, we went to the monthly sales meeting. We listened to 3 of our suppliers who told us all about their products. After each presentation the whole group discussed how our value add could make those products even more attractive.
• After the meeting, my boss explained how my commission works. I get a % of the gross profit from what I sell. You see, our suppliers set the list price and publish that to the whole industry. We buy each component at what they say is a deep discount from list, and set our customers’ price at a lesser discount. Pretty simple. All I need to know is list price for the product and the two discounts. Seems weird that they don’t deduct something for the cost of all that value add work. Hey, but I didn’t say anything. I guess the boss is right about the value add we put into the products being the only reason our customers buy from us.

Anyway, here’s my real question. My dad always told me watch what people do and not just listen to what they say. My boss and everybody else around here talks a lot about how important knowing the customer is, but they don’t act that way. ”They gave me only one page of customer information.’ ‘I have 50 pounds of product information and another 30 pounds about how our value add gets tacked onto those products. And there’s more on the way! Our web site is loaded with product info and how our value add capability makes those products more attractive. The owners planned our entire sales meeting around products and the value add we put into those products. My commission – the thing I ultimately care most about – is based purely on product.

They “say” customer-centric, but they “do” product-centric. All this value add emphasis proves my point. It’s all about adding value to the product, and making the product more attractive. Nothing else. Are you really sure I should spend all that much time learning about my customers?”

Hmmmm… Looks like the rookie has a point. All the emphasis on value add does force a product-centric view of the world. If you were to turn a territory over to a new rep, how much information and documentation about each customer’s goals, objectives, strategies, projects, problems, financial health, decision processes, decision criteria, decision makers/influencers, opportunities and past successes in improving their business results could you pass along? How many reps in the territory right now could show you that kind of documentation?

by Todd Youngblood

“Your stuff looks great, but I need a lower price.” Every sales rep in every sales force hears this statement or some variation of it virtually every day. Buyers are trained and paid to drive prices downward, and the fact is most are quite good at it. So what’s a sales manager to do? Get used to it, because it’s a fact of life? Train the sales force (again) to be tougher negotiators? Hold firm and “fire” a few customers?

We all have the feeling sometimes that our own products and services might not be as special as we’d like them to be. Sometimes competitors actually DO have a legitimate leg up. That’s why the ability to articulate differentiation is so essential.

Here’s a way to get a feel for how good a “differentiation articulator” you really are… Think about classifying the value proposition for each deal you offer on a 1 to 6 scale. Keep track of how many fall into each level. Challenge yourself to increase your average every month.

Level 1 is differentiation by Low Price. This positions the product or service as a commodity. For all but the very largest companies, this is usually not a good place to be.

Level 2 is differentiation by Advanced Features. This is the traditional feature/function/benefit sales method. Being first to market with new features can provide a substantial competitive advantage. Unfortunately, it never takes the competition very long to match or exceed the performance benefits.

Level 3 is differentiation by Value Add. A focus on value add has been around for a long while and has gotten really intense over the last five years or so. Just-In-Time? delivery, extra services, free warranties, etc. are all now expected – for no extra charge of course. A value add strategy can work, but all too often it turns into a technique for shifting cost from buyer to supplier.

Level 4 is differentiation by providing lower Total Cost of Ownership (TCO). For many sales reps, this approach to providing value represents a radical change. At its core, TCO drives the product or service being provided into the background, and considers it in a much larger context. For example, you can buy a PC for less than $1,000. Gartner, a respected research firm, has demonstrated that the actual total of cost of ownership of a single PC exceeds $8,000 annually!!! Which vendor wins? The one that knocks the PC’s price down to $950? Or the one who can reduce the client’s TCO by $2,000 per year?
Level 5 is differentiation by Breadth of Impact. Level 4 TCO sets the stage for applying your expertise across a broader range of customer business processes. The ability to understand the impact of your own products and services on customer financial statements indicates that you could do the same thing for other products and services. Why not package and sell this business consulting skill as a service?

Level 6 is differentiation by Depth of Impact. After a level 5 competency has been established, the next step is assuming total responsibility for executing a portion of the customer’s operations. In other words, outsourcing.

If achieving levels 4 through 6 sounds difficult, that’s because it’s true. Anybody can offer a low price and describe features, functions and benefits. Value add is a bit different, but not at all uncommon. Not too many can clearly articulate TCO. A handful are aggressively selling TCO across the customer’s entire enterprise. And only a very few have the depth of knowledge and capability to outsource.

Would getting to the next level help you sell more? What exactly are you proposing? Is it really all that different?

by Todd Youngblood

Sometimes positioning yourself in the customer’s mind – how you sell – is as key to winning a deal as what you’re selling…

When a prospect perceives that a sales rep can help solve a problem, that rep is at least half-way to closing a deal. Given that, it is critical to have a good handle on just what kind of help the customer really needs. Is it as simple as finding feature, function and pricing information? Or does it entail thoroughly understanding all the nuances of a complex set of inter-
related business processes? Or is it something in between?

Try using the “2 X 2″ matrix above to get yourself positioned appropriately in the prospect’s mind. First, classify the type of product or service that will meet the need using the vertical scale. Your standard offerings are toward the bottom; customized, one-of-a-kind products & services are at the top.

Next, get a feel for the decision criteria, and place yourself on the horizontal scale. Is it price, price and price? Or is it price plus your ability to apply your deliverables to the customer’s business? Or are you way out on the right – where the customer expects a lot of creativity and leveraging of all aspects of your company’s capabilities?

If all the customer really needs is basic information, become a “web surfer” and deliver it quickly and efficiently. Don’t waste time with relationship-building efforts. That’s not what this customer wants. (…at least not right now.)

The customer in the upper left needs expert-level product/service knowledge. He or she will want answers, not questions. So teach! Extensive probing for needs will most likely be perceived as an annoying waste of time.

A buyer in the bottom right needs a rep with in-depth understanding of the customer’s industry and business. Knowing how to bend, shape and stretch your standard deliverables is most important. Demonstrate those consultative selling skills.

The upper right is the most demanding quadrant. (It’s also the most profitable and carries the most risk…) Customers here not only don’t have the answers they need, they don’t want to spend too much (if any) time figuring out the questions. They want to outsource entire business processes. Reps here really need to be more like entrepreneurial general business managers. Focus on smoothly integrating your products, services and capabilities with those of your customer and other essential partners.

With these basics of the tool in mind, think through your top 5 current opportunities. Where does each one fit in the matrix today? Where should each one fit? How will you change your positioning? Do you have the knowledge and skills to fit into the appropriate quadrant for each opportunity? What else can you do to position yourself and your company as the best available solution to the customer’s problem?

by Todd Youngblood

Consider differentiation on three distinct levels:  The “Basic” level consists of Features, Functions, Availability and Price. Your reps MUST be intimately familiar and conversant with these aspects of your products and services. They are the minimum requirements to be a contender. They will not make you the winner, but without them, you get eliminated.

The “Application” level has been the traditional difference-maker. It consists of the ability to clearly and concisely explain how a specific customer can increase revenue and/or decrease costs by using your product or service. Today, even the average competitor has quite a bit of depth with regard to applications. It’s no longer enough.

Your reps need to get good at the “Complexity” level. It means being comfortable in dealing with lots and lots of complexity. It means clarity and speed in articulating how your products and services enhance not only your customer’s operations, but also those of your customer’s customers, vendors and partners. It does not mean “simplify.”

Set yourself apart by embracing complexity. Most of your competitors’ reps won’t be willing to expend the intellectual effort.

by Todd Youngblood

When it comes to physical prowess and raw punching power, Iron Mike is the real deal and ranks among the all time boxing greats. But, what’s he selling here?

With regard to certain competencies, your company is also the real deal. But it’s not the best at everything it does.

Ever try to stretch, spin or fit your product or service into a niche where it doesn’t really belong? Have you REALLY internalized your core competencies? Are you always careful about how you articulate the value you can actually and consistently deliver?