A challenging new B2B sales paradigm has emerged from today’s volatile economy and marketplace. The buying process is now longer and more complex, and is often conducted without direct vendor participation until very late in the game, making it harder to capture the attention of buyers and decision makers.
Many sales and marketing teams at B2B technology and manufacturing companies fail to maximize the total value of their offering. Consequently they restrict their capacity to achieve profitable revenue growth.
Sales and marketing teams are not necessarily doing this on purpose. However, during our ten years of working with B2B sellers and marketers, it’s become apparent that many people talk about value without truly understanding it or how to leverage it as an integral part of a winning business strategy.
If you want to increase your average deal size, the best thing you can do is learn to sell based on value. That’s because a value-based selling approach helps you justify your price and expand cross-selling and upselling opportunities. Here’s how it works.
To increase your average deal size, start by learning how to talk about the customer’s business challenges. Specifically, think about how your solution impacts situations or circumstances that require your customer to 1) spend money unnecessarily and/or 2) not achieve their potential in terms of sales revenue.
Is your offering underpriced? It happens more often than you’d think. For example, during a recent consulting project, I helped a particular business unit at a material manufacturer realize they were charging $100,000 for an offering that was delivering $1.2 million in value.
One of my fundamental beliefs is that the strategic marketing team—not sales, finance or operations—should own pricing. The reason is that marketing is best equipped to set the optimal price and maximize an offering's lifetime value.
It’s happened to the best of us: you tell a prospect how much your product or service costs and silence ensues on the other end of the line. This is known as “sticker shock.” If you’ve done your job as a salesperson though, your customer should never experience this. Why? You’ll have set up the value and discussed price early on and, therefore, eliminated any price sensitivity. However, there will be times when, despite your transparency with price, the prospect may not have been paying attention or started to think about pricing.
Last week we discussed how salespeople can overcome objections related to price. Now we want to address how marketing can support sales’ efforts.
For marketers, problems with price typically show up in the following ways:
Here are three things marketing can do to keep pricing from becoming a systemic challenge.
Salespeople often run into trouble near the end of the buying cycle, when they’re trying to secure budget approval from a finance team. Without a solid business case to justify the cost of investing in your offering, the deal can fall apart.
Customers and prospects often lean on price as an objection for why they don’t want to do business with you. Some common things you hear from customers might be:
Overcoming objections like these is a lot easier when you understand how to approach the issue of price. Here are three tips that can help.
“Can I use a value calculator to set my price for my customer?”
I hear this question a little bit less frequently than I used to. But at times people still come to me and say, “I want a value calculator so I can figure out how much to charge the customer.” I then ask, “Why?” and they say, “Well, because we are implementing a value pricing strategy and we want to know how much value the customer receives so that we can charge as close to that value as we can.” Because I know this isn’t going to end well for them, and despite the fact that I am in the business of selling value calculators and ROI tools, we never do these deals.
Do you ever downplay the value of your offering because you’re afraid prospects or customers won’t find the estimated ROI believable?
I’ve had many discussions with B2B salespeople who say they tone down value as soon as ROI calculations start to become “too high.” For example, let’s say a salesperson’s solution costs $1,000, and their ROI calculations show that the prospect will receive $100,000 worth of value. Feeling that the resulting 9,900% ROI is unbelievable, the salesperson will say, “We don’t really deliver $100,000 of value. We actually deliver $10,000 of value.” The salesperson believes that a 900% ROI sounds more believable to the prospect.
