For our February Webinar, Stephan Liozu, Chief Value Officer at Thales, reviewed the types of competitive information that is needed to make sure your customer value models are relevant, precise, and dynamic. To conclude the webinar, he answered some questions from the audience. Here are his live answers:
How do you motivate the C-suite to support a transformation to Value-Based Pricing?
Typically, the C-suite is not going to change until there is a problem. The real question is how to motivate them to do it when it is not a problem. The way you do that is having someone create a sense of urgency. If you don’t face an erosion of margin, or if you’re not seeing a pattern of leaving money on the table, maybe the message has to be, “we’re making 15% EBIT but we should be making 20% EBIT.” Then, you have to showcase studies that show your competitors are doing much better.
The closer you are to the C-Suite, the easier it is, though it is sometimes difficult in big companies. In other mid-size or smaller companies, the VP of Sales or Marketing may be the person that needs to hear the message you’re trying to convey. The C-suite is also going to conferences, reading Harvard Business Review and talking with their peers [and hearing about Value-Based Pricing]. This is the best case scenario – when they say “we need to do this.”
What are the critical elements that organizations need to execute on Value Pricing? What strategies work best to improve sales organizations ability to sell value?
That’s a great question, and I think you need to read my book (Dollarizing Differentiation Value), as it covers a lot of this. You have to develop your capabilities – two of them being customer intimacy and competitive intelligence. But there are the other core capabilities too—segmentation, competitive intelligence, pricing, and more.
When you hit a certain maturity level, you need to use software or tools like LeveragePoint because at some point you need to industrialize your transformation. You cannot do that in Excel and PowerPoint is way too static. By industrializing this process when you bring salespeople on board, it becomes easy for them to reuse and modify Value Propositions, enabling them to become more productive when they are managing 100+ accounts.
At some point, you need to tie your value-based innovation, pricing, marketing and selling into an integrated approach that incorporates capabilities, tools, and culture. It is a lot of work, but there are things that you can do to accelerate it, and for me, when you’re ready, having the right tool is the right move.
What strategies work best with sales teams when they need to deal with complex competitive landscapes, such as multiple direct competitors in addition to do-nothing scenarios?
You have to do the homework at a high-level, you need to understand your competitors, direct and indirect, as well as your customers’ capabilities. Sometimes your competitors are your customers, and only give you bits and pieces of the offer. When you get to the specific bid or proposal, you need to focus on your customers’ hot buttons, what the customer can and cannot do, and who you think will compete on that specific bid. That’s where you need to decide who you think your competitors are going to be.
You can’t boil the ocean and do the entire analysis for 2,500 competitors. We do war games and black hat sessions where we pick around four likely competitors and have teams of people playing as them, designing the commercial solution and pricing levels, and at the end of the day we “compete” for the offer, and see who wins. This process helps you refine your competitive priorities.
Sometimes in complex bids, over the course of the commercial process, you may have to change the order or ranking of the competitors as new ones come in and others get ejected. It’s a very dynamic process and someone needs to do this, otherwise you will go in blind when you engage with the customers. Yes, we may know the customer needs and their pains, but a competitor might come flying in with a disruptive bid that knocks you out of the process.
How big dollar-wise should a segment be? Does it matter?
You have to look at your entire population of customers and the market size. I always recommend 3-5 segments, but it always depends on the number of customers you have. I usually move away from size at a certain point because you may have a segment with few customers that is very small to date but may be the next big segment 10 years from now, and that requires a different offering, different pricing, and a different way of hand-holding.
Obviously, two customers representing 1% of the market may not be an intelligent way of segmenting the market, so if you are doing a scientific segmentation based on transactional data (with a large number of customers and transactions), the stats will give you the number of segments. If you have 100 customers and you want to do a qualitative segmentation, look at the size and power of each of the segments, as well as their future projections (including wallet share).
Pay attention to customer needs, their preferences, and how they buy. When you qualify and profile the segments, that’s when you look at company size, volume and profit, which will help you make intelligent decisions on which segments to focus on.
What is the appropriate level of detail for identification of differentiators? Do you suggest going to the feature/functionality level for each product? Or something broader?
My philosophy is that you do a total analysis of differentiators, but what you put into the Value Proposition is different. You need to understand if you’re selling a product, you’re going to go deep into the product features and their attributes, identify the benefits of each, and then do a Product Value Proposition. But don’t forget that you also have divisional, corporate, regional, and relationship differentiators. When you assemble the best Value Proposition for your sales team, you may have, for example, two product features, one divisional feature, and one relationship benefit.
What is the best Value Proposition I can put in front of my customers? In this case. three of those drivers are quantifiable, and one is not, but it’s part of the story I’m creating. The beauty of LeveragePoint is that all of these Value Drivers are documented, so you may have 50-75 differentiators for each offer. It’s phenomenal how fast you can create a Value Proposition that match your customer type, just by clicking on the ones that are relevant to your potential customer
The homework is to do as much as you can [to document your Value Drivers] but to create a story, you need to blend the specific differentiators that match the customer you have in front of you to create your Value Proposition.