Spring is finally starting to break through in the DC area, and I’m emerging from a runner’s hibernation in preparation for my spring and summer race schedule. This winter I faced a number of obstacles: an unusual amount of snow and particularly cold mornings, a nagging lower-back strain and a full travel schedule.
As I’m overcoming these barriers, I’m reminded of the hurdles sales organizations must clear to achieve the objectives of value-based selling (VBS). For tech companies, these hurdles can be quite daunting, but if taken on with a programmatic approach, VBS can be a reality. In fact, a study conducted by the Aberdeen Group and ZS Associates, found that companies who followed VBS best practices achieved:
• 91% customer retention (versus 42% for average performers)
• 16% year-over-year growth in gross profit (versus 1.8% for average performers), and
• nearly 12% year-over-year increase in average deal size or contract value (versus 1.7% for average performers)
VBS is simple in concept: Win and grow customers through product, service and program offerings whose total value relative to price exceeds that of alternatives. In Winning on the Margin: The B2B Value Imperative, my colleague Mike Moorman reminds us, “Value-based selling (VBS) is not a new idea, it dates back more than 20 years.” Mike also points out, “The reality has proven more difficult. VBS requires a challenging shift in culture, strategy, operations and execution capability.”
The first of these hurdles, culture, is often the highest. If the company culture is product focused, often driven by a (perceived) foundation of technical superiority, the shift from an inside-out view prevents the company from seeing things from the customer’s perspective. With a set of “product” blinders, the company can only see the application of its technology in a few ways—the way the developer envisioned it—and the value proposition is based on features and benefits. However, if the company is able to create a new culture that is focused on an outside-in view with an understanding of customer needs, many new opportunities to create value for customers and growth for the company become evident.
If the company can shift the culture, the next hurdle to overcome is strategy. Value-based selling is a strategy, not a sales process or methodology. To achieve the benefits of value-based selling, tech companies must develop a comprehensive strategy that factors market insight, segmentation, value proposition, sales process, channel strategy and sales force structure.
A well-developed strategy often exposes sales operations questions: Do we have the right data? Can we draw insight from our data? Do we have the tools and systems to support the customer engagement process? With strong underlying operations, the final remaining hurdle is execution capability. To overcome this hurdle, the sales organization requires first-line sales managers who believe in a value-based selling approach and can coach the sales team to peak performance.
Winning on the Margin: The B2B Value Imperative suggests four factors that lead to VBS success:
1. A comprehensive and systematic approach that addresses the full sales and marketing system.
2. Sales and marketing alignment and integration that transcends what past models required.
3. VBS is a go-to-market strategy, not just a sales discipline.
4. Implementation of VBS requires skilled change management practices for transforming deeply entrenched sales force beliefs, behaviors and skills.
Setting a personal record during one of my spring or summer races will depend on logging the miles, cross-training, speed work and avoiding injury. Whether your organization drives profitable growth will depend on how you lead your team to overcome the hurdles to value-based selling. In both cases, I’m confident improved performance is achievable.