Webinar: Selling Solutions Using a Compelling Value Proposition

September 18, 2013

Selling Solutions Using a Compelling Value Proposition

Marty Gilbert, President of Growth Initiatives LLC

www.growthinit.com • 847.732.7400

Bob Sherlock, President of Marketwerks Inc.

www.marketwerks.com • 847.382.6210

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Value Proposition DefinitionA value proposition:• Relevancy… Explains how your product solves customers’

problems or improves their situation.• Quantified Value… Delivers specific benefits (quantified

value).• Unique Differentiation… Tells the ideal customer why they

should buy from you and not from the competition.• Customer Motivation = Perceived Benefits – Perceived Costs• “Value proposition is the #1 thing that determines whether

people will bother reading more about your product or hit the back button.” -- the new generation of decision-makers

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Solution Selling Definition• Rather than just promoting a product, the salesperson focuses

on the customer’s pain and addresses the issue(s) &/or problems with his offering of products &/or services. The resolution of the pain is what constitutes a true solution.

• Solution selling means targeting the types of companies most likely to benefit from your products and services so that you don't waste time selling to people who shouldn't buy anyway.

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The Importance of Value & Solutions• Product features often speak to technology & not the

customer’s needs.• Product feature focus runs the risk of implementing

capabilities that are irrelevant to the customer (over-engineering).

• Product feature focus tends to commoditize & devalue your product over time.

• Salespeople need products & stories that solve problems.

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From Products to Value to Solutions Selling

Defining Customer Pain Points

Converting Needs into Solutions

Refining Your Value Proposition

Selling via Solutions

The process starts with understanding your customer’s pain points

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Vertical Market Pain Points• Excessive operational costs that are reducing profitability• Lack of process is leading to inefficient operations• Security breaches put our database at risk• Logistics costs are getting out of hand• Price erosion due to product commoditization• Difficulty in determining investment priorities• Regulatory environment makes our future uncertain• Stagnant revenue growth• Quality concerns

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Horizontal Pain Points

Decision-makers may differ by industry

Operations

IT

Marketing & Sales

Finance

CEO/COO/Pres

Healthcare Manuf Education Telecom Financial Svs Transport= Decision-maker I N D U S T R Y

R E

S P

O N

S I

B I L

I T

I E S

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Converting Needs into SolutionsA healthcare IT solution example for the XYZ System:

Need SolutionEach hospital within our health system performs at different operational levels & we don’t know why.

Identifies under-performing departments, key contributors & recommended course-of-actions to reduce cost & improve efficiencies.

Each surgeon operates in a silo which creates variations in care and increases our procurement costs since each physician purchases his own surgical materials.

Surgeon vs. surgeon procedure analysis identifies optimum surgical approaches to improve quality of care, lessens legal risks and reduces costs by purchasing optimum surgical materials in volume.

We don’t know where we should be investing in terms or staff, technology and our physical build-out.

Predictive analytics identify what kind of patients and diseases are likely to enter your hospital. This, coupled with new technology entrants enable us to recommend staffing, structural build-out and new equipment investments to meet changing local market demands over the next 5 years.

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Refining your Value PropositionThe 4 steps to building a value proposition:

1. Define - 2. Qualify - 3. Evaluate - 4. Measure

1. DEFINE the problem set to determine which problems are worth solving.– Is the problem unworkable?– Is fixing the problem unavoidable?– Is the problem urgent?– Is the problem under-served?

2. QUALIFY the problem– Are you addressing an unmet need?– Do you have a meaningful competitive edge?

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Value Proposition Points

Prospect’s Needs

YourSolution

Competitor’sSolution

Points of Difference

Points of Irrelevance

Points of Parity

Differentiation matters if it’s important to your prospect

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Refining your Value Proposition3. EVALUATE whether your solution is unique & compelling

– Discontinuous innovations… transformational benefits over the status quo

– Defensible technology… IP that can be protected to create barriers of entry and unfair competitive advantages

– Disruptive business models… value & cost rewards that help accelerate growth

4. MEASURE potential customer adoption using the pain/gain ratio– Game-changing benefits with minimal modifications to existing

processes

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The Pain / Gain Ratio

• Revenue• Cost-savings• Time• People• Reputation

Gain

Inertia

Pain

• Switching costs• Alternatives?• Good enough• Default = do nothing

• Try• Buy• Implement• Broad deployment• Own – TCO

Goal: Disruptive innovation that is non-disruptive to adopt.

to implement

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The Pain / Gain Ratio

• Revenue• Cost-savings• Time• People• Reputation

Gain

You win when the Gain exceeds the pain of adopting

Pain

• Try• Buy• Implement• Broad deployment• Own – TCO

to implement

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Building the Value PropositionHere is a very simple framework from which to build your value

proposition…• For (target companies)• who are dissatisfied with (the current alternative)• our product is a (new product)• that provides (key problem-solving capability)• unlike (the product alternative).

For hospitals that are dissatisfied with ineffective tools for improving care and reducing operating costs, our XYZ System provides clinical performance analytics and predictive modeling solutions that help reduce operating costs by 10%, eliminate errors by 15% and improve patient satisfaction scores by 20% within the first 2 years of implementation.

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A Poor Value Proposition ExampleMcKinsey’s corporate finance site

Our value proposition rests on an unrivalled package of strategic, transactional and financial advisory services, uniquely linked with independent judgment and deep industrial/commercial insight.

Our reward is not “transaction-based”, so we can maintain genuine objectivity in our client’s long-term interest. In negotiating and carrying out an engagement for a client, we participate fully in the client’s corporate thinking, and take into account not just the immediate value and impact of the project, but its context and implications over a longer period of time.

We work closely with management and other advisors, such as major investment banks, to leverage and complement their knowledge and ensure maximum impact. We try to foster senior management’s commitment to our recommendations and actively support implementation and skill building.

Comments:• Not targeted to any specific audience.• No quantified value/contribution.• No competitive differentiator.

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A Good Value Proposition ExampleVMware

For IT organizations wrestling with the high cost and inflexibility of the old “one server, one application” model, VMWare can improve the efficiency and availability of IT resources and applications through virtualization. About 70% of a typical IT budget in a non-virtualized datacenter goes towards just maintaining the existing infrastructure, with little left for innovation. VMWare can free your IT admins from spending so much time managing servers rather than innovating. An automated datacenter built on the production-proven VMware virtualization platform lets you respond to market dynamics faster and more efficiently than ever before. VMware customers typically save 50-70% on overall IT costs by consolidating their resource pools and delivering highly available machines with VMware vSphere.

Comments:• Starts by describing the target customer’s problem their product solves.• Quantifies the problem: 70% of an IT budget is spent on maintenance.• Describes the benefits of implementing a virtualized data center.• Offers a range of IT cost-savings from their typical customers.• Only missing a statement regarding their competitive edge.

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Selling via SolutionsKey steps to solutions selling:

1. Prioritize the markets to pursue.2. Understand the customer’s organizational structure, key influencers

& decision-makers.3. Align your value proposition with the customer’s needs.4. Quantify the value of your solution

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1. Prioritize the Markets to PursueHere are some of the criteria that are commonly used to determine solution selling prioritization:

a. Market sizeb. Ease of entryc. Likely average order sized. Competitive environmente. Length of time to close contracts

DOES YOUR PRODUCT DELIVER A UNIQUE SOLUTION THAT IS CRITICAL TO THIS MARKET?

– If yes, then items a-e above will become less important.

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2. Understand your Prospect’s Organization

Create internal champions with spheres of influence.

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3. Align Value with Customer Needs

Create Awareness

Build Credibility

Demonstrate Value

Close

Qualify

Pitch

Negotiate

Close

Build Credibility

Demonstrate Value

Create Awareness

CUSTOMERSales Marketing

Recognize need

Gather info

Evaluate

Buy

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4. Quantify the Value of your Solution

Q1 Q2 Q3 Q4 Q1 Q2 Q3

CumulativeCost

$

IncrementalBenefit

For example, the implementation of our product delivers:• 10% increase in sales in Yr 1, 20% in Yr 2.• 20% reduction tech support costs from implementation.• 10% reduction in headcount after 6 months.• 30% increase in average order size by month 12.

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One Additional Value Prop to ConsiderThe value proposition to your channel partners:• Manufacturer’s objectives

– The 3 Ms: mindshare, market share and money

• Channel partner’s objectives– Financial benefits

• Sales margin, service revenue, add-on business, annuity revenue if possible– Product differentiation – Product quality & reliability– Product alignment with the partner’s customers or vertical markets

• Reduces their cost of sale and time spent prospecting– Training, technical support, marketing support & MDF– Revenue opportunities after the sale

• Implementation, support services, license renewals, etc.

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Selling Solutions Using a Compelling Value Proposition

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