A new era of Value Selling

Thomas Menthe

A new era of Value Selling

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A new era of Value Selling

Thomas Menthe

Copyright: © 2019 Thomas Menthe

Book set & Envelope: Erik Kinting / www.buchlektorat.net

Grafikdesign: Lennart Rohlfing

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List of figures and tables

Figure 1: Linear Funnel model

Figure 2: The customer journey today

Figure 3: Translating Customer Value Learning into Action

Figure 4: Customer Value in Exchange

Figure 5: Addressing emotional and rational needs of a customer

Figure 6: Customer value

Figure 7: How emotions influence B2B buying

Figure 8: Communication of a seller´s offering towards the customer’s needs

Figure 9: Elements of the Value Pyramid

Figure 10: Components of Customer Value

Figure 11: Suggested Process Framework for a Value Based Sales Process

Figure 12: From Product Selling to Co-makership

1 What is changing

Digitization is just one of the major influences and trends that requires companies to significantly change and adapt to improve their offerings and customer relationships. While the idea of digitization and globalization is not new, there is a new wave of transformative technologies with the potential to substantially affect the world around us. Artificial Intelligence, Big Data, Internet-of-things, Robotics, and Blockchain, to name a few, allow new areas for opportunities and differentiation for vendors and suppliers. Many of these technologies will impact the marketing function and in particular sales organizations, customer interaction and demand. Looking at the future of sales, we proclaim six assumptions:

1 Robots will take over commodity and, ultimately, business-to-business sales (B2B). By 2020, digital sales will be well established in B2B and chat bots will take over part of the sales function. In consequence, understanding customers creates the highest emotional value for prospects. If customers know what they want, they don’t need a sales person anymore

2 E-commerce includes complex solutions - the end of solution sales?

3 Emotional value-add differentiates a sales organization

4 Proactively identifying customer pain points is applied by many collaborative start-ups, which have found ways to simplify complex and frustrating customer experiences. Uber, Airbnb and Lyft have disrupted whole business sectors and created new markets

5 Artificial Intelligence and analytics impact not only the B2C environment with chatbots etc., but B2B markets are adapting these technologies and sales organizations need to respond. Well-designed analytics programs deliver significant top-line and margin growth by guiding sales teams to better decisions

6 Agility, customer obsession, trust-building and long-term thinking are the new principles for sales success

We are living in the era of subscription and have entered the shared economy. Back in the 1970s, product sales served customer needs. When customers became more demanding, they asked for services like product support, warranties, maintenance, installation or consulting. The early 1990s were driven by the introduction of electronic commerce and online sales, and companies like Amazon changed the way we buy books, which disrupted a whole economy of traditional book stores. Being customer-centric was en-vogue in the 2010s.

In many markets, service margins are up to four times higher than product margins and therefore influence revenue streams and profit results much more. It is not enough to just have high performing products and services, if the sales appearance and brand recognition from the beginning of the sales process to the end are not sufficient. Selecting the right set of supplementary services is equally as important as their quality, which is finally measured by customer satisfaction and loyalty of the customer-life-cycle. Back in the 1990s, companies like HP started selling their printers at a very low cost in order to compensate the loss of product margin with frequent future sales of printer cartridges, while optimizing utilization and quality during the production process. Customer value is not generated by products anymore, but by services, and companies need to realize that this requires a shift towards a cross-functional process to deliver that value through customer-specific solutions. Buying decisions are already made without the sales person.

Still, companies are trying to find a way to focus away from their internal processes and structures towards understanding the journey of the customer along their touchpoints in order to respond to customer needs rather than to develop new products and try to sell them through traditional marketing channels like sales organizations or push marketing. Today, we live and work in an era where the relationship is the center of buying and selling. Vendors increasingly face the alternative of either gaining a key supplier status with their customers or being pushed into the role of a backup supplier. As product and price become less important factors, suppliers of routinely purchased products search for new ways to differentiate themselves in a buyer–seller relationship. This suggests finding new avenues for differentiation through value creation in business-to-business relationships. Results from research have found that relationship benefits display a stronger potential for differentiation in key supplier relationships than cost considerations.

Speed has become a key differentiator to distinguish yourself. Consumers can expect to receive their parcel the next day or with Amazon Prime Now within 1 hour after ordering online. B2B companies can launch 1000 servers and build a whole data center within minutes and go global by using cloud technology (a network of distributed and highly-automated servers on the internet). Traditional overnight batch processes cannot satisfy the requirements of a modern company. Agility and real-time processes are needed to establish the next generation of value chains.

What happened to the Fortune 500 companies?

In the last 15 years, 52% of the fortune 500 companies (S&P 500 index) have disappeared. In 1955, the average life expectancy was 75 years. In 2015, the average life expectancy of companies was 15 years. In most organizations, decision cycles lagged behind technology cycles, which is the reason why they struggle to respond to digital disruptions.

According to Capgemini (2015), one key reason for organizations becoming complacent is management inertia - the failure to sense the need for change. For example, Kodak had most of the patents for the digital photography technology, but did not commercialize them aggressively as it feared the cannibalization of its film business. Successful responses to digital disruptions launched services that mimicked those of a disruptive competitor. They started hiring digital talents, acquired multiple startups in innovative fields, and incorporated the teams into their operations later.

What is the impact if companies do not adapt new technologies?

Because the world increasingly becomes software-driven, competitors will emerge from adjacent industries rather than just the home industry of the incumbent. Organizations need to move to a resource allocation that is centrically organized around opportunities and new business models, not existing structures.

1.1 Trends
1.1.1 Future sales needs and how personal emotions fuel B2B purchases

According to Forrester Research, 25% of sales people have business acumen and 88% know their products and services. This shows a clear gap in understanding business measure, strategic decision making, process understanding and ways of expanding an organization, including its transformation and cultural change management. Besides a financial knowledge management on key performance indicators like budgets, margins, growth rates, CAPEX vs. OPEX targets, cost optimization or return rates, e.g. IVV, NPV or ROI. Many of the CxO’s objectives involve gaining competitive advantage through time-to-market, costs and agility improvements. Sales is shifting the argumentation from product pricing to adding value to the customer’s value chain. This requires the skill of the salesperson to utilize economic models such as Net Present Value (NPV) or Return-on-investment (ROI) as well as cash flow analysis. They need extensive information and different contacts within the customer´s company. As the pressure to grow earnings has increased, the focus in most sales organizations is moving towards profitability rather than simply generating revenue streams. This results into streamlining the cost of sales around support costs, service models and selling higher prices to increase profit margins. It will be essential to move away from a prospect-oriented feature discussion to how clients can improve their total cost of ownership (TCO), time to market, agility, innovation rate, profit, cost savings and revenue growth by building a solution with tangible financial benefits to ultimately increase efficiencies across the value chain with the seller’s offerings.

Thus, account managers need to think and act as entrepreneurs and evaluate risks in delivering their solutions to the client and the impact of a price reduction. In general, the customer needs to be analyzed regarding his value contribution to the seller’s financial targets. Long-term thinking is an important prerequisite to not lose profit in every deal. There will be more times to make a hard decision to sacrifice short-term gain for a longer-term goal. The value assessment of and with customers comes in several steps. First, the identification of the value potential, then the evaluation of the performance after the initial baseline assessment. After a long-term value realization including data management and analytics these assessments should be conducted on a regular cadence by analyzing customer satisfaction after the delivery of the solution. Thus, account managers need to recognize opportunities in a systematic process with pre-defined key performance indicators (KPIs) to detect misallocation of resources, understand risks and potentials of the customer and develop a solution, which generates value for their client. This has been approached by solution selling and needs to be extended by value-selling to determine the value.

On top of this, we recognize the trend that buying centers are getting larger and more complex with up to six different stakeholders instead of the old-fashioned purchaser who only negotiates the price, delivery times, payment and termination term. The value proposition has to be explained to different people or groups of people from business, procurement, legal and other corporate functions.

Sales will be organized along customer segments and less around product groups. In fact, the matrix organization is moving away from a product / regional split to business lines and customer segments within the sales organization. If companies want to be truly customer-focused, they have to be obsessed about the customer and his structure and needs, instead of their existing silos that add no value to the buyer per se. This requires a detailed understanding of the customer´s business strategy, financial goals, major projects and their processes, e.g. procurement, supply chain, decision making and stakeholder network, which is not represented in an organizational chart. In the Business-to-business (B2B) domain, these sales-driven companies need to change their communication channels in the age of social media, touch points or multi-channel management and ensure that the customer can easily access information on a seller´s portfolio. The account manager´s role has already extended into an information broker and catalyst between the seller´s and buyer´s organizations.

Trends and sales approaches for the new era of value selling:

 From product to solution offering

 From purchase price to economic value

 From transaction to value-generating

 From product-only to product + service and customized solutions

 From product/region matrix to customer segments

 From personal sales to multi-channel

 From information sharing to customer involvement with social media

 From sales representative to catalyst

 From customer-orientation to customer-obsession

In 2015, Forrester forecasted that 1 million US B2B salespeople will lose their jobs to self-service e-commerce by the year 2020. B2B buyers favor do-it-yourself online options for researching and buying products and services, and they are demanding that B2B sellers fully establish those digital paths to purchasing. Digitalization will change the buying behavior much more towards e-commerce and self-service consultation with support of sales robots. The salesperson will be an information catalyst and relationship manager until technology will be able to overtake the role by using machine-learning and understanding emotional vibes from speech to text recognition as Amazon´s Alexa or Apple´s Siri show nowadays with new skills every day from various companies and organizations.

Forrester suggested to B2B companies to reshape their channel strategies and fundamentally rethink the role of their sales people by:

 Expanding the role of self-service e-commerce. The evidence has shown that nearly 75% of B2B buyers said in the survey that buying from a website is more convenient than buying from a sales representative. Furthermore, 93% said that they prefer buying online rather than from a salesperson when they have decided on what to buy.

 Delivering a digitally enabled B2B selling model because digital channels are here to stay. B2B e-business and channel strategy professionals and their ecosystem partners must create websites that network B2B buyers researching online with call centers, inside sales agents, field sales professionals, and their own internal websites.

In 2017, the “Death of a (B2B) salesman report” has been updated by the author Andy Hoar as business leaders are continuing to automate sales processes and promote digitally enabled commerce:

 53% of the B2B buyers Forrester surveyed in 2015 preferred to gather information on their own, as opposed to interacting with a sales rep. Today, that figure has grown to 68%. B2B buyers want to do their own product research

 The survey found that upskilled inside sales will play an even greater role in all phases of SMB and enterprise sales than initially predicted in 2015.

 Shifting from offline to online sales is both cost- and customer-effective. Companies such as Coca-Cola and Levi Strauss reported that shifting its B2B customers to a self-serve portal increased their revenue by 10%.

As an example, German based software start-up foxbase.de has started to develop a solution for digital B2B sales. Likewise, in a professional sales conversation, customer and sales staff of a selling company can easily find the best product from a wide range of product portfolio online. Henkel Adhesives B2B has engaged with foxbase and launched multilingual digital product selectors (DPS) for different industrial adhesives categories. Customers provide their individual needs and, based on this information, the DPS searches for the best suitable product through filters, and recommends up to three products. Prices could be made visible based on stipulated volume agreements between the supplier and the customer. The DPS is directly linked with the supplier’s lead management system and search behavior, combined with different information coming from the user, can be used for conversion and optimized product recommendation through machine learning. Data from DPS is stored, analyzed and visualized in sophisticated dashboards and reports to validate customer requirements and identify trends.

First, understand the customer, then increase the value

The seller needs to get closer to the B2B and B2C customer and create engagement instead of demanding generation. This can be achieved by understanding the Customer Journey through Analysis (CJA). The funnel concept fails to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer. A more sophisticated approach is required to help marketers navigate this environment, which is less linear and more complicated than the funnel suggests. We call this approach the consumer decision journey.

1.1.2 E-commerce within multi-channel strategies

With the shift towards online business (e-commerce), the number of channels being used by consumers has expanded. CJA offers a company the possibility of visualizing and quantifying the CJ across multiple channels with the added value of understanding and optimizing the journey by analyzing large volumes of data. It should then provide more relevant and differentiated insights into consumer behavior, which is more complex today, since customers go through a sequence of non-linear interactions. While in 2016 50% of worldwide data has been collected, only few insights have been generated to introduce data-driven decision-making.

Predictive data analytics providers offer applications for finding complex patterns, profiles and common interaction paths to increase marketing effectiveness and customer satisfaction. Scientific research and studies have proven that the idea of online-to-offline flow (and vice versa) is common sense and online media can lead to offline sales. Sufficient technology (e.g. session-based tracking, multi-touch cookies and algorithmic attribution services), data coordination and knowledge management between business departments are the first steps in developing a new value model of marketing (Skinner, 2010), which includes the value of both online and offline media to sales. The Makebuzz example - how marketing automation impacts media spending- resulted in a decrease of 10% from the marketing budget due to a shift of approximately 25% of online media budgets (paid touch points), which reflected the growing importance of internet media and incorporated marketing and sales data from both channels to form a comprehensive CJ picture. By understanding the impact of all media to e-commerce, store and call center, Makebuzz.com found a way to ‘right size’ the complete customer journey with their advanced CRM technology. They transformed a media services firm from a single point offering to a significant technology and organization. Revenue grew from $80 to over $450 million. Table1 provides an overview of the CJA phases in more depth.

Table 1: Phases of customer journey analysis

Source: Thomas Menthe, 2018