Make sure your Value Adds actually add value!

The concept of including additional “Value Adds” in a proposal has come up frequently lately. In the interest of keeping this posting short (as readers have recommended!), I’ll address only one issue around Value Adds at this point: it is important to make sure that your client actually understands the value of what you are including.

This sounds like pretty basic advice; after all the word value is included in the phrase Value Add. But the key is to make sure that you can show what the specific Value Add means to that specific account, and then, to the extent possible, quantify it. I’ve seen many situations where a salesperson fails to do that.

Here’s a recent example: A salesperson for a technology company wanted to improve the overall value of their solution by adding some additional training for the operators. This was to be included in the proposal, as a bullet point under a heading of “Additional Value Adds”. The customer contact with final approval on the proposal, a fairly senior executive at the organisation, would have had very little idea what that meant, let alone the value of it to the organisation.

It turns out that this Value Add was about building new skills in the operators, beyond the skills required to operate the equipment (which were covered under "Training" elsewhere in the proposal). This would be of tremendous interest to the operator community, who view it as an opportunity to advance their skills, and to get involved in more interesting work within the company. If they had those skills, they could be more proactive about working with other parts of the organisation, and improve the workflow within the business. This could result in reduced administration effort, compressed development timelines, less rework, fewer errors, less frustration, etc. So clearly, this Value Add really could add value, but it was in danger of being sidelined.

To make sure that your Value Adds aren’t under-valued make sure you focus on three areas:

1.  1. Identify what the Value Add means. In the example above, there was the very real possibility that the Value Add would be confused with the training required to operate the equipment, thereby eliminating the additional value. Keep your explanations clear, concise and relevant, but if additional description is needed, make sure to include it.  

2.  2. Specify what it means to the specific individual(s) reviewing the offer. It is important to understand what your audience cares about. If the audience is the operators, discussing the opportunity to learn new skills and advance their career would have been extremely relevant. In this case, though, the audience is senior executives, and operators' career paths may be less compelling. We’ll need to translate the Value Add into business metrics that matter to management: improved efficiency, lowered costs, shortened development timelines, etc. Get the impact right for the right audience.

3.  3. Quantify the impact of the Value Add. It can be hard, but the better we are at quantifying the impact, the more compelling the Value Add will be. We could work with operators, and other departments, to possibly identify the savings from improved productivity, or reduction in waste. We might even model the impact of a decrease in employee turnover in the operator community. In this specific case, the salesperson was leveraging privileged relationships to get access to training that would cost thousands of dollars on the open market: another opportunity to quantify the impact!

Following these three steps can significantly improve the perceived value of your Value Adds, and improve your chances of success! Over time, you may even find that you require fewer Value Adds as you ability to show their impact improves...  

Selling in the Post-GFC world: Commercial Acumen in the salesforce

Business-to-business selling in the post-GFC has been tough. Budgets have been cut, investments postponed, entire functions down-sized out of existence. Yet some selling organisations continue to be successful, while others have stumbled. I’ve been looking at why some firms have been better able to weather the storm than others, and will be sharing some thoughts over a series of articles.

One of the key drivers of success in B2B sales currently is the amount of applied Commercial Acumen in the salesforce. Successful organisations are much better at putting together a compelling business case for the client company, clearly demonstrating the value created by the decision to move forward. What I’m calling Commercial Acumen here is a combination of financial and business smarts that allows someone to generate a business case showing the client the clear difference (in profitability, or earnings per share, or EVA or whatever key business metric is important to that client) the seller’s products or services can make.

Commercial Acumen is important in this economic environment for reasons that all come back to the same theme: budgets are tight. Purchasers (whether business-led or procurement) are coming under immense pressure to justify any spend that they make. This leads them to require harder business cases from suppliers, or to simply not spend. There’s a lot of fear out there, and significant risks to the purchaser, and organisations that don’t address this will have trouble moving forward.

On a similar note, there is much more executive intervention in spending decisions than ever before. Decisions that previously could be approved at one level of the business now have to be made two or even three levels up. We’ve seen situations where business unit head approval is even required for any interstate travel ($50 on Tiger!). Selling organisations need to recognise that their proposals are being looked at by a much more senior audience than before. This audience has completely different, and more commercially sophisticated, expectations.

From my observations, there are three levels of Commercial Acumen in a salesforce:

1.    

1.  Price/Performance. Realistically, this is the absence of applied commercial acumen. A salesperson here focuses on lining up specifications against the performance requirements, and demonstrating price leadership. This price focus leads to the occasional win, but tends not to build a long-term relationship.
2. Tactical. Organisations at the tactical level of commercial expertise demonstrate a focus on the operational impact of their products or services. They tend to be very good at the cost-out part of the equation, showing how they can help save the client money above and beyond the price of their offering. Strong and useful relationships can be built with purchasers when operating at this level.
3. Strategic. At the top of the pile is Strategic, where salespeople integrate multiple perspectives into an overall impact statement. A notable difference from the Tactical level is being able to look across multiple functions within the client to identify impacts and savings. Another key difference is the inclusion of strategic priorities of the client, things like growth, increase in market share, customer retention and the like.

Moving from Price/Performance to Tactical is a huge and important maturation for a business. In fact, companies that have not been able to do so over the past 5 years or so are probably no longer with us (or operate in a truly commoditised space). This was true even before the GFC.

But the GFC has shown that firms with that can operate at the Strategic level of applied Commercial Acumen are much more likely to keep growing, or, in some situations, even accelerate growth. These firms are more likely to get approval to move forward with their ideas, more likely to build strategic executive partnerships, and more likely to be retained next time around. I’ve worked with companies to put together Value Proposals (a simple business case model) that emphasise this Strategic element, including a food ingredients company that emphasised the impact on the client’s customer retention, and a document automation company that focused on a client’s incremental improvement in customer acquisition. The Strategic perspective can actually change the entire conversation from a selling conversation to a business conversation.

How to get there? Jumping from Price/Performance to Strategic directly is tough, and I certainly haven’t seen it happen. The first focus needs to be on incremental movement, from one level to the next.

To get to Strategic from Tactical takes a series of concerted efforts. Having a structured Value Proposal template is one step, where the template emphasises looking beyond the obvious, and beyond the current contact, both horizontally and vertically. And, of course, you’ll need to develop some basic finance skills and a comfort level around discussing these topics within the sales team .

Oh, and you’ll need to engage with the client quite intimately to get this right. An organisation can’t reach the Strategic commercial acumen level from the outside. To succeed you’ll really need to be sitting down with the client to put together the Value Proposal with their input and active participation. But that’s a topic for another day!