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Deal Value Or Buyer Value?

by David Brock on May 7th, 2013

A few years ago, a client called me very frustrated.  He was the CEO of a large company, he’d been traveling in the field, visiting customers and sales people.  He told me of a ride-along with a sales person in Boston.  Proudly, the sales person was talking about a large system he had just sold.  When my client asked him, “What did you sell if for?”  The quick response was, “For $7.5 million!”

Some of you may be scratching your heads wondering, “Why is the CEO upset, sounds like a great deal?”  What upset the CEO was, he wanted to understand what the customer bought the system for–not what they were paying.  He wanted to understand what problem they were solving and the value they would achieve from the solution.

All of us tend to make that mistake.  We talk about deals every day.  In talking about them, we focus on deal value—what are we getting out of the deal.  In virtually every review I participate in, it’s one of the first 3 questions managers ask about a deal, or one of the top 3 points the sales person mentions.

Don’t get me wrong, I get it, deal value is important to us.  The problem is it’s meaningless to our customers.  They care about the value they get, buyer value is what’s important to them.

So why make the distinction?

Focusing on deal value colors our strategies and focus.  However subtly, everything becomes “what we get from the deal.”  But we get nothing unless the buyer gets superior value from our solution and chooses it.  So deal value is meaningless unless we understand buyer value.

So what do we do about this, how to we change our mindset?

For managers:  In every deal review, a key part of the review has to focus on Buyer Value:

  1. What is the customer trying to achieve?
  2. What value do we create in helping the customer achieve their goals?  This has to be specific.  If the sales person starts talking about features and functions of our product—she’s on the wrong tact.  It can’t be general, “We improve productivity, we reduce costs, we reduce errors……”  Every element of the value must be quantified in terms meaningful to the customer.
  3. How is our value differentiated and superior to the alternatives the customer is considering?
  4. How does our value contribute to the corporate strategic goals and priorities?
  5. What value are we creating in the customer’s buying process?  Do they recognize and value this?
  6. How are we communicating the value to the customer—everyone involved in the decision-making process?
  7. Does the customer “buy” our value?

The magic about focusing on Buyer Value, in the review process, is that we focus our deal strategies and next steps on things critical to the customer, instead of focusing on ourselves.  This always resonates with customers.  Focusing on the Buyer Value improves our positioning and the probability that we will win!  Focusing on Buyer Value has the potential of reducing the sales/buying cycle—the sooner they make a decision, the sooner they can start to achieve results.  Focusing on Buyer Value makes our price less important.  It’s just an element of the total business justification.  If we focus on Deal Value–and focus our customers on Deal Value, the focus becomes price.  We know what happens next.

For sales people:  In developing and executing your deal strategies, can you answer all the questions outlined above?  If you can’t, then you aren’t focusing on the things most critical to the customer.  If you can’t you are putting your ability to win the deal at greater risk.

Deal value is important, but a meaningless part of the discussion.  We know what the deal value is, after all it’s in our CRM system.

To win the deal, focus on Buyer Value.  It will provide more insight on what you need to do to win.

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7 Comments
  1. Jim Jean permalink

    Great Topic David! It has been a cultural thing over the years. As a sales manager leading a sales team I can’t tell you how many times I’ve been asked, “when is that order coming in and for how much” or “what do we have to do to get the order in before the end of the quarter and shipped”. The sales manager for the team is or at least should be on top of the buyer value information since he/she is held accountable for forecasting the business. At least in the past from my experience, those types of questions have not been asked or a big focus of conversation if and when a CEO is actually participating in a ride along. Maybe this CEO and myself should have had the opportunity to work together, sounds like we would have made a good team.

    • Jim: Thanks for the comment. He was a great CEO/Chairman, but has since retired and is serving on some boards, etc.

      The counterintuitive thing is that when we focus on developing compelling Buyer Value, deal value becomes pretty easy as a follow on.

      Thanks for joining the discussion.

  2. Natalie Brown permalink

    Hi Dave,
    Great post as usual.
    I also want to point out the value to the rest of the sales team when this analysis is done. When you can articulate why a customer bought and what results that solution enabled for the customer, it helps train the others on the sales team what to look for and what to ask in prospecting similar opportunities. It helps laser focus the message to reduce the cycle time at the next customer because you offer your experience and insight in your customer’s language.

    • Natalie, I always love to see your comments. You’re absolutely on target! It’s a powerful way to help everyone in the sales team start to think about things differently. It’s also powerful to engage the whole team in developing and communicating the buyer value during the buying cycle itself!

  3. Great story and topic David!

    I too see and hear this far too often at all levels in clients. Sales methodologies built on the sales process rather than the buying cycle and sales people losing sight of what is important.

    A great point Natalie makes too around sharing and enabling sales people to feel part of a collaborative endeavour. Its a sure way to shift the performance curve and takes such little effort in reality

    • Yvette, thanks for the comment. I agree with your and Natalie’s views. I think sales managers should make this an integral part of their opportunity/deal reviews, helping to leverage the development and communication of buyer value in each and every deal, across the entire sales team.

  4. Dave, this is another great read from you, on a topic that is (frankly) a personal mantra of mine.

    With sales performance pressures and quarterly goals, it is only natural that we talk about the metrics we get measured by. But that has absolutely nothing to do with why a buyer would spend their financial (and personal) capital with us.

    Buyer Value is inevitably associated with a project the prospect is planning or has under consideration. Without question, that project has a business case that articulates why, how and quantifies the value. And just because the project has a great business case doesn’t mean it will be approved. Our prospects can’t do them all, so my project is going to be measured against the business cases of other projects being considered. If we as sellers aren’t insanely focused on the business case…well…it’s no wonder that almost 54% of FORECAST deals are lost to “no decision” or the “competition” according to the 2013 CSO Insights survey of 1700 Chief Sales Officers.

    So it would do us good to be relentlessly focused on buyer value. That’s a lot harder than pitching product, but the results and rewards are the pinnacle of our profession.

    By the way…an adjacent topic is “what is the cost of my solution”. If we have a $1M deal, we tend to act like the cost of our solution is $1M. In reality, it’s reasonable to assume that the total cost of the project will be 10x that amount or more…that is the hurdle our Buyer Value will be measured against.

    By the way #2. I think your CEO friend is atypical. I’ve worked for some pretty good CEOs, but the conversations with them were typically about quarterly performance and deal value. He sounds like a special guy.

    Thanks again for the great post.

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