The 5 simple steps to create a strong value speech.

Based on a recent study from Simon-Kucher Partner:

Out of the 61 interviewed leaders from the chemical industry: 4 of 5 companies do still sell primarily on price rather than value.

This is an example from the chemical industry, but similar experiences can be seen in other industries. Even though most of the companies and management understand that selling value is upmost important to generate higher profitability and create differentiation, why do they still prioritize price focus approaches?

One of the key challenges that I have observed in the last 15 years is why organizations do not sell through value. Even though management pushes initiatives to develop value selling capabilities, the reason is that mainly the salespeople do not have a clear understanding of how and what to communicate to their customers when talking about the value that their offering is providing. Going one step further: one key element of communicating value to your customer is to properly understand what is the value that you provide in monetary means proving the tangible benefits. So this means that salespeople′s confidence to communicate the value to their customers can be increased if they better understand what is the value in a quantified manner that can be provided to their customer. Obviously you should not forget the intangible benefits as those will be supporting the customer′s perception of the value.

In this article, let′s focus on how to quantify the value or in other words to define the key parameters that impact the value, the so-called value drivers. This is the base of clear and confident communication of value towards your customers. You will realize while starting the value quantification exercise that many parameters might be unknown. Don′t be scared here, educated assumptions can be a good starting point that can be further discussed and validated with the customer in a later stage.

Value quantification can become a very complicated, cumbersome exercise: the key is to keep it as simple and pragmatic as possible and here don′t forget: ?good enough is good enough“.

What are the key steps that are required to make a strong value quantification:

1. Based on the USP and identified benefits, qualify the key parameters in Customer′s process that will impact (positively or negatively)
2. For each of the key parameters, identify the KPI and value that can be measured including the generic price for your solution
3. Build a simulation of those key parameters leading to the benefits such as revenue increase, cost reduction, CAPEX reduction, production improvement
4. This will help you to understand what is the value that you possibly are able to create for your customer and you can simulate at the same time what is the share of value that you can capture. Typically, a value-sharing of 100 - 70 % for the customer and 0 - 30% for you is seen as fair. Obviously this is highly related to the potential innovation that your offering provides.
5. By making a few iterations, you will be able to get a sense of what’s the reasonable value to create and to capture. Additionally, this will give you more confidence in the price to apply and later in the negotiation process you will have more insights to relativize the price discussion/squeezing

By using these 5 steps, you will be able to build a strong understanding of the USPs of your offering, the benefits delivered to your customers and even being able to quantify the impact and at the same time the value sharing proposal. You have the capabilities to then communicate the value and the impact of your offering with much higher confidence.

If you can't wait until my next blog and want to learn more about practical tips around value selling: you can download the free ebook "THE 8 ULTIMATE TOOLS FOR VALUE_BASED SELLING".

Enjoy the reading! Steve