For our August Webinar, Mark Stiving explored how B2B companies can transform into Value Based Businesses that consistently capture the impact of their Value-Based Pricing efforts by supporting sales conversations centered on value delivered. At the end of the session, he answered questions from the audience. Here are his live answers:
Of the common problems you cite, which ones tend to be the most common? Which ones do you see creating the most problems for companies that you’ve worked with?
I think if you look at the very bottom of that slide, it says they’re all caused by the fact that we don’t understand value. And without a doubt, that to me is the single biggest problem – the most common cause. So few companies truly understand value, but if I were to say, which is the one that resonates most with most companies, it’s the one on salespeople are always asking for discounts.
Back when I was teaching in front of rooms, pre-COVID, whenever you bring up the question “do your salespeople ask for discounts?” The room is just like, Oh gosh, yes. And without a doubt, that’s just a super common problem that people deal with.
What cross-functional best practices do you see your most successful clients set up?
So I think the answer to that question is less about process and procedure. And it’s more about individual leadership. What I’ve seen that works well, and it doesn’t matter if it’s comes out of the product management group, the product marketing group – some companies have pricing groups and their pricing people do this really well. But the thing that really matters is – I’m going to assume that this person wants to be a true leader in the company – then this cross functional leadership happens when we go out and we talk to everybody else in the company.
So if you’re in product marketing, you’re out talking to product management and helping work with them on what is value and how do we create more value. We’re out talking to salespeople and helping them understand value, and the things that are getting in their way, and how to help them be more successful. I would say from an individual leadership perspective, if you can take the attitude that says, how can I help more people be successful, then that’s the win for the entire company and it’s a huge win for your career.
Are there any special considerations that you need to make when you’re selling to an intermediary or reseller?
So the answer is both yes and no. The thing that’s really different is that you need to price both the intermediary and the end customer. So you need to understand value to your end customer, and then you need to understand value to your intermediary. So I’ll assume for a second, just to make life easy – we’ll talk about a distribution channel, a distributor, where they’re physically taking in product and shipping it out. You have to ask yourself: “what’s valuable to that distributor on my product?”
So some things that come to mind is if your product sells easier than your competitors products, then they like that. And so, because that’s the case, you can probably get away with a higher price, which might translate into lower margin to the distributor. But in the end you treat the distributor just like you would a customer, you understand how they perceive value, what value means to them, and then you price the value that you’re delivering to that distributor.
But the hard part there is you also have to go to the end customer and understand what the willingness to pay is for the end buyer and start working your way backwards in the chain. We want customers to buy from us at higher win; buy more at higher prices. When we’re talking about a distribution channel, it’s the exact same thing. I want to look at how much my customer and my end customers are willing to pay and work my way back through my distribution channel a step at a time to figure out how much I’m going to charge each step, or how much margin I’m going to give each step, depending on how your industry works.
How do you see services and other non-product components fitting into, and possibly enhancing, the offering in a “which one” scenario?
I don’t see any difference between a service and a physical product or software. And the reason I say that is because, in almost every case, we need to understand how our buyers are making decisions and if our buyers are saying what’s different between your service or somebody else’s service. And how much is that worth to me, in almost every case, it’s just how they’re perceiving value.
So the question might be: “how do I see add-ons when I’m in a ‘which one’ situation?” And in that case, what I would be thinking about is: “how do I create value.”
In fact, I almost always recommend this to my clients. How do I create good/better/best packaging? And I create good/better/best packaging by understanding my market segments, their problems. I bundle the right things together for the right customers. And the more I understand my customers, the better those packages are, and the easier it is for my customers to make decisions, which means I’m more likely to win those deals.
What role do value propositions play in enabling sales to have an effective value conversation?
So I’m going to define value proposition in two different ways. And the first way I would define a value proposition as we’re trying to create a generic value prop, where we can say these words and this is what people love about our product. So for example, if I were creating a value proposition for LeveragePoint, it would “win more deals at higher prices.” That’s one of my favorite lines anyway, right? So win more deals at higher prices. That’s your value proposition, and it’s kind of generic across the board. I feel like that’s really valuable for marketing for trying to find customers who appreciate the value that we can deliver to our marketplace.
On the other hand, you could take all of the different features that you’ve built into your products. And each one of those features was built to solve a specific problem and different customers are going to receive different amounts of value from different features. So from that situation, I would think of a value prop as this is a place where value may exist in different customers. And my sales person’s job is now to go find out, does this one matter to that customer? And as the sales person is realizing these are, say, the three out of seven value hypotheses that really matter to this customer, they become the value proposition in that sales situation.