Paul shares three tips to redefine value in tough times.
“During moments of scarcity and tough times, people focus more on what they give up versus gain.”
“In good times or in bad times, buyers still want value. That should give you hope.”
The utility of your solution doesn’t change, but the impact of your solution does. The impact of your solution should align with your prospect’s definition of value.
During tough times, people want tangible value. Dollarize the impact your solution has on the customer.
Buyers will pay more if you can reduce the worry factor.
Click here to purchase the latest copy of Value-Added Selling!
Our show is updated weekly with the questions you ask. So, please go to the home page, subscribe, share it with your friends, but most importantly, ask the question that you want answered.
Thank you for tuning in. Make it a big day.
How do customers and prospects define value in tough times?
(Transcribed from podcast)
Today’s question came from a recent virtual kickoff meeting. So, in the midst of all this, yes, salespeople are still having kickoff meetings. I love it. During this program, we talked about being customer focused and how important that is in defining value in the customer’s terms. One of the salespeople on the call had a great question, “If we define value in our customers’ terms, how does that change given the current situation? During a crisis, a downturn, or a recession, how do customers define value in these tough times?” That’s the question we’re going to answer on today’s show.
Before we answer that question, a quick shout out to our sponsor, The Creative Impostor Studios. If you’re interested in starting a podcast, Andrea and her team are available for you. They’re going to answer questions. They’ve set up a link to actually get a free consultation, so take advantage of that. Information can be found on the website, TheQandASalesPodcast.com, so check it out.
Also pick up your latest copy of Value-Added Selling. It’s now on its fourth edition. It’s available on Amazon or wherever you buy your books, so check it out. A lot of the concepts and ideas we talk about on this show are also in the book, only, in the book we go into a lot more depth.
Let’s get back to that question: How do customers define value in these tough times? Here’s the problem. During moments of scarcity, or moments of a crisis, whatever is happening, people tend to focus more on what they are giving up versus what they gain. In short, they focus more on the sacrifice versus what they’re actually getting. We, as humans, naturally we’re going to do that. What we give up looms larger than what we gain. But during a crisis (which leads to scarcity, which leads to hoarding of resources), it only becomes exacerbated during these tough times. That’s the big challenge, how we get past that.
Now, there is hope. In good times or in bad times, buyers still want value, so as a salesperson, we have to bring that value and we have to communicate it in an effective way. That’s what we’re going to focus on in today’s show.
Previously, we talked about the value formula. When you’re thinking about your customers and how they determine what is value and what is not, they’re looking at four variables: price, cost, utility, and impact. Pricing cost is what they sacrifice, but utility and impact is what they gain. The utility of your product or service is, basically, what it does. But impact is how it really affects the buyer. So we’re going to focus on the utility and impact here for a moment. We’ll talk a little bit about cost, but here’s the first tip.
During a tough time or crisis, remember that the utility of what your product or service does doesn’t really change, but the impact can. Here’s what I mean. For example, let’s say that you are selling a large piece of equipment—a machine tool, for example—that will produce parts. During good times or bad times, your machine tool will produce quality parts. And during good times, you want to emphasize things like the profitability aspect, right? So quality parts leads to greater profitability.
However, during tough times and during a crisis, we want to emphasize costs instead. Here’s how we might reposition the impact. We can say, “Mr. Customer or Ms. Customer, in good times or in bad times, you still need quality parts. And these quality parts will mean fewer rejects, fewer quality issues, and that’s going to help save your overall cost. During tough times, it would be even more burdensome to take on that additional cost of do-overs and rejects, and things like that. We want to avoid that.”
You notice there, there’s a subtle shift in how we’re focusing the impact. During good times, we want to focus on enhanced profitability. But during these tough times, we want to focus on reducing costs. Let’s say you’re selling automation or software, something like that. Let’s say the utility of your software or automation… you basically help different parts and pieces communicate with each other that will help a plant more effectively run. I know that sounds pretty general and crazy, but let’s just say that’s what your product or service does.
During good times, you can say, “The end result of experiencing that software that’s going to help all these different parts and pieces communicate and run more efficiently, that’s going to lead to greater profit.” During tough economic times, you might want to shift the focus and say, “Given the fact that all of these parts and pieces are communicating with each other, it’s going to enable you to do more with less. This is going to help save on your overall cost.”
Again, the same utility—different impact. That’s our goal. We want to make sure that we are focusing the impact of our solution on what that customer really cares about at this point. That’s why we shift that focus.
Next thing, let’s look at the number two tip. This is a good idea in good times (especially in bad times)—dollarize the impact of your solution. Now, when you think about all the value-added extras that you provide, you should be able to tie a dollar amount to it. For example, if you warehouse more inventory, you should be able to calculate how that turns into real impact for the customer.
For example, if you’re able to deliver a part one day sooner than maybe some of your competitors, or maybe even a couple of hours sooner, be able to calculate the dollar impact. If you’re able to save labor with your software package, or if you’re able to save on engineering costs with your software package, you should be able to calculate and dollarize that impact. During these tough times, we have to be able to prove and demonstrate and show how our value impacts their bottom line. Unless we dollarize the impact, that’s going to become a greater challenge.
Here’s what I’m suggesting. Recently, I worked with a group of salespeople and we did this exercise. We went around and we made a master list of all the ways they help save on their customers’ total costs. Whether it’s labor costs, engineering costs, logistical costs, downtime, think of any way that you help save on that customer’s cost.
Next thing you want to do dollarize the impact that it has on that customer’s business. Once you create that master list, you’re just trying to come up with some general numbers here that are conservative. We don’t want to go out there and claim too much by any stretch. We want to give some realistic numbers to that customer.
Once you do that, once you have established the numbers, the next thing you want to do is find the biggest skeptic in the group. When you’re working with salespeople, there’s always going to be at least one or two that will argue anything. This is where that person creates a lot of value. You present the numbers, all the cost-saving ideas, to that individual like they were the customer. Their job is to try to poke holes in your logic and find the gaps in your plan, and more or less argue with you. We don’t do this to create tension with the group. Instead, we’re using it to determine how valid our numbers are. Because if you can take that one skeptic in the group, get their feedback, give them a chance to argue, you’re also going to understand what your customers are going to be doing to you when you go out there and present this to them as well. It gives you a chance to fine tune your numbers, to make them more realistic. And again, the reason we dollarize it is because it is more meaningful. Once we dollarize our intangible value added, it becomes more tangible. So that’s the goal.
The third thing we want to do during this tough time is reduce our customers’ and prospects’ worry factor. During tough times, in a crisis, things like this, people worry. It’s natural, right? When we’re filled with fear, we can worry. We want to reduce that. When we’re communicating our value to our customers, we need to highlight all the ways that we help reduce that fear, that risk, that uncertainty. We want to highlight that and reduce that worry factor. And the good news is people are willing to pay more to reduce that worry factor.
I was reading, the other day, a great book. I’ve read it a couple of times. It’s one that I always keep within arm’s reach: Daniel Kahneman’s Thinking Fast and Slow. This guy won the Nobel Prize for Economics. He’s done some groundbreaking research. In his book he talks about how we respond to threat and worry. In Kahneman’s book, they highlighted an experiment. In this experiment, they surveyed different parents. And here’s what happened. The parents were given a few different options. It involved insect spray.
Here’s what they had to decide. The first option, they said, “You can pay $10 for this bottle of insect spray. However, out of 10,000 of these bottles, 15 are going to lead to poisonings (meaning 15 children will get poisoned). However, if you’re willing to pay more, we can reduce the level of poisonings to five. So instead of 15 children getting poisoned, only five would.” They asked them how much more they’d be willing to pay for that, and they were willing to pay an additional $2.38 just to reduce that number.
Now, they were also asked, “How much would you be willing to pay to reduce that down to zero—to completely eliminate that threat or that worry?” They were willing to pay an additional $8.09—nearly three times as much as the previous example going from 15 to 5. They’re willing to pay three times more to go from 5 to 0.
Now, without getting too hung up on the numbers, looking at the basics… for 15 poisonings, they’ll still pay $10 for that bottle. To reduce that number by five, they’re willing to pay $12.38 for that bottle. But, to completely reduce that risk to zero, they’re willing to pay $18.09. Pretty unbelievable. That shows you that people will pay more to reduce worry.
The question is… how are you reducing your customer’s worry? What are the things you’re doing to mitigate their risk? Make a list of that and plug that into your customer messaging, because during tough times, during a crisis, they want to reduce that risk; they want to reduce uncertainty; they want to reduce their worry.
Make it a big day.