Value-Based Selling is how you support that price. By understanding and reinforcing the reason why a transaction will be valuable to the customer, you simultaneously increase the likelihood of a transaction as well as the price the buyer will be willing to pay.
In this episode you’ll learn:
What is Value Based Selling
2 Types of Value
Role of Consistency in a Value Conversation with a Client
Value-Based Selling is the process of understanding and reinforcing the reasons why your offer is valuable to the client. This can increase the likelihood of a transaction as well as the price the client is willing to pay.
In determining value with clients, there are 2 types of value that your clients may obtain. We have quantitative value – we can put a number to them. Qualitative value on the other hand are things that can be observe but not measure.
It is not about how important it is to involve clients because if they make a commitment to the value (and goals), it will trigger consistency for them.
Identifying and addressing a client’s needs with a service and guiding them into recognizing the value of that service is the way in which such involvement builds a healthy, stable relationship between you and the client.
Mentioned in this episode:
For more information on remote selling and a complete list of links mentioned in this podcast, visit this remote selling article on our website.
Value Based Selling Done Right:
If I asked you how much you’d pay for a watch, what would you say? I’ll take a second. Think of your number. Now think about all of the different price points for watches. $1, $10 $100, $1000, 10,000, 100,000. I’m sure there’s more expensive watches than that. Maybe you even said it’s useless to buy a watch because you have a phone. Now you can go through the same exact exercise with a phone or a car or a house or just about anything you can buy. It really comes down to how much you value a particular thing and how much money you have to spend. What you will pay is simply an expression of how much you prioritize and value that thing and whatever you answer will be different from others, especially if you’re willing to spend near the top of market prices.
See, value is variable and yours isn’t equal to mine, and value is about far more than money too. Let’s go back to the watch example for a second. If the only thing that mattered was money and utility, who would buy a Rolex? It’s expensive to fix, it attracts all kinds of attention. I would even say some of the wrong attention, and there’s no difference between how it keeps time versus a $20 watch you can buy from Amazon. You can see I’m a utility kind of guy. So why in the world would someone buy a Rolex? Well, because you know it’s expensive and it gives them social status and it supports their identity of having the finest things in life. Maybe it’s been a childhood dream of theirs, whatever it is, it’s not because a Rolex keeps better time. People aren’t buying the watch, they’re buying the brand and what the brand means.
In business, it’s a little bit more complicated, and selling services to big companies is even more complicated because of all the different decision makers and forms of value that we can deliver. In today’s episode, we’ll talk about how to set value with your clients next time you’re selling your products and services.
Welcome to Modern Sales, a podcast for entrepreneurs, business owners, and sales people looking to have more and better conversations with your perfect clients. You’ll get a healthy scoop of psychology, behavioral economics and sales studies to help you create win-win relationships. I’m your host Liston Witherill, and I’m pleased to welcome you to Modern Sales.
Hey, it’s Liston here and this is episode four in the SDS training series of podcasts where I’m reviewing the core topics and ideas you would get in my sales training. If you’d like to start from the top, you’re just listening to Modern Sales for the first time, or maybe you’re catching up on a backlog of episodes, I do recommend you go back to the episode titled The Sales Process You Need to Win Big Clients, to hear the overview and start the series in order. You can also get all of my training decks by my website, www.servedontsell.co, and there’s a link right there on the homepage that gives you instant access without even having to sign up with your email address. And finally, if you’d like to receive sales insights sent to your inbox weekly, be sure to sign up for the Serve, Don’t Sell newsletter, which is I promise, painfully obvious and easy to do on that same website, servedontsell.co.
Now let’s talk about value, shall we? It’s one of the most misunderstood aspects of selling and the main misconception of selling based on value is that value is all about what your clients value. Said another way, what you think is valuable doesn’t matter all that much and what you’re selling ultimately boils down to the value or the outcomes that you can deliver. Oftentimes this does include things like ROI, payback periods, and other calculations that go into creating a business case for your services, and of course it does, but value is something your client needs to perceive and appreciate for it to be influential and persuasive. That means we have to translate their huge, terribly painful problems into goals that would get them to the better future they’re after and finally determine what those goals are worth once they’re achieved, aka the value. PGV, Pain, goals, value. This is the clear thread, my friend, which will help you sell any type of service about a thousand times better.
Now again, if you haven’t heard the last two episodes, I go through how to find the pain and how to set goals, so go back and listen to those episodes if you haven’t already. Now we’re in the part where we determine value with clients and there are two types of value that our clients may obtain. The first is quantitative value, things that can be observed and measured. We can put a number to them. There’s also something called qualitative value, things that can be observed but not measured. So that includes things like interviews, anecdotes, and other forms of feedback that we can’t quantify. The first thing we have to do when we’re determining value, and this is going to happen in conversation with our clients, is we need to ask them what would it be worth to you to fix this? Very simple.
Now the rub of course is that many of our clients won’t have a clear answer to that and that’s where you come in, my friend. This is part of your job in the sales process. So if they say, I’m not sure what it would be worth, what I want to figure out is how they will measure whether or not a goal comes to fruition. Because in order to measure something, we need two things, an object of measurement, the thing that we can measure and we also need a methodology, the way we’re going to measure it. Whether we actually measure or not, that’s not the point. The point is we need to have at least a conceptual framework for how our client would perceive the value that we’re delivering to them. And of course one of the reasons this is so important is because as I said, what clients are actually buying is the value we can deliver.
Now, if we way overdeliver it, we give them way more than they think they should be getting for the price we’re charging, what we’re doing there is something called setting an upward anchor. Meaning, let’s say the value we deliver is $5 million and the cost of our project is $50,000, doesn’t that project suddenly sound very affordable and inexpensive? Now you may be saying, well, what if I can’t deliver that kind of value? What if in fact the value that my clients receive from my services is just a little bit more than I charge? And to that I would say one, good for you. You found a way to be profitable without being the most valuable thing in the market. And number two, I would say your days are numbered.
It’s critical for us to deliver value, which is a whole different conversation. So if you’re not delivering it, maybe you and I should talk about your overall business strategy, right? Because there could be a problem in delivery, there could be a problem in the markets you’re choosing or the clients you’re serving. There could be all kinds of other related problems. But let’s just say for the purpose of this conversation that you are delivering plenty of value. What we want to do is define that value in order to set an upward anchor and make our services look a thousand times more attractive. And one of the key ideas here is also something called consistency. So I’ve mentioned Influence by Robert Cialdini before on this podcast and basically it is the definitive book on persuasion. There are five factors to persuasion. One of them is called consistency, which is simply to say we human beings like to remain consistent with previous commitments we’ve made in previous things we’ve said. We also like other people to remain consistent in the same way.
So when we’re having a value conversation with our client and they’re volunteering or at least agreeing with the value that we can provide them, they’re going to want to remain consistent to that verbal commitment that they made. This is important and the goal of this is not to be tricky. It’s only for all of us to be on the same page. Remember, serve, don’t sell, right? What we’re looking to do is provide better service to our clients, even in the sales process and the way we can do that by helping them set value is to help our clients understand what it’s actually worth for them to pursue a specific course of action. We can also help them uncover all of the different pieces of value maybe they hadn’t thought about. Maybe it’ll unlock even more opportunities for them and maybe my friend, dare I even say, they will find out and we will find out that the value just isn’t there for them to move forward with a particular project or buying your service and that is true service.
In any case, what we want to do is serve and when we can demonstrate that we can provide value and then that value is a multiple of what they’re paying, we get to do those two things. Setting an upward anchor, our value is way more than the price we charge and our client is going to remain consistent with their commitment that they agree on the value that we can provide. Now I know what you might be thinking at this point because I’ve heard it about a thousand times and that is that setting value can be really, really difficult. What you do is so esoteric. What’s the value of a blank? One of my favorite examples of this question is what is the value of culture? Because it is so difficult to pick apart what exactly we mean by culture, but it actually turns out to be quite possible.
Of course, in order to talk about value and to set value, we would need to first start with the definition of culture. What the hell do we mean when we say culture? What is that? Well, for everybody that I can tell, what we mean when we say culture is the beliefs and behaviors collectively that make up the company. Okay, so beliefs and behaviors. Now we’re getting somewhere. What kinds of beliefs and what kinds of behaviors? Well, if someone came to me and said we need to improve our culture, of course I would ask them what do you mean by culture? And alternatively I would ask them how would you know when your culture is improved? And they may have an answer and they may not. An alternative version of that is how do you know there’s something wrong with your culture?
And what a lot of people will look at is rates of turnover. How long employees stay with the company. They’ll also look for how many days off employees take, especially sick days. How many mental health days if a company offers those. And if we started with the hypothesis that happier people tend to come to work more often, which has been proven empirically, then we know one of the things that we can measure to demonstrate that our goal of improving the culture has been realized is if we can reduce turnover and if we can reduce sick days. Now, if our client agrees to that, we can now set a value for reaching those goals. How much does it cost you to hire someone new? How long does it take to onboard? What is the impact to your HR department if you’re constantly in a hiring cycle? What’s the cost of lost wages for people who call in sick or take mental health days?
A harder thing to measure but is just as valuable would be productivity. Do people become more productive when they’re happier and more engaged in their work? Probably yes. That would be a little bit more difficult to measure, but it could be something that’s on the table. So as you can see, we started with this really esoteric, impossible to measure thing, improving culture, and we got down to something that was very, very, very clear and very doable. Now, even if we don’t actually measure those things, remember this is all advice for you to apply to the sales cycle. Whether or not those things are measured and whether or not those things can be measured is very much dependent upon your client’s ability and wherewithal to do it. Maybe they don’t have the data, who knows? But the conceptual agreement is what’s really critical here.
So here’s my offer to you since you’re already going to the trouble of listening to this. If you sell something that’s hard to value, send me an email and I will show you a few different ways you can begin to value your service that’ll help facilitate more productive value conversations with your clients. I do mean it. Email me at Liston, L-I-S-T-O-N @servedontsell.co. It’s also linked here in the show notes and I am looking for you to stump me about how I can come up with a way to value your service. Now, when you do set value, you shouldn’t feel pressure to make it an exact number. At this point. This is happening in conversation remember, value should really be a rough estimate. It’s an approximation. It’s designed to give us more information than we had before we went through the exercise. It’s not designed to be good enough for the company to go out and get a loan from a bank, right? We don’t need to put together a complicated spreadsheet for it. You should be able to do this in conversation.
And value of course is different than return. So when we talk about return, what we’re looking at is three components, money made, money spent and time. And what I would focus on in these value conversations is really where will you make the biggest impact? So for me, because I’m offering sales training and sales consulting, I’m always, always, always talking about the possibility of money made. How many more opportunities might you close? How many more opportunities might you surface? What impact would it have to accelerate the sales cycle? All these kinds of questions is really where I’m focused and what I’m looking to do is see approximately how valuable will this be to the client, which is to some degree a reflection of how much pain they’re experiencing.
And so value could be as simple as the benefit of fixing the main problem, right? Whatever money they avoid spending, whatever money they’ll make as a result of it, the time saved, the staff saved, whatever it is that you’re offering your client, you can look at that one main metric and really get a lot closer to value than you were before the conversation and actually approximate where you would be if you went through the trouble of making a detailed calculation. So here are the actions that I want you to take after you listen to this episode in order to do more value-based selling. Number one, do the math. Yes, you will have to do some math to set value with your clients, but it can be done in your head or with a simple calculator. Your phone will work.
Number two, know your clients. One of the best things you can do is know the most common ways you bring value to your clients depending on the problems you solve for them. Once you understand what those problems are, you’ll be in a position to clearly predict the business results they’ll be most interested in. But do remember the only thing that matters is how they perceive value. It’s not what you think your delivering. It’s about what they want. So you can offer them the different pieces of value that you typically give your clients, but ultimately it’s up to them whether or not they see those things as valuable. And number three, ask your clients how they’d measure the impact of their goals. So this really goes back to the goal setting exercise. The more specific you are in setting a goal, the more easily you’ll determine the value you bring to your client.
So for instance, if a client says they want to improve their sales performance, I’d ask how they know if that happened. Of course, they’d say something like, we’d get more sales, but that doesn’t communicate the value. So I’d ask a few of the following questions. What’s your current volume of opportunities now? Let’s say they say 50 a month. What percentage of those opportunities do you win? Let’s say they say 20% so that’s 10 opportunities per month that they’re winning. What’s an average opportunity worth to you? Let’s say they say $250,000. Okay, so I have three important data points here, and it all came from asking how they would measure the value of sales training. The first data point is they’re servicing about 50 opportunities per month. The second is that they’re winning 10 of those or about 20% and the third data point is that an average opportunity is worth $250,000 to them.
So here’s what I know now, closing one more deal per year would give them a $250,000 increase in revenue and closing sages 10% more deals for an effective closed rate of 22% rather than 20% would bring in an additional $3 million. There is my upward anchor and if they agree with these numbers, I’ve leveraged consistency too. So the key takeaways from this episode are that value helps illustrate what it would be worth for your clients to achieve their goals and they’ve probably not already figured it out yet. You have to help them. You’ll draw a straight line from pain to goals and finally to value. That’s the PGV critical concept and one way that you can get to value is to start by asking your client how they’ll know if they’ve achieved their goals. You don’t need to be exact in your value setting exercise. The purpose is for you and your client to get a better sense of what the project is worth and what they’ll get if all goes well.
Even when it seems difficult to set a value or calculate your impact, you can do it. And if you’re not sure how I accept the challenge, email me at firstname.lastname@example.org, it’s linked in the show notes and I’ll personally show you how to do it. Next week, we’re going to talk about how to present your sales story, proposal and offer. That’ll be coming up in episode number five in the Serve, Don’t Sell training series. If you haven’t already subscribed, please do subscribe to this podcast by clicking the subscribe button and if you are so inclined there are two things you can do to help support this podcast. Number one, leave a review in iTunes. Number two, tell someone else about it in email, social media or however you’d like to spread the word.
And lastly, if you’re looking for help training your team of client services professionals to sell more to big companies, I can help with remote and onsite training options. All you have to do is head over to servedontsell.co, click the contact button and you can fill out a quick form to begin the conversation. Thanks so much for listening. My name is Liston Witherill of Serve, Don’t Sell, and I hope you have a fantastic day.