Selling Value: Maximize Growth by Helping Customers Succeed

Citation

Hellman, K. (2009), "Selling Value: Maximize Growth by Helping Customers Succeed", Journal of Business & Industrial Marketing, Vol. 24 No. 7. https://doi.org/10.1108/jbim.2009.08024gae.002

Selling Value: Maximize Growth by Helping Customers Succeed

Selling Value: Maximize Growth by Helping Customers Succeed

Article Type: Book reviews From: Journal of Business & Industrial Marketing, Volume 24, Issue 7

Kari Kaario, Risto Pennanen, and Kaj StorbackaEdited by Hanna-Leena Mäkinin,WS Bookwell Oy,Porvoo,2004,176 pp.

Keywords: Sales training, Coaching, Career development

Overview

Selling Value describes three phases in the evolution of sales strategy.

Phase one: product-based selling

Purchasers trust the product and their knowledge about how to use it, and keep the supplier at arm’s length. As a supplier, you try to differentiate on features and benefits.

Inevitably, product-focused markets mature. Competitors catch up with each other and points-of-difference diminish. The basis of competition devolves to price. So to maintain margins, you and your fellow suppliers turn to …

Phase two: solution-based selling

Suppliers bundle complementary products and augment them with services to solve an existing customer problem. Total cost of ownership (TCO) works its magic of reducing customer costs while increasing supplier margins. To be sure, the customer needs to co-operate. They need to see the problem the way you do, and be open to sharing the information you need to create your solution. So far, this is a familiar story. But the authors push their analysis past the boundaries of conventional sales wisdom. They point out that solution-based markets also mature. One competitor’s service-augmented bundle solves the customer problem about as well as the next. Rather than using TCO as the point of comparison, it’s the cost of the next best competitor’s solution that sets the price.

Phase three: customer process innovation

If your solution solves the problem about as well as the competitor’s – redefine the problem. Change the game to one where you are the only player. Let the competition optimize the existing process. You will redefine the process and achieve economies that leave the old process and the competition in your wake.

Customer process innovation is not for every sales situation: The customer’s trust in the supplier as a partner must be raised to a whole new level. The customer must be open to this much broader scope of innovation. And the supplier investment in the customer process innovation strategy will be significantly higher.

The authors view all sales effort as an investment that needs to be optimized. “When sales is seen as an investment in increasing the value of the customer base this investment needs to be directed towards customer where the expected return is the biggest”.

They recognize that only the largest customers (they call them “Key”) can justify the considerable investment of customer process innovation, but not all Key customers are ripe for this strategy. In fact, all three sales strategies can coexist in a portfolio of customer relationships among the Key customer group. The next tier of customers which they term “Important” can justify either product or solution strategies. The smallest customers can justify only a product strategy (see Figure 1)

Figure 1 Customer’s buying style versus value of the customer relationship

Selling Value is a complete explication of customer process innovation, elucidated with best practices, and illustrated with wonderful case examples.

About the authors

The authors are the brains behind Vectia Ltd (www.vectia.com), a management company focused on helping clients leverage their customer assets. Vectia’s work is driven by the notion that the future of any company is defined by the quality of its customer base. Dr Kaj Storbacka is the founder and chairman of Vectia and is one of the pioneers in customer relationship management. His co-authors are Kari Kaaio, his Senior Partner and Risto Pennanen, his Partner.

Figure 2 Different sales strategies require different contacts and discussion items with the customer

Content

The book has four parts. Part I argues the need to go beyond product-based and even solution-based selling and describes customer process innovation as the needed next sales paradigm.

Part II: Processes and Competencies for Value Sales, provides distinct frameworks and tools for executing all three sales strategies. The authors introduce the rubric of a “relationship concept” which answers three key questions”, i.e. whom does the provider want to work with? What is offered to the selected customers and how are the customer relationships managed?

Concerning the whom, the authors distinguish both the nature of the contacts and the discussion items as shown in Figure 2. Concerning the what, the authors elaborate on a useful focus for each strategy: “Product sales supports the customer’s purchasing process. Solution sales supports the customer’s usage process. And Value Sales process supports the customer’s business processes”. And concerning the how, they recommend different operating models, for each of the three strategies.

The authors elaborate on the competencies required for implementing customer process innovation that are quite different from those required by product and solution sales: understanding value chain dynamics, understanding the customer’s business drivers and processes, understanding the supplier’s own organization’s capabilities, the ability to proactively identify opportunities for customer process innovation, and the ability to mobilize resources. And they describe how to quantify business impacts and to capture a fair share of the value created for the supplier firm.

Part III: Managing Value Sales, begins with a financial investment perspective: “Value sales strategy is an investment into a selected part of the customer base and each investment should bring an acceptable return”. Resource allocation considerations discussed include both how to select accounts to invest in as well as how to allocate resources among sales projects.

A very useful chapter on forecasting is provided with guidance on how to use the sales funnel as a basis for forecasting as well as the insight that the funnel itself is a strategic variable to be strategically designed and managed.

The authors lay out principles for defining metrics for value selling which include: simplicity, focus on outcomes, tying metrics to remuneration, long-term scope, both hard and soft metrics, and ensuring metrics are a sales tool. They provide examples of metrics that are helpful in evaluating competencies, actions, and business results.

Part IV: Future Implications builds on the notion that “The Customer Asset is the most important asset not on the balance sheet”. The authors lay out a process for “systematizing investment in the customer asset” and “improving the quality of the customer base”.

They observe that “customers’ purchasing practices have changed more dramatically during the last twenty years than providers’ sales practices”, and outline a path forward for developing an integrated approach to meet the new purchasing realities.

The authors are very generous in sharing their vision for how firms can create competitive advantage and superior returns in the face of commoditization and mounting pressures from professional purchasing.

Selling Value is a triply powerful book: First, its ideas are innovative and thought-provoking. Second, its prescriptions are specific and practical. And third, the case studies are compelling.

Karl HellmanCenter for Business and Industrial Marketing, Atlanta, Georgia, USA