Today, Anthony Iannarino and I had a discussion on Focus.com on the Perils of Discounting. As an aspect of the conversation, we started talking about the value sales people bring to their customers.
I’ve maintained the value the sales team brings to the customer is the most under-appreciated, yet most differentiated and sustainable aspects of a value proposition. Sales people don’t get it, consequently don’t get their customers to appreciate and “buy it.”
Great sales people bring tremendous value to their customers–this value has the potential to surpass any discount or cheaper pricing a competitor can propose. Great sales people bring ideas about how the customer can more effectively achieve their goals, execute their strategies, or exploit new opportunities. This difference, over the period of the relationship can mean thousands or millions of dollars to the customer. Great sales people recognize this and make sure their customers understand what they are worth.
Let me illustrate this with a story, a long time ago–way back in the days of mainframe computers, I sold a $20M computer system for 1 second. That is, I proposed a new system to improve response time in an online application by 1 second. It sounds like a little, but when examined across all the online operators and transactions, this unbudgeted $20M investment had less than a 6 month payback.
My customer didn’t have budget for this, but they immediately went to the CEO to get approval. My customer didn’t go out for competitive bids, though my competition could have come in several million less than my $20M proposal. They wouldn’t even think of that–my team was worth much more than the few millions they might have saved with a competitor.
All the competitor could do was sell compatible systems at a cheaper price than we could. We brought the customer ideas and new methods for improving the business. In this case, for a $20M investment and a payback of less than six months–we created an opportunity that was worth more than $40M to them. No customer in their right mind would ever trade off $40M for a $3M savings.
It was our team’s job to do this every day with our customer. We worked with them, analyzed operations, found new opportunities, created $10’s of millions every year in opportunities. The competition had a different strategy–they just offered good product (sometimes technologically superior to ours) at a cheaper price. But they weren’t giving the customer what we were–opportunities to grow their business, opportunities for them to make millions.
Our team–myself, my sales partners, and our pre-sales people were literally worth $10’s of millions to the customer.
How much are you worth to your customer? If you are competing on price, you are only worth the money you save the customer over the alternatives–in today’s competitive world, that’s pretty small. If you are competing on the basis of helping your customer run their businesses better, address new opportunities, and grow, then you are worth many times more than price differential a competitor might provide.
How much are you worth? Does your customer know? If they don’t, you are missing a tremendous opportunity!
“All the competitor could do was (to) sell compatible systems at a cheaper price than we could. We brought the customer ideas and new methods for improving the business. In this case, for a $20M investment and a payback of less than six months–we created an opportunity that was worth more than $40M to them. No customer in their right mind would ever trade off $40M for a $3M savings.”
The flaw in your argument, both then and now, is your math.
If the “Compatible” system brought the same ‘1 sec.’ saving then it too would generate the same $40M in “savings” plus an additional $3M saving in Cost of Acquisition, a TOTAL cost saving of $43M.
Who in their “right mind” would lose $3M for no reason.
But, in my opinion, when two equal “Compatible” offers were made the differentiation was often not the ‘Added Value’ of the sales team but their misrepresentation of the risk. Frequently large dominant incumbents sold over-priced and underperforming “Systems”
using FUD factors. Fear, Uncertainty and Doubt were sown in the mind of the Buyer, poor benchmarking performance was traded-off against “exaggerated risks”.
The expression “Nobody was ever fired for buying from Big IT!” originated inside the Company, not in the Data Processing Department of the Customer. Big IT was forced by “Plug Compatible” Competitors to Fairly Price, to Innovate and to Sell, otherwise the cost per Flop, or per Megabyte would be the same now as it was then. Progress came from the skill of Competitor Salespeople (like me) in overcoming FUD, in managing Discounting and generating high margins while giving Fair Prices to the Customer.
Brian, I am a little confused by your comments. I think you are missing my point and what was really important to the customer. The customer placed great value in the ideas for improving their business that my team was providing. They knew they could buy a competitor product and save $3M, but if they did that, we would stop finding ways for them to make money. The $10’s of millions we produced in finding new opportunities to grow their business, fnding opportunities improve operational efficiency, etc was far more valueable to them than saving a few million in one transaction.
They knew that we invested our time in helping them build their business on the basis of selling them the solutions for that brought them the improvement.
The competitive sales people, at the time, were not bringing them solutions to improve the business, they were bringing alternative products that would perform the same functions, but more inexpensively. They were not, however, bringing the ideas my team was bringing to improve the business. So the decision in these solutions sales and the economic value to the customer was very clear and compelling. Clearly the customer(s) did not believe there was a flaw in the logic, but I’d be glad to give you their names so you can go tell them they made a foolish decision some decades ago.
Your argument reinforces the point I am tryig to make in the post. Too many sales people (and apparently consultants) fall into a trap of focusing only on the product–feature, function, feeds, speeds, price/performance, competing only on that basis-in which case price wins. Great sales people are doing something entirely different, they realize the customer is not trying to buy a product at the best possible price. They are trying to grow their businesses, address new opportunities, improve their operational efficiency. Those sales people that are engaging their customers on that basis are doing something completely different, one their “product-based” competitors can’t compete in.
The rest of your comment refers to a time long past and not meaningful to the readers. I don’t necessarily buy the arguments, or feel it is a meaningful to my readers or a good use of my time.
Develop a relationship! LISTEN to your customer. To quote Jay Goltz in the NY Times You’re the Boss Blog: “On paper, business is about marketing, management and finance. In reality, it is also about relationships: the good, the bad and the ugly.”
Great insight Doug! Thanks for joining the discussion. Regards, Dave