Is the Sales Model Broken?

I’ve spent my career showing organizations in crowded markets how to survive—and thrive—without cutting their prices by using the simple, yet powerful technique of value creation.

While I was speaking with the Vistage CE Group in Buffalo, New York, this month, some of its members expressed a frustration with this concept, a frustration that I’m hearing more and more these days.

Many companies go to a lot of trouble to enhance the value they provide through a range of so-called value-added services, only to receive “commodity” prices for their products.

This can be a disaster for any company’s margins and profitability.

The executives I spoke with expressed a particularly acute frustration that their investment in “value” didn’t win their sales people more business—or help them hold firm on their price.

So what’s the solution? It got me thinking and I came to this conclusion: at many organizations, the sales model is just plain broken.

It All Starts with Clarity

In today’s sales model, the one item that’s always crystal clear is price. So can we blame customers for seizing on it and using it as a bargaining chip?

Now, when it comes to value, the picture gets much more murky. Even though most customers are demanding proof that your solution is providing value in excess of the price paid, most sales professionals simply aren’t trained to deliver that clarity.

Because price is crystal clear and value is unclear, the resulting buying decision inherently returns to—and erodes—price.

A Radically Different Way of Approaching the Sales Process

Products, services and solutions deliver little business value in and of themselves. Actual business value depends on 1) how well the solutions are targeted and 2) how well they positively impact what matters to the customer, such as the customer’s bottom line, business revenue and ability to serve their own customers, among other factors.

Because this differs so drastically from organization to organization, it’s the primary job of each sales person to uncover and understand these factors—and understand how their solution fits into this picture.

In this new world of selling, sales teams need to develop the skills to build financial models for their offerings, run preliminary numbers through the model and then engage C-level executives in a process of debating and verifying the predicted value.

In addition to bringing complete clarity to the value of each benefit of your solution, this skill set positions the sales professional as more than just the “sales guy.” He or she becomes a business consultant who has the authority and information to solicit support from the highest levels of management in the client organization and dramatically shorten the sales cycle.

Once the value of your solution is established, the second step is to create a tracking process to measure and demonstrate to your customers how adequately those value promises have been filled, with an emphasis on financial impact. When presented with this evidence, you can be sure that your sales people go into a renewal armed with solid evidence for a decision in your company’s favor.

The Changing Role Of Salespeople

It’s up to executives to make this switch and refocus their sales teams. Companies who want to flourish in uncertain economies or crowded markets need to look beyond the old sales paradigms of overcoming objections, educating customers, negotiating deals, conducting demos, answering questions, or any of the other well-known traditional selling activities.

Instead, in this new value-based model, every sales professionals needs to develop the skills and tools to:

1)     Understand their customer’s business (perhaps better than their customers do), and identify what matters to each customer (what I call their “value drivers”), be it new business, customer satisfaction, decreased production costs, etc.

2)     Quantify in specific financial terms how your company’s solution affects these value drivers and communicate this value to your customers

3)     Become a trusted business and financial advisor who can penetrate higher levels to get buy-in from their contacts as well as upper management

When you combine this philosophy with the tools and skills for consistent execution, the potential for dramatic sales and margin improvement is considerable.

For example, if a sales team improves its activity rate by 10%, improves its win rate by 10% and reduces the selling cycle by 10%, the combined effect is a 48% improvement in bottom line results. That’s the kind of investment that won’t disappoint.

I’d love to know your thoughts. Is the sales model broken at your organization? Are your sales representatives focusing on your customer’s value drivers? Are your customers able to recognize, understand and quantify the unique strategic value your solutions bring to their organization? Leave me a comment below.

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