What will it take to win over today’s buyers?

What is it going to take to win over increasingly demanding and budget strapped buyers? Well, here is a step by step formula:

1. Go beyond features to benefits and then keep on going…

Go beyond features to benefits and then keep on going. That is because buyers are not as impressed by benefits lists as we sellers like to think they are.

Benefits are a hypothesis about what is important to the buyer, a catch all list of possible reasons to buy. But, that is all they are. The problem is that most benefits and features lists are too long. They tend to be laden with adjectives and are vague, unquantified and subjective.

Another problem is that benefits often suffer from a crisis of identity being regularly mistaken for features. They also tend to be written with the technical, as opposed to the business buyer in mind and generally do not reflect the issues of concern to senior management.

So it is time to move beyond feature and benefits selling – to stop telling the customer what the benefits are and listening to what it is that he, or she wants to achieve. It is time to start selling solutions, right?

2. Go beyond selling solutions and then keep going...

Selling products and services is so 1990s, so you would be mistaken for thinking that you should be selling solutions instead. Well, not necessarily so. That is because too often salespeople start selling a solution before they understand the problem, or need that it is meant to solve for the customer.

Here is the problem - buyers don’t really want what you are selling! Rather they want the results that it can help them to achieve. So, your SOA enabled turnkey solution is not what you should spend most of your time talking about. Instead, you should be discussing the end results that your prospect wants to achieve and how your other customers have achieved something similar.

The challenge of moving beyond the solution can be made more difficult by some customers, for example when they send out an RFP, or request a proposal without giving the salesperson an opportunity to really understand their needs. In any respect, the buyer may have a less than complete understanding of his/her needs.

For example, we regularly are asked to provide proposals in respect of the provision of training to sales people. Our wisdom gained over many years, tells us that sales training (at least the traditional variety) generally falls short of delivering what managers want to achieve. So we try to better understand what challenges or priorities are facing the sales team and the results expected. With this information we are can put training in its proper context in terms of the full range of options available.

So, you have gone beyond the solution to focus on the need, but is that all? Well, it is a great start. Now keep going till your conversation has left needs in the shade and started to focus on results.

3. Go beyond the pain and the problem to the results…

It is fashionable to talk about point of pain for the buyer as the fundamental motivation to buy and in particular as providing the impetus to buy now. This is one step up, in terms of intensity, from the focus on the problem as a means of selling your solution.

However, while both of these elements are important an even more compelling approach is to focus on what your customer is trying to achieve. That is the hope, as opposed to the pain and the opportunity as opposed to the problem.

So, what is the business impact of your solution? Specifically, how will it impact on the Productivity, Performance, Revenue and Profit of your prospect? What business results will it enable your customers to achieve? How will it impact on key business metrics?

4. Go beyond results and keep going until you get to the strategy…

With buying decisions being made higher and wider in most organisations, there is still one common denominator for senior buyers – that is business strategy. Sales people must connect with managers not through the focus on solutions, problems and pain, but instead on their strategy for their business. That is what they want to achieve and how the salesperson’s solution can make it a reality.

Having moved beyond the solution to the need and beyond the need to the results, you are ready to relate to the buyer in a totally new way. That is to connect with managers not by focusing on their strategy for their business. That is what they want to achieve and how the seller’s solution can make it a reality.

Selling at a strategy level can present a challenge for many salespeople. That is because it requires a new level of insight, as well as a new language – one that is more akin to business people than traditional salespeople. It is the transition from salesperson to trusted advisor and requires deeper relationships, as well as high levels of credibility and trust.

Pricing is a blend of art and science

Many managers struggle with the issue of price.  That means they are leaving money on the table.  The ability to justify, negotiate and command high margins and prices is the supreme test of salesmanship, as well as the most meaningful measure of quality.

1. Why Managers Struggle To Get The Price Right

Pricing is a blend of art and science.  For economists it is a relatively straight-forward equation – that point where demand and supply meet.  But in the real world how prices are set is much more complex.  That is why it cases problems for managers.

 Price is only one half of the price-value equation, albeit the half that tends to get most attention.  A product, or solution that is 50% more expensive, but delivers a 20% saving year on year over and above others solutions is still the best solution to buy.  Hence, the increasing focus on pay-back, or return on investment.

Even for rational buyers and economic buying decisions price involves the notion of psychology and perception.  Products and services that may be relatively similar in terms of form and function can have vast differences in price depending on brand name, styling and other quite subjective factors.  Indeed, a whole array of difficult to weight factors, from the reputation of the company to the relationship with the salesperson, can outweigh price. 

Part of the reason for the difficulty in setting price, is the fact that there are few absolute rules ot follow and several paradoxes, for example:

      ·         For some products raising the price perversely increases demand, or at least desirability. 

      ·         Price is relative and increasing it can be effectively achieved by reducing the volume of the product, the length of service, etc.

2. Pricing: Key Questions to Address  

Here are some of the key questions Managers should address in setting, or revising price:

1.       (a) What is the cost?  That is what do you need to charge to cover the cost of producing and delivering the product/service, as well as the cost of its development and marketing? 

Tips:

·         To avoid under-estimating the cost of marketing, take the cost of development and multiply it by 3.

·         Calculate the total cost of development and taking your product, or service to market, adding up all direct and indirect costs.  Spread this over different estimates of volumes to be sold.

·         Of course, to that needs to be added a profit margin representing the return on investment and reward for risk to the promoters.

2.       (b) What is the customer willing to pay?  The answer to this question is based on an understanding of the value and the payback of you solution.

(i)    Understanding the value

What are the factors that determine the perceived value of the solution?  Break your product/solution into components (e.g. scoping, pilot, installation, integration, commissioning, ongoing support, etc.) and, where possible, isolate the benefits/value associated with each.  Re-arranging these components can impact on the value.  

In terms of market research report they may put little value on the research process and reporting, but great value on the conclusions and recommendations.  So it would make sense to increase one and perhaps reduce the other.  Can you separate out different elements and charge for them separately (e.g. service)?

Tips:

·         Keep in mind that price sensitivity, perceived need (or urgency) and value for money of your solution will vary greatly from segment to segment. 

·         It can also vary according to how you position your solution and the promises, benefits, or features that you highlight.

 (ii)   Understanding the payback

How significant is the problem that the solution solves?  What is the payback, or return on investment for the customer?  What saving, or additional revenues will ultimately result from the solution?   What is the customers total cost of ownership?  What proportion of that total cost does the price account for?

Tips:

·         Create a spreadsheet to calculate the implication of your products, or services on the customer’s business.

·         Involve the customer in modeling the business case / return on investment for your solution.
It is generally best to be modest, or realistic in your assumptions.

·         Track how customers apply and benefit from your solutions.  Undertake a before and after analysis of the impact.

 

3.       (c) What are competitors charging?  What do the alternatives cost?  

 

Tips:

·         Keep the list of alternatives as broad as possible, including the cost of alternative technologies, or solutions and even the cost of doing nothing.

Questions:

·         Do you start with a low price to penetrate the market and then increase?

·         Do you have a higher list price, but be prepared to negotiate?

·         Do you offer a number of product variations/service alternatives with different prices attached to each?

·         Do you charge for your solution in terms of a large upfront payment, or alternatively in smaller increments?  Do you charge once-off or per usage / ongoing license / retainer fee? 

What do you do when your client wants to renegotiate on price?

Most buyers are passing on the pain of budget cuts to their suppliers, they don’t have a choice.

However, some suppliers are better insulated against cuts than others, specifically those with whom relationships are strongest, satisfaction is highest and, most important of all; those who are able to quantify their impact on key business drivers.

The next group that is faring better with respect of cuts, is those suppliers adopting a proactive approach – dealing with it before receiving the purchasing departments email or phone call.

1. Ask the Hard Questions First

- Is the contract worth it? Will your company die without this contract? What is the balance of power? Is the customer a good payer? How profitable is the work?

- What is the buyer’s motivations? What are the underlying business drivers for the customer? Is it cutting costs, driving efficiencies, minding the cash, targeting non-essential costs, delaying capital projects, or maximizing revenue/value capture? Which of these is involved can have a subtle, but important impact on how to renegotiate price.

- How valuable is the relationship? How successful the renegotiation is, depends on the relationship in question. How far you are prepared to go to meet the customer’s needs depends on how important the customer is to your business. But it also depends on your assessment of how secure the customer is - what is the real financial position in the client company? Will they survive?

- What is the bottom-line impact? Go back to your project budget, your cash flow and your P&L. What impact will price cuts have? What is the impact on margins and profits of different strategies to achieve cuts of 5%, 10% and 15%? Some aspects of projects are less profitable than others, some may even be sub-contracted and deliver only small margins - target these areas for the greatest cuts.

- What is the market outlook? What are competitors charging? What is the cost of switching?

2. Strategies to Use in Renegotiation

- Prepare for the negotiation – practice lots of scenarios – ensure you have competitor pricing, use information from project reviews, come with suggestions, play good cop and bad cop, don’t decide there and then allow time to consider.

- Revisit your contract. What does your contract stipulate in terms of re-negotiation? Although you may adhere to requests for renegotiation even if not technically required under contract, timing and related issues are very important. ‘All deals are renegotiable’, but that largely depends on the bargaining power of the parties involved.

- Use the Right Parties to Renegotiate. The choice of who sits in on the re-negotiation is very important. Don’t just leave it to the person who is dealing with the account on a day to day basis. Ensure any re-negotiation is submitted for approval to the most senior level.

- Decide in advance your final negotiating position and how you are going to try to improve on it. Consider the milestones in the neogitation from your buyers perspective.

- What is the quid pro quo? With a win-win in mind what can the buyer offer in return for a price cut? For example, if you’re unhappy with the price we’ve agreed and want it cheaper then I might renegotiate for a higher volume of orders from you.

3. Key Principles To Follow:

- Adopt a win-win approach – handle it well - put yourself in the buyer’s shoes - it is not personal, its business. Once the issue of a renegotiation is raised deal with it proactively, put a process and timeline in place to address the issue.

- Pass on your savings immediately, and if you don’t have any to pass on start cutting your costs and renegotiating with your own suppliers.

- Reframe the issues in terms of value, or the impact of your solution/services on the customer’s business. Have the anticipated benefits been achieved? Have unanticipated benefits arisen? Now you know the client, the environment, etc. much better than you did when the project began, or when you crafted the proposal you can bring that learning to bear on the project and cost benefit analysis review with the purchasing/procurement officer.

- Focus on efficiencies and driving additional benefits / value. Quantify the impact your solution is having in the customer’s business and identify ways in which this can be maximized. It may seem like you are revisiting some of the earlier stages of the sales process, but re-affirming needs and payback for the customer is very important.

- Examine the total cost of the solution – your cost may only be a small proportion of the total cost to the customer. For example a software client’s price was 1.5 million, however the customer organization had allocated 50 IT staff for 12 months to the implementation project which more than doubled the budget. Targeting this area could identify a wide range of savings.

4. Find innovative ways to cut the cost, including:

· Price differentiation – identify changes in the product / service that can have a significant impact on perceived value, that may include adjusting; support levels, feature set, scalability, etc. Some of these areas may cost very little, but greatly impact on level of perceived value.

· Simplifying the product - sometimes you have to stop adding value, as it is adding too much to your product cost.

· Re-package and re-bundle. Break down into components of value and cost.
· Target reductions in support costs, for example, improved self-service help functionality, or remote monitoring. These can all greatly reduce ongoing support costs.

· More flexible pricing (e.g. Software As A Service) or delivery models (e.g. phased implementations).
· Provide the customer with the option of self-provisioning / internal fulfillment of parts of the solution. E.g. the customer provides 2 manpower resources to reduce the implementation budget.