Are customers giving you all the credit you deserve? Paul shares three examples to reinforce and validate the value you deliver.
“Nobody gets the credit they deserve; you only get the credit you ask for.” Therefore, its…
“As most people are unaware of the air they breathe; most customers are unaware of the value they receive.”
Your customer is not intentionally forgetting about your value, they just don’t think about it. When things work the way they should, they don’t notice it.
Value reinforcement is critical because price only becomes an issue in the absence of value. If the customer forgets about your value, price becomes an issue.
There are two things you can do to validate and remind the customer of the value you deliver: dollarize the impact of your value, and communicate that impact to different levels of decision makers.
“_______ is the number-one reason salespeople discount their price. So, ask yourself this question…”
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How do I validate and remind the customer of the value we deliver?
(Transcribed from podcast)
Today we have a question from a salesperson in the packaging industry. It’s a great industry filled with lots of ways you can add value, so I’m looking forward to sharing this question and also sharing the answer with you today.
This salesperson did go through our website and filled out our question form. Here’s what this salesperson asked:
“How do I validate the value that my team and I bring to the business relationship? Our clients define their value, and we try to meet or exceed those expectations. But, when it comes time to bidding on our products or services, we lose—or are scared that we will lose—based on pricing. I would like to be able to say to our client at the time of our proposal, ‘As you can see, Mr. and Mrs. Client, we can service your needs through a variety of premium solutions that are tailored specifically for your company. Now, please pay our premium pricing.’”
Obviously, that last part I don’t think you’d say. But, he did put a smiley face there on the question.
I think that this is a very common question. We hear this quite a bit. Here’s the deal…You create a lot of value—your company does, your team—then when it comes time for the bidding process and you’re putting together a proposal, you’re still held to the same pricing standard as a competitor that hasn’t proven all that value. Today, we’re going to answer that question.
When you look at this question and we break it down, there are a couple of elements we’re going to focus on. The first one is how you can validate the value. In Value-Added Selling, we call this value reminding. There are a few things you need to remember. Nobody gets the credit they deserve from the customers; you only get the credit you ask for. It’s critical that you go out there and remind the customer of the value that you deliver. In fact, as most people are unaware of the air they breathe, most customers are unaware of the value they receive.
It’s not that your customers don’t want to give you credit for all the things that you do, it’s that your customers are busy. They’re not waking up every day saying, “Gee. My supplier (my partner, my service provider) did all of these great things for me yesterday.” No. They just don’t think about that. They’re busy. They have other priorities that are coming up. And, if everything’s working the way it should, they just take it for granted or it becomes normal.
When’s the last time you got into your vehicle in the morning and you turned the start key or pushed the start button and you sat there for a moment and thought, “Wow! My car actually started. This is amazing!” You call your buddies, “Hey. Did your car start?” No – you don’t do that. You just expect it to work. You become accustomed to it.
The same is true for the value you deliver. As you deliver value and you meet or exceed your customer’s expectations, and you do that on a regular basis, they will take it for granted. The key is that you have to remind customers of this. Top achievers, in our study we did a few years ago, know this. In fact, 82 percent of top achievers are reviewing the value added that they deliver with the customer on a regular basis. You have to remind the customer of the value you do deliver.
The reason that we have to do this… in the absence of value, price becomes a bigger issue. Your customers are looking at your price, and if they’re not reminded of all the value you deliver that went into that price, they’re going to compare that to what the competitor is offering. That’s going to create an equity gap. They’re going to say “This just doesn’t seem as fair. Why are they [you] charging more?” Value reinforcement answers that question “Why are you charging more?” We’re going to dive a little deeper into this value-reinforcement method. I’ll take a few examples from our book, Value-Added Selling. I’ll share a couple of stories, too, from clients.
Here’s the tip I have for you. If you’re trying to validate the value that you bring to the relationship with your customers, with you clients, you need to document the value that you deliver, and then dollarize the impact that it has on the customer’s business. You can do this through documenting cost savings, by labor savings, you name it. You want to be able to demonstrate by putting a number dollarizing the value you deliver. Then, you want to reinforce that value at different levels throughout the organization. Here are a few examples:
A couple of years ago, I was working with a group, an industrial distributor. They’re doing a lot of specialized industrial fittings – things like that. They had a similar challenge as the question we’re answering today.
“We’re bringing a lot of value. We’re putting together these highly engineered solutions. But, at the end of every year, we’re forced to put together a bid; we’re forced to put together a price, and in some cases, we’re forced to discount to beat our competitor’s price.”
Here’s what we worked with the group on. The first thing we did was identify the key performance metrics that were important to the different levels of decision makers. For example, for the procurement department that was delivering a lot of the price resistance, their key metrics were based on cost savings. There’s a key difference between cost and price. And, if you’ve listened to previous podcasts, we go into that distinction. The fact that cost is their key metric opens up to all the ways that you can help save on their total cost. They looked at the procurement folks, and looked at the key metric, and cost savings was a big part of that. As they went up to another level, getting to some of the operations managers and higher-level decision makers, they had different performance metrics that were tied to things like profitability.
Here’s what this company ended up doing. They identified all the key decision makers that were involved; they identified the key metrics that they were graded on every single year. Then, they put together a customized report for each decision maker detailing how their partnership led to them achieving their metrics. That is documented value reminding right there.
Not only did they document the benefits they created and dollarize the value that they would add, but they customized it for each individual decision maker. When they would get to that meeting and go through and review the value they delivered, they would start with that report. That helped take the focus off of price. None of their competitors could do that.
Another example. There was a group I was working with a few years ago. They supply fasteners to several well-known motorcycle manufacturers. This one in particular was very price sensitive. In fact, they documented some of the cost savings that they brought to the table; they presented these cost savings to the procurement department. The salesperson told me that the cost savings amounted to close to a million dollars. That is a significant number; a number that is tangible; a number that can really make a difference in a company’s bottom-line profitability. They also presented it to the director of operations. They ended up getting both groups in the same room—operations and procurement—and they went through their cost savings. The procurement person said to the salesperson, “Yeah. You delivered all these cost savings, but we expect that. That’s something you had promised us already. So don’t think that just because you provided these cost savings that you’re not going to have to be a little more competitive with your pricing.” They framed it in some way like that.
The salesperson admitted, “I was taken aback. The fact that we would deliver a million dollars in cost savings and they’re still complaining about price.” He looked over to the operations person and said, “What are your thoughts?”
The director of operations said, “We don’t expect this from every supplier. The fact that you’re able to deliver this level of cost savings is very unique. In fact, no other supplier has been able to bring this much value.”
There you go. Think about that for a moment. The power of bringing in a higher-level decision maker and documenting the value added. That was enough to take the focus off of price.
Finally, this last example has more of an emotional appeal to it. I think it is important that we acknowledge the role that emotion does play in decision making. One salesperson I was working with in the construction industry was selling chemical anchoring systems. He went in to one of their top customers, a customer that does a lot of business with them, and gave their year price—put together a proposal—and the procurement person said, “We ended up going with your competitor because they were a dollar cheaper.” One dollar cheaper for a different product.
The salesperson said, “Really? You’re willing to just move that business because of a dollar?” And, then he started to explain some of the personal value that he brings but he said, “Everything I said to this procurement guy was just falling on deaf ears.”
He went to the owner of that company and said, “I wanted to give you a quick update on where we’re at with the business.” He went through a couple of things and said, “It ends up that your procurement guy switched to a competitor for this one particular product. And I wanted to remind you that when you guys call and need something, I’m here to take care of it for you. On the weekends, if you need something, I’ll drop what I’m doing to take care of you. I do all of this for you guys, but the procurement guy decided that he wanted to switch because the other was a dollar cheaper. That’s basically saying that I’m not worth a buck to you.” He let that sink in for a moment.
The business owner responded by saying, “No. You’re worth a lot more than that to us.” He made a phone call to procurement and they ended up winning back the business.
Think about it. In each one of those three examples, there was a common theme. There was documented cost savings, and they reinforced the value at the highest level with the organization. The first example, they talked to everyone—procurement and some of the operational folks. Same with the second example. The third example…going all the way up to the business owner.
That’s my tip for this challenge. Document the value that you bring to the table and then reinforce that value throughout different levels of the organization.
Now, value reinforcement cannot just be a one-time event. That’s another thing to remember. You should be reminding the customer of the value you deliver on a regular basis. I would even sit down quarterly with your customers just to review and document some of the value you bring to the table. When you do it on a regular basis, it builds more value—it’s fresh in their mind—so, make sure you’re doing it on a regular basis.
Let’s go back to this original question for a moment: How do I validate the value that my team and I bring to the relationship? Our clients define their value, and we try to meet or exceed those expectations. There was one part that jumped out. When the salesperson said, …but, when it comes time for bidding on our products or services, we lose—or are scared that we will lose—based on pricing. That second part, or are scared that we will lose based on pricing. We know from our research that the number-one reason salespeople cut their price is because they fear losing the business. You’ve got to realize that buyers know this. Procurement people know this. For every value-added training out there, there is a training for procurement buyers to do the opposite to what you’re trying to do. That’s just the reality of the competitive business world we’re in. So, you’ve got to remember that buyers are going to make you feel this pressure, and a large part of the reason is because they know that you’re fearful of losing the business.
In fact, a couple of weeks ago, I was at a speaking engagement, and one of the sales leaders in this organization used to be a buyer for a large auto manufacturer. He said that on day one, one of the first things they taught the buyers was to keep asking for a discount until the salesperson says no. How often do salespeople continue to cave in on pricing?
Here’s one last tip I have for this salesperson who submitted this question and for everyone, by the way. I know you’re scared and fearful of losing the business. I’ve been there. I’ve lost business because of price. It is frustrating, but it’s okay. The world will go on. Here’s an exercise I’d like you to do. Think about the last time a buyer asked for a discount, you didn’t give the discount, and you lost the business.
Here’s the reason I ask this. I asked a group of salespeople the same question in a seminar probably six years ago. What was interesting is that I asked the group to write down an example of the last time a buyer asked for a discount and they didn’t give it and lost the business. After a few moments, I realized that nobody was writing anything down. I thought to myself, “I wonder what’s going on?” I said, “Guys, what’s the deal? Do you not want to participate?” After a few moments, the sales manager raised his hand and said, “Paul, I think the problem is I can’t remember the last time we didn’t discount.”
If you can’t remember the last time that you held the line on pricing, it’s been too long. Your customers know that, they pick up on that, and they’re going to make you feel that pressure.
Make it a big day!