Price Getting

“I know what we have is differentiated. Communicating that effectively and consistently is a different issue.”

Push your thinking to outcomes. What will a customer “get” for doing business with us? What impact or outcome will result from a purchase from a supplier? Yes, it is a bit of a semantic play, but the pricing business spends way too much time talking about value without getting to the important issue: what is it that customers really want to get because of doing business with us or a competitor, and how does doing business with us result in a better outcome? In B2B, the results a customer looks for can be reduced risks and/or costs, new or faster product introductions, and innovative products that drive both more revenue and profits. When pricers focus on outcomes along with costs, they can tell if their costs are reasonable if the outcomes justify the prices they set and if the prices are fair. When salespeople begin to focus on outcomes, the benefits are even more dramatic. After all, it is the outcome the customers really want, and that leads to higher customer satisfaction and long-term loyalty. Since procurement people are often disconnected from real outcomes, the customer conversation moves to people who really matter: users and decision-makers. If salespeople can learn to have the right conversations with those people, they will be better at crafting the solution to meet customer needs. That inevitably is going to move beyond the core product and service to include features that augment the customer experience.

“I want them to be confident before stepping up to the plate.”

Sellers often negotiate with experienced buyers who use well curated tactics to challenge prices during a negotiation. As a result, sellers should use three important measures to validate the right price for their customers. First, Sellers must identify the tactics being used to drive prices lower. Next, they must offer value based tradeoffs (Give-Gets) to uncover what their customer values and what they are willing to go without. Finally, sellers must quantify the financial value they create. These three measures help shape the sellers confidence in the price.

“I know what we have is valuable and differentiated. I need my team to be confident in this as well.”

Procurement and buyers want us to think we sell a commodity. If we hear it enough, we tell ourselves we are. Think about the value you really deliver to your customer. The truth is, it doesn’t matter if you are (or think you are) selling a commodity when it comes to value. Some time ago, Holden Advisors assisted a company that sold construction dirt by helping them better define their value. Is there a better example than dirt to prove that a commodity can be differentiated? Think about it. When only 30% of B2B buyers make decisions based exclusively on price (noted in Negotiating with Backbone), it’s not surprising the other 70% care about value if they are thoughtfully informed about it. We’ve found this is true even with governments, who are typically price and RFP oriented. Buyers won’t spend time talking to you at the negotiation table if you don’t bring value to their business. If you know your solution is valuable to your customer, don’t believe procurement when they say you’re a commodity. Find out the differentiated value your product brings to your customers, and charge for it.

“We can’t afford to lose them. How do we set ourselves up for success?”

The most important thing is to know your customers. If you truly understand your customer’s business model, you can evaluate how their sales will be impacted (or not, more likely) by your pricing. If you provide a discount, will they sell more? It starts by relentlessly discovering the value you provide. Talk to your customers or have a third party talk to them. Validate why they buy your products and uncover new reasons why they like you. The key is to learn what incremental financial benefit your product gives to customers relative to your competitors. Value drives profit to their bottom lines, and you can share in that mutual benefit through pricing. Finally, tier your offering. Customer needs vary across segments. Versioning your products steers Value Buyers and Poker Players towards your flagship product, while Price Buyers will settle for a flanking offering that maintains price-value alignment. By removing the most valuable features from the flagship version, these Give-Gets™ create powerful negotiating tools that help you get your price after you set your price.

“We need visibility that we don’t have.”

Achieving growth boils down to pursuing the right mix of opportunities that are expected to deliver revenue within the goal time frame. This expected revenue analysis can be challenging when your mix of potential opportunities includes upsell of existing services, cross-sell of other existing services, and development of new capabilities. However, performing a directional value assessment across a list of opportunities can provide insight into the value that each delivers to a customer and the associated revenue potential. Layering a feasibility score on top of the impact assessment allows companies to segment opportunities into quick wins and medium-to-long term initiatives, while de-prioritizing high-effort / low-revenue opportunities.

“We need a plan for when we’re up against Poker Players.”

Give-Gets are features or levels of service that you can add or subtract to adjust the value delivered to the price paid. They reset the client conversation from “what’s my discount?” to “how do you impact my business performance?” It can include things like higher or lower grade ingredients, dedicated customer service versus access to a call center, or extended versus 30-day payment terms. Give-Gets force the buyer on the other side of the negotiating table to reveal the true value of your offerings. So, when the negotiator (often procurement) tells you that you must match a competitor’s lower bid, you say “no problem, but to match that price, I’ll just have to move you to this lower offering tier or remove this value-added service.” If the client objects, congratulations! Your team has just called a Poker Player’s bluff and protected the integrity of your pricing. If the client agrees, you win as well, by accurately matching customer value to price. Then start out the next quarter, or next year, right by completing a full inventory of your product, service, and business terms portfolio to expand the Give-Get tool kit you can offer to Sellers. Your whole team will thank you for your leadership to enable profitable growth.

“The sales process starts off well, but then we get stuck in procurement every time.”

To be successful in defeating the “pricing buzz saw” of procurement professionals trying to commoditize high-value products and services, sellers must have a high level of preparation and anticipate some of the tactics that procurement will use and have ready answers for the questions they ask. Procurement tactics can be overcome by preparing sales with counter tactics, better value information, and working together with pricing professionals to improve the profitability of deals. In summary, here are the actions that a company can take to prepare for procurement negotiations. For Sales, (1) Learn the tactics of procurement and organize them into a list. (2) Collaborate with the pricing team to develop a basis for responding to the procurement tactics. (3) Develop a procurement negotiations playbook to anticipate the tactics and have ready responses. (4) Train the sales team and senior executives on how to conduct procurement negotiations before they face the procurement specialist. For Pricing (1) Develop analytics that quantify the value of the company’s offerings. (2) Organize rules of engagement to support the sales playbook. (3) Participate in building responses to the list of procurement tactics. (4) Support and/or attend the sales training on procurement negotiations. Remember: you are in this together. Your mission is to close profitable deals. Just as procurement is measured on profit improvement by cutting costs, sales and pricing should be measured on profit improvement by securing better prices. With thoughtful preparation and collaboration on the part of sales and pricing professionals, companies can blunt the effect of commoditizing procurement executives. Yes, it does take time, but the rewards can and will be significant to those brave enough to prepare for and execute better plans and tactics for negotiations.

“Typically we put our best sellers on the largest accounts. Is that the right move?”

Ultimately, prioritized sales opportunities roll up into individual accounts, and it’s critical that the right resources are managing your different account types. Most B2B organizations have a distinct sales structure of inside sales (serving many low-spend accounts), strategic sales (serving a moderate number of higher-spend accounts), and key account teams (serving a very select number of your best customers). Typically, more successful sellers are responsible for larger accounts, but this traditional view ignores a key account characteristic. Some accounts, even key accounts, can be treated as a maintenance account. Maintenance accounts appreciate the value you deliver, often buy multiple services from you, and therefore allocate a high share of wallet to your organization and have a low churn risk. These accounts can often be served by a relationship-driven seller who thrives on maintaining this relationship and quarterbacking customer service or technology issues. On the other hand, some accounts are high-growth accounts. High-growth accounts require strategic-minded sellers who can ask probing questions to uncover problems and pain points that your company can solve, either with existing services or by leading a value engineering team to develop new solutions can be commercialized. Both seller personas are critical to your account health and allocating them to the right accounts will drive both growth and retention.

“We always prepare, but often fall short when it comes down to must-win deals.”

The short answer… the same way you should negotiate with any customer you are interested in doing business with. You need to analyze customer needs, understand the buying center, evaluate likely buying behavior and develop your negotiation approach. However, you cannot stop there. You should also outline different scenarios based on different customer responses to your primary negotiation strategy. Develop a secondary negotiating strategy to ensure you are prepared for the customer’s response and even the competitor’s response.

“I worry my sellers aren’t having the right conversations with our customers to show our value.”

It takes planning to avoid leaving money on the table. Planning helps salespeople be better prepared for the tough questions and further demands from customers. Ask yourself three key questions to determine if your sellers are having the right value conversations with their customers. Do my sellers link what the customer needs to what the company offers? Does the sales team map the buying center to understand the needs of each stakeholder? Does the sales team quantify the financial impact that we create for our customers?