Making Salespeople Champions of Pricing Strategy
By Dr. Reed Holden
For leaders to foster alignment with sales and pricing people to win profitable business, building salespeople to be price champions can be quite transformational. Sales must team with marketing and pricing to execute pricing and “value” initiatives to yield promised results of increased revenue and profit.
Escape the Margin Death Spiral: Protect Manufacturing Revenue & Profit
For companies with significant investments in plant and equipment, managing the balance between driving margin vs. securing the volumes needed to maintain favorable operating economics can feel like walking on a knife edge. Too much emphasis on margin over volume can lead to poor plant utilization. This forces tough decisions such as whether to shutter capacity. Too much emphasis on volume can lead to disastrous price wars and lost profits. Either approach results in underperformance on key financial measures such as return on capital employed and can destroy shareholder value.
Beyond the Surgeon: Value Selling in the New Age of Hospital Procurement
Working with a team of top surgeons, you’ve developed an industry-leading medical device. But sales have stalled. Surgeons love the product but can’t get it through their value analysis committees. Economic buyers, who have increasing control over the approval process, say they already have a similar product, and unless you are willing to drop your price significantly, they aren’t interested.
Selling medical devices and defending price has become a lot more complicated. To build a winning position, you have to start with a comprehensive framework for customer value.
Getting to Value in B2B
By Dr. Reed Holden
The process of selling has changed dramatically since the Great Recession. Customers can evaluate amongst several “good enough” solutions these days. So how does a sales person help a customer really weigh the difference in their solution versus a competitor? By understanding the value of that solution and sharing the financial results other clients have received by using the solution. Getting to Value is critical for selling today. Here is how value can be uncovered and shared with your sales team. Arm them with value and they become confident in the solution and in defending the price of that solution.
The Case ROITM Method: A Versatile Sales Tool for Defending Price
By Mark Burton and Alex Beram
The Case ROITM is a proven method for quantifying the financial value a customer gains by using a company’s products and services versus the competition. This method yields numerous benefits for both buyer and seller:
- Sales personnel can use the findings of the Case ROI to formulate compelling value propositions and most importantly, to showcase the return on investment (over time) from using their products and services.
- In the course of using the Case ROI to defend product and service value, the seller conveys not only a high level of knowledge of the business and operation of the customer, but a willingness to display the competitive alternative and how they compare.
- It is a powerful tool for building customer relationships, showcasing differential value, and defending price at the negotiating table.
- Additionally, companies glean extremely valuable information from their customers, and are able to feed this back into marketing, sales, and product development. They are able to make more informed decisions about product offerings, and be far more calculated in serving their segments.
Selling to Procurement: The New Normal
By Dr. Reed Holden
Commoditization is accelerating at an alarming rate and increasingly with differentiated high-value products and services. Commoditization means that while these offerings may be more valuable than competitive offerings, there is a strong tendency for suppliers to compete on price. Recent work in medical devices, insurance, financial services, IT services, and professional services has shown that most suppliers in these industries struggle with increasing price competition. In many cases, discounting, combined with the high costs of R&D, supply, service, and support, leaves little left over for the most important indicator of business success: profits.
One of the biggest contributors to profit decline is negotiations with the customer’s procurement arm. Most managers still haven’t faced or even plan to address this very real change in the customer’s business practices. It involves procurement review and negotiations for goods and services. At the same time, procurement processes and goals have matured into professional cost-cutting forces. Importantly, as a supplier, the firm must adapt its approach to accommodate procurement’s involvement in the buying of the product or service. The greatest opportunity for managing price in procurement negotiations is to train and prepare salespeople and executives for the “procurement pricing buzz saw.”
Kick the Discounting Habit
By Dr. Reed Holden
Price discounting has become the crack cocaine of business. A brief high is followed by devastating effects on both revenue and profits. The addiction starts when managers decide to use price discounts to hit revenue targets. They assume it is only temporary, that price discounting is a quick fix to a small problem. Soon that quick fix becomes a major element of business strategy. Eventually discounting becomes the tool of first resort to fight the effects of a market downturn, intense competition, and increased sophistication of buyers.
The real problem is that over time, the quick fix of discounting becomes so ingrained that managers are incapable of kicking the habit. They believe that discounting is a necessary evil–that theirs is a unique and tough business where price discounting is the real test of the abilities of seasoned managers. This is when discounting causes managers to lose sight of what’s really at stake: how customers value a firm’s products and services.
Pricing Innovations: Rocket Plan
By Mark Burton and Steve Haggett
Holden Advisors "Pricing Innovations" article is published in the AMA’s October Marketing Management.Companies can fuel success with a rigorous pricing approach – one that measures customer value, the innovations nature, and the product category life cycle stage.
Pricing Outsourced Services
By Mark Burton
The market for outsourced services - everything from short-term staffing to complete IT outsourcing programs - is in a state of upheaval. With strong, low-cost competitors and increasingly sophisticated customers who play off one vendor against another, there is enormous pressure on service providers to rethink every element of their cost positions and bid response processes. Knowing how best to respond starts with a clear understanding of what clients need in performance and relationships from their outsourcers.
To address the needs for differing client relationships, outsourcers should consider analyzing and correcting deficiencies in three key areas: offering definition, pricing, and sales approach.
In developing offerings many outsourcers still rely heavily on customizing most of their services. But this makes it difficult for customers to understand (and salespeople to explain) what they are getting. It also increases variation, and with it, the cost to deliver and the cost of quality.
On the pricing front, outsourcers have been slow to move away from traditional time and materials (T&M) pricing. T&M emphasizes cost to deliver (inputs) rather than the value of the results achieved (outputs). This invites constant client scrutiny on efficiency and work efforts - especially when low-cost competitors almost always look better on paper. It also puts the outsourcer and client at cross-purposes, undermining trust.
As with any period of market turbulence there are significant opportunities for firms that are proactive about challenges they face. To begin this path outsourcers need to:
- Recognize that some clients want full-blown collaborative relationships, but some will buy on the basis of minimum specifications and lowest price while still others want to maximize their ROI.
- Develop very specific offerings for these different requirements.
- Deploy a range of pricing models that can avoid price-based comparisons by connecting to very clear measures of client value.
Get Out of the Commodity Trap
By Dr. Reed Holden
In the eyes of many business clients, all service firms look alike. These services are viewed by increasingly sophisticated buyers as a series of well-defined commodities that are available from a plethora of companies. Because many service vendors have not updated their offering to meet the evolving needs of their business customers or communicated their unique value to each client, business customers have focused primarily on price in their acquisition process.
To avoid this commodity trap, companies must become adept at diagnosing their customers’ business problems, developing targeted solutions, and communicating this value to the client in terms relevant to their business. Simply stated, the sales manager must become a trusted advisor to the customer, partnering with the customer to deliver greater and greater value to their business operations. Absent this relationship, customers will view low-cost as the only value delivered by their commodity provider and will be happy to let multiple vendors duke it out with low prices.
Research and years of working with clients tells us that the most productive answer is moving up the customer value chain with solutions based on effective value propositions. In our experience, most customers would like their vendors to offer additional services and solution packages, and are quite willing to pay for this added value. To accomplish this, services firms must:
- Recognize that while some customers will pay for this added value, others will not and still others will attempt to “play poker” in the hopes of negotiating value at a lower price
- Understand the needs of their specific customers, and then develop solutions and value propositions that address these needs
- Pass the “acid test” of value by demonstrating value to customers in economic terms.