Great salespeople know building value for their product or service is the best way to a successful close. In a previous post Talking About Money, I wrote about the importance of getting the prospect to understand the monetary cost of their problem. Now let’s look at how to change the focus from the price the customer will pay to benefits they receive.
For products or services with a small price tag, building value is not as important. But great salespeople know the larger the investment you ask the prospect to make, the more importance of building high value. Think about toothpaste. (If you are a frequent reader you may ask why I always choose toothpaste for small sales examples. Everyone uses and buys it so can identify with the product and the purchase decision.) We all have a preference for a brand built on our history using it. And most sizes and brands of toothpaste are priced about the same. I shop at a couple of stores which bundle several packages and offer a lower per tube price. That’s how they add value at the low end of the pricing spectrum. They use branding to build value, depend on successful usage history and sell in larger quantities.
Now think about a car, a washer-dryer, a home. For the consumer this is a high value purchase. Or production machinery, raw materials, professional engineering services or even the purchase of an existing business in the commercial world. We spend lots of time building value in the prospects mind. Great salespeople know large infrequent deals are won when the buyer is convinced the cost of making a change is less than the cost of not doing it.
Talking About Value Equation
The definition of Value I like best is the relationship between benefit and price:
VALUE = BENEFIT / PRICE
A prospect considering whether to buy looks at what they will get for what they have to pay. If the benefit is equal to the price, value equals one. When the price exceeds the benefit to the buyer the value is less than one and the sale is unlikely. But when you, great salesperson, have shown the benefit to be greater than the price, my favorite equation yields a value greater than one. The higher the value the easier the close. So by asking good questions the salesperson finds out the cost of having the problem and the reward for solving it.
Building Value Begins With The Benefit
Let’s think of sales where the buyer is expected to make a major investment. During the early part of the sales process the great salesperson has uncovered a problem they can solve. (Read Qualify Hard-Close Easy.) Great salespeople continue to ask questions based on their experience solving similar problems to increase the benefit.
When I worked for a fire protection company we sold fire detection and suppression systems for data processing centers. The sensors would alarm and discharge Halon into the data center to stop a potential fire at the incipient state. Only a brief shut down of the data center resulted. Long enough to isolate the potential source of the fire. One customer was a data center for a large pharmaceutical company. The data center processed $20 million a day in invoices for the company. By demonstrating the benefit of not having a catastrophic fire for the price of only one percent of one days invoicing, we made the deal. Of course the company I worked for had demonstrated capability and experience to take on the project.
When To Talk About Price
At some point the prospect will ask: “what will this cost me?” Before that point the great salesperson has lead the prospect through a discussion of the all the costs of staying the same. Salespeople know how their product or service benefits a customer by solving problems. And they know there are obvious costs associated with the problem and hidden, or unrecognized costs, too.
Commodity products (those where the buyer has little differentiation between products) are often sold by offering the lowest price. When I sold safety products for a distributor, all the buyers wanted to know was how my price compared with what they were currently paying. My strategy was first to ask a few simple questions: “How many competitors did they buy from?” “What did it cost to process a purchase order from placement to payment of the invoice?” “What was the value of all the safety products in inventory?” Buyers only cared about showing their boss how much they saved on each purchase. But by asking about the first two questions got them thinking about the other costs their company incur with each purchase. And by looking at how much cash they had invested in inventory we could discuss ways to reduce it.
So I made sales not by beating the competition by a couple of dollars on a box of earplugs but by showing the benefit of reducing the number of vendors and purchase orders processed while freeing up cash from having a large inventory. All these are “hidden costs” until I brought them to the buyer’s attention. So reducing these hidden costs becomes a benefit. Once great salespeople have gotten all the benefits of making a change out, then is the time to discuss price. When you do your job well the value equation will yield a result greater than one and you’re on your way to closing the deal.
What You Can Do Right Now Talking About Value
- Think about how you build value in the customer’s mind
- Understand the importance of all the costs of the current situation
- Know how to build benefits to be greater than the price