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 Value-­‐Selling AutomationTM: Overview and Motivation A White Paper Q3 2014 © 2015 DecisionLink Corporation – All rights reserved ABSTRACT In a seemingly paradoxical convergence of interests, buyer and seller expectations are precisely the same when it comes to justifying investments for automated solutions to business challenges. Both parties recognize that their key to success is an effective business case. Yet B2B buyers report that only 20% of their sales representatives are genuinely interested in understanding their business challenges. Moreover, those same buyers report that 80% of sales representatives just “pitch product”, most without adding or bringing any value to the table1. The cause of this ‘disconnect’ appears to be that the sales channel is simply not prepared to engage buyers in business value-­‐centric conversations. Lacking appropriate knowledge, insight, and tools, sales teams and partners struggle to meet CSO and CMO expectations. Strengthening sales channel readiness requires an effective value-­‐selling approach – featuring an appropriate process, framework, content, and automated tools. DecisionLink was founded to help B2B solution companies address this value-­‐selling dilemma. In this, the first of a series of white papers, we clarify the expectations and challenges from both buyer and seller perspectives, characterize the elements of a systematic approach, and provide a checklist of considerations for evaluating automated value-­‐selling solutions. In subsequent papers, we compare the pros and cons of alternatives and provide a framework and approach to building the business case for acquiring appropriate tools. 1
Forrester Research, Global Executive Buyer Insight Survey
© 2015 DecisionLink Corporation – All rights reserved The Challenge BUYER AND CSO EXPECTATIONS ARE HIGHER THAN EVER In a seemingly paradoxical convergence of interests, buyer and seller expectations are precisely the same when it comes to justifying investments in B2B solutions. Both parties recognize that their key to success is an effective business case. Industry analyst research reports that 90% of buyers require quantifiable evidence of business benefits before investing. Yet two thirds of buyers confess that they are poorly equipped with knowledge and tools to create a credible business case. Over 80% of buyers look to their suppliers for assistance in quantifying value.2 On the seller side, CSOs and CMOs recognize that quantifying and selling the business value of their solutions is critical to their success. They understand that their sales teams need a credible way to engage prospects in sales conversations that matter. Given this common motivation, why do B2B buyers report that only 20% of their sales representatives are genuinely interested in understanding their business challenges?3 Why are buyers chagrined that 80% of sales representatives just “pitch product” without adding or bringing any value to the table? The answer to these questions has quite a bit to do with the sales channel’s ‘state of value-­‐
selling readiness.’ ORGANIZATIONS ARE NOT READY TO SELL BUSINESS VALUE An effective value-­‐selling approach must recognize and overcome a number of hurdles. As suggested above, a major aspect of the challenge is overcoming the traditional ‘inertia’ associated with a ‘pitching product’ mindset and/or a solution selling approach that provides generic value claims but stops short of providing the financial justification specificity required for prospects to invest in a proposed solution. Understanding the factors that contribute to this inertia is critical to improving sales channel readiness and to providing all members of the sales team with sufficient motivation and capability to change. IDC Customer Experience Survey and Customer Experience Panel.
Buyers do in fact add that another 30% at least try to understand how their solution will help the
client.
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© 2015 DecisionLink Corporation – All rights reserved Sales rep readiness. Often lacking skills, knowledge, insight, and easy-­‐to-­‐use tools, reps are understandably averse to changing their traditional approach to selling. Reps typically talk about ‘deals;’ buyers think in terms of ‘projects that deliver business outcomes and require investments.’ Moreover, sales reps prefer to be self sufficient in exercising account control. Traditional approaches to creating a business case often leave the sales rep on the sidelines as a deal ‘coordinator’ and require high-­‐priced business consultants (ROI gurus) to use and explain complex ROI models. As a result, business cases are created for only a very small percentage (perhaps 10 – 15%) of deals. Frustrated by the lack of support while being told that a business case for each deal is mandatory, morale deteriorates and sales rep turnover is predictably high. Inside sales teams are challenged to initiate meaningful sales conversations with prospects. Insight into the potential business value of a solution to a prospect provides an effective way to gain attention. Partner relationships also suffer. Because they lack sufficient insight into the business value of your solutions, partners typically are not as effective as your top sales reps. Lacking information and an effective engagement process, partners often take the path of least resistance and turn to other easier-­‐to-­‐sell vendor solutions. Marketing campaigns may lack insight into the precise value of a solution to a target buyer. This lack of focus results in a ‘shotgun approach’ to marketing, missing the mark on properly qualified target buyers. The entire sales ecosystem (sales teams, sales enablement, product marketing, product management, and service delivery teams) needs a consistent, well-­‐defined value-­‐engineering approach for effective collaboration. This approach should feature: • A consistent structure and proven methodology to empower your sales ecosystem to collaborate in quantifying the business value of your solution; • Ability to continually enrich this business value content with customer / prospect experience; • Ability to align and embed the content into your sales methodology or process so that it can be applied ‘all the time’ -­‐-­‐ engaging 100% of qualified prospects in meaningful sales conversations and projecting precise value into customer engagements, leading to a defensible business case; • An automated platform with a single version of ‘solution value truth’ -­‐-­‐ in lieu of propagating ’silos’ of inconsistent, out-­‐of-­‐date, and inaccurate information across the organization that impede scalability, responsiveness, and quality engagements. We describe an appropriate approach below. © 2015 DecisionLink Corporation – All rights reserved RESULTS ARE PREDICTABLY DISAPPOINTING Lacking insight into a solution’s precise business value, an effective buyer-­‐centric engagement process, and automated tools, the selling channel struggles to engage prospective buyers in an effective way. The results are evident in sub optimal sales performance. • Too little, too late. Business cases are prepared for only a small percentage of deals. When they are done, it’s usually too late in sales cycle to ‘protect and defend’ a proposal. • The pipeline is cluttered. Without proper validation, the pipeline contains too many unqualified leads – thus reps spend too much time ‘prospecting’ and not enough time ‘selling.’ • Shockingly low close rates (averaging 46-­‐54%). The inability to have “buyer focused conversations” is a key factor causing companies to lose as many as 50% or more of the deals their sales organizations forecasts to close.4 • Average sales price (ASP) is too low. Discounting is done with insufficient consideration of the business value of the solution. • Cost of sales is high. Significant resources are expended on “bad business” and sales cycles are elongated by having poorly defined buyer business objectives. The solution to the ‘readiness challenge’ is also clear. CSOs and CMOs agree that their number 1 challenge is to enable buyer-­‐aligned messaging for their sales channel and marketing efforts5. The channel needs a more effective process, framework, and supporting tools to meet buyer expectations. Yet when customer-­‐aligned, customer precise value-­‐selling occurs, the results are remarkable. One company’s internal study showed a near 50% improvement in close rates with a 30% higher Average Sale Price (ASP) when using their value engineering team and resources. Sounds encouraging, right? Regrettably, absent the enabling technology described above, these successes only occur on 12-­‐15% of their deals. Moreover most of these engagements occur late in the sales cycle; are almost exclusively limited to existing, major customers; and each requires several weeks of specialist time, at a cost of $25K-­‐75K per engagement. Imagine what would happen if the “all good, except fors” could be eliminated. Below, we explore the attributes of an effective value-­‐selling approach. 4
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CSO Insights 2014 Survey of 1000+ Chief Sales Officers.
Corporate Visions 2013 Survey of CSO and CMO executives. © 2015 DecisionLink Corporation – All rights reserved Solution: An Effective Value-­‐Selling Approach VALUE-­‐SELLING DEFINED While there appears to be growing agreement that value-­‐selling is critical to competitive differentiation and sales success, there is little agreement on the goals and scope of value-­‐
selling solutions. We define ‘value-­‐selling’ as the sales discipline of engaging buyers in value-­‐centric conversations focused on their business challenges, prescribing a solution that delivers measurable business outcomes, and provides the financial evidence they need to make the decision to invest. There are a few terms in this definition that merit further clarification. • ‘Conversations’ suggest value-­‐selling is not a one-­‐time event. It requires give-­‐and-­‐take discussions with a buyer and continuous discovery throughout the entire sales cycle – covering all stages in the sales process including pipeline validation, forecasting, opportunity and account planning, proposal and business case preparation, and negotiation. • ‘Value-­‐centric’ suggests that the conversations and proposed solutions are clearly aligned with the buyer’s performance goals (e.g., key performance indicators) and can be quantified in monetary terms to support the buyer’s business investment due diligence process. • ‘‘Financial evidence’ implies a compelling business case that is refined over time – ensuring that the buyer owns and can defend the result. Initiating and sustaining ‘conversations that matter’ requires a process, framework, and content that (a) helps quantify the business value of solutions and (b) promotes collaboration to create a shared business case. © 2015 DecisionLink Corporation – All rights reserved GREAT SALES CONVERSATIONS LEAD TO A SHARED BUSINESS CASE Launching and sustaining great sales conversations requires a collaborative focus on building and iteratively refining a shared understanding of the value of the seller’s solution to the buyer. 6
Because the resulting business case must be ‘owned’ and defended by the buyer, the underlying process used should exhibit the following characteristics. • Traceability. The business case methodology must navigate from qualitative high-­‐level statements of value (e.g., Improved Customer Satisfaction) to rationally quantifiable financial metrics (e.g., 5% greater customer retention which is worth $200K). • Structure. Moving from qualitative to quantitative content is accomplished through the application of a structured framework that captures the rationale and metrics underlying the financial values. • Credibility. The resulting business case captures the best management judgments made by the combined expertise of all interested parties. Articulating, socializing, and gaining consensus on these judgments is more important than the actual financial numbers produced since they capture the thinking that drives management decision-­‐making. Because the rationale is explicitly visible to both the buyer and seller, each may determine whether the result properly represents their own perspective. • Non-­‐intrusive. The buyer must be provided with an approach that minimizes the buying organization’s expenditure of time and energy throughout the process. The seller is also interested in an efficient, cost effective approach that scales its ability to deliver business cases to all prospective buyers in a consistent, repeatable way. To achieve these goals, it is incumbent on the seller to provide the buyer with a quantifiable representation of the value of a seller’s solution(s) to a buyer. We refer to this construct as a ‘Value Map’ and describe this framework as follows. We define ‘buyer’ as the individual who makes the decision to invest in a solution. Other
possible roles are the decision influencer, champion, or purchasing agent.
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© 2015 DecisionLink Corporation – All rights reserved A STRUCTURED APPROACH: THE IMPORTANCE OF A SOLUTION VALUE MAP The “value map” for a given buyer solution is the core construct upon which great sales conversations can take place leading to a credible, shared business case. To appreciate its significance we introduce the concept of a Solution Value Map as illustrated below. Figure 1. A Solution Value Map Hierarchy provides the ‘center of gravity’ for an effective value-­‐selling platform Each B2B Solution provides business value by contributing to one or more Key Performance Indicators (KPIs). Each KPI characterizes a business benefit that can be measured (e.g. Improved Customer Satisfaction). Each KPI results in one or more positive Business Impacts -­‐-­‐ clarifying how the KPI contributes to business improvement in terms of: Increasing Revenue, Improving Asset Productivity, Improving Labor Productivity, Mitigating Risk, or Eliminating Cost. Each Business Impact is quantified by one or more disjoint Metrics (conveyed in numbers, currency, time, or percentages) providing the basis for a defensible benefit calculation. While a detailed discussion of this framework is outside the scope of this paper,7 an example should suffice to clarify the concept. For a CRM Customer Service solution, it is likely that both the seller and buyer will recognize the importance of at least two KPIs: (1) Improved customer self-­‐service and (2) Improved assisted service. As the table below suggests, the KPI ‘Improved customer self-­‐service’ can be quantified in a number of ways. In the table below, we examine the business outcomes and metrics associated with the former KPI. DecisionLink will publish a separate white paper describing the Value Mapping methodology in
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© 2015 DecisionLink Corporation – All rights reserved SOLUTION: CRM CUSTOMER SERVICE KPI: IMPROVED CUSTOMER SELF SERVICE Business Outcomes Metric Description Improve Labor Productivity Reduced Number of Call Center Agents By customers answering their own questions on the web, via mobile and IVR they are less likely to call the call center and reduce the overall FTEs required to assist Increase Revenue Improved Cross Sell / Upsell By knowing the customer and his or her service history the self-­‐service channel can present the most relevant offers to each customer. Figure 2. The KPI ‘Improved customer self service' can be quantified in a number of ways QUANTIFYING THE METRICS THAT DRIVE MEANINGFUL CONVERSATIONS AND CREDIBLE BUSINESS CASE Each Metric in a Value Map represents a quantifiable unit of business value. As illustrated in the figure below, there are three (3) factors that drive the calculation. Value = Driving Factor
X
Financial Factor
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Improvement Factor
Figure 3. Three factors comprise a Metric •
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The Driving factor is a primary characteristic of the Buyer organization that determines a distinct business value element of a Solution. The Financial factor is the assumption that monetizes the driving factor. The Improvement factor represents the projected improvement over current performance. When this factor is expressed as a range of values (conservative, probable, aggressive) a buyer is given important insight into the potential benefits and risks of an investment. This is an important ‘lever’ that provides both buyer and seller the flexibility to experiment with a range of assumptions that affect the projected business value of an investment. By way of example, consider the metric ‘Reduced Number of Call Center Agents’. If we assume that a Call Center with 500 Agents with an average annual cost of $20,000 per Agent can be © 2015 DecisionLink Corporation – All rights reserved improved by our CRM solution in a range of 5 – 15%, then our projected annualized savings is $0.5M to $1.5M. Metric: Reduced Number of Call Center Agents Driving Factor Improvement Factor Financial Factor 5% Number of call center agents 500 Annual call center agent cost $ 20,000 10% 15% $ 500,000 $ 1,000,000 $ 1,500,000 Figure 4. Sample calculation of Metric Thus a Value Map provides the collection of Metrics that, taken together, quantify the business value of a Solution. Properly defining the factors that comprise a Metric leads to the sales discovery questions that are essential to a meaningful conversation between the buyer and seller and to a credible business case. If quantifying a solution for a specific buyer were as simple as calculating a few metrics, building a business case would be a trivial exercise. The reality is that solutions are composed of several KPIs, with multiple potential business outcomes and associated metrics; and each buyer has a different set of business challenges to address. Moreover, metrics may vary from industry to industry, competitor to competitor, the buyer's role, and numerous other situational factors. This complexity is why it takes a specialist (or teams of specialists) to perform the function today, thereby inhibiting the ability scale delivery of value-­‐selling. To create a precise business case for a buyer, the Value Map must be applied to a given buyer’s situation. This requires collaboration to (a) select the value statements and associated metrics that resonate with the buyer and (b) replace default data and assumptions in the Value Map with available data and assumption values that the buyer can defend for each metric. Changing values for the Driving Factors, ratcheting improvement assumptions up or down based on the buyer’s experience and comfort level, and inserting customer provided financial factors leading to a defensible, credible business case. © 2015 DecisionLink Corporation – All rights reserved Value-­‐Selling Automation Considerations While a detailed checklist of considerations is outside the scope of this paper, it is important to note that an appropriate level of automation is typically required to support and scale the delivery of this process so that it can be used by all participants for all deals. Many organizations begin by creating Value Maps using Excel or ROI tools. While the use of spreadsheets and ROI tools offers some flexibility to customize models to a specific buyer’s needs, their suitability as value-­‐selling tools is limited based on the following considerations: Criteria Consideration Ease of use. Are the spreadsheet models easy to use by all members of the sales team? Extensibility. Can the models be used by channel partners, inside sales teams, strategic account reps, and core general business reps? Usability by sales reps Collaboration. Recognizing that every member of the team that engages and interacts with the buyer needs to participate in formulating the solution’s value proposition, can you promote efficient collaboration across sales, sales consulting, marketing, implementation services, and value engineering. Flexibility – Can a sales person refine the model to adapt to specific selling situations – including specific compelling business events, industry considerations, and competitive differentiation? Sales cycle coverage Can spreadsheet Value Maps be leveraged to support all processes in the sales cycle (pipeline management, lead to opportunity conversion, opportunity to close)? Cost Do the models require costly specialized consulting skill levels to support? Scalability Do you have sufficient business value consulting expertise available to support all deals in the pipeline or will only a small percentage be supported? Timeliness How quickly can your models be updated to reflect enhancements that increase solution value? Quality Can your models be validated and refined based on customer experience? Can you evolve the underlying value statements and metrics to ensure that your sales reps always communicate the right message, at the right time, for each specific prospect? Visibility As part of your opportunity and account planning process, do you have a single system of record where you can track which forecasted opportunities have (a) quantifiable propositions associated with them and (b) a customer-­‐validated business case? © 2015 DecisionLink Corporation – All rights reserved CRM integration. Can you drive your internal and customer-­‐facing value content directly from your CRM application? Integration with other sales tools Sales portal integration. Would integration of a value-­‐selling platform with your current sales portal lead to higher sales channel adoption of your value-­‐selling strategy because content can be adapted to the right situation, every time? To overcome the limitations of spreadsheets, there are various methodologies and technologies in use today – with widely varying sales cycle coverage and degrees of automation. The decision of which route to take requires consideration of two essential factors: 1. Solution scope: how much of the sales cycle does automation support? 2. Solution functionality: does the platform combine ease of use with the rigor that leads to rich conversations and a compelling business case? DecisionLink has published a separate white paper that provides a checklist of considerations associated with both factors. © 2015 DecisionLink Corporation – All rights reserved Summary and Conclusions This paper has focused on the whys and wherefores of value-­‐selling automation. There are a number of key takeaways. 1. Collaboration on a shared business case represents a win-­‐win situation for buyer and seller. Buyers and sellers both gain by collaborating on a process using a framework that quantifies the business value of solutions to business challenges. Buyers justify investments required to achieve business goals and improve performance. Sellers provide a systematic approach that quantifies precisely how their solutions add value. 2. Sales channel ‘readiness’ to sell business value needs to be strengthened. Lacking insight and tools, direct sales teams, inside sales, partners, and marketing teams struggle to engage prospective buyers in an effective way. Moreover, value-­‐selling is a team effort – requiring collaboration across sales, sales consulting, marketing, implementation services, and value engineering. Every member of the team that engages and interacts with the buyer needs to participate in formulating the solution’s value proposition. 3. Improving sales channel readiness requires a systematic approach. Value Maps provide a proven framework for quantifying the business value of solutions. To create a precise business case for a buyer, the Value Map must be applied to a given buyer’s situation. This requires collaboration to (a) select the value statements and associated metrics that resonate with the buyer and (b) replace default data and assumptions in the Value Map with available data and assumption values that the buyer can defend for each metric. 4. Evaluating automation options requires considering both the scope of the value-­‐selling approach and platform capability. The goal of automation should be to promote meaningful conversations throughout the entire sales cycle leading to a defensible business case and closure of more (and larger) deals faster. While the use of spreadsheets may be a good way to start, they are inherently limited in their ease of use, scalability, and sales cycle coverage. Thus automation options should be evaluated in terms of their ability to support (a) the full sales cycle (pipeline management, lead to opportunity conversion, opportunity to close); (b) functionality; (c) ease of use by all members of the sales team (direct sales, inside sales, partners); and (d) scalability. 5. Take the time to build your business case for automation. The use of Value Maps and the process outlined herein can also be applied to help you justify investment in value-­‐selling automation. (The subject of white paper #2) Interested in learning more? DecisionLink was founded to help B2B companies attain the pinnacle of customer-­‐aligned value selling. To find out more about Automated Value SellingTM from DecisionLink, receive a complimentary Value Assessment or find out about our Money Back Guarantee, contact us at 800-­‐670-­‐8301 x1 or at [email protected]. © 2015 DecisionLink Corporation – All rights reserved