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The Compounded Benefits Of Selling Value

(882 words – 7 min)

Every purchase has one thing in common: A potential buyer looks at the price of a product and compares it to the value they expect to receive. If the prospective consumer doesn’t make the purchase, it’s for one of two reasons: Either the price was too high, or they didn’t perceive enough value.

You can probably lower your price enough to get them to purchase — but that’s not why you’re in business or in sales.

The key to sales is to help the buyer perceive more value in your product. Ultimately, the most successful salespeople see themselves not as sellers of products but of value.

This article is meant to function as a twofer. My main point is to highlight the transformative benefits you reap when you learn to sell value rather than products. My second is that you should watch how it’s done.

A Scenario To Consider

I am going to illustrate these points by calculating the true, multilayered impact of selling value in a hypothetical scenario.

Let’s say I get a meeting with your VP of sales. She complains that the sales team simply “shows up and throws up.” She wonders if the sales team learned to sell value and whether revenue and profits would increase.

I could ask, “How much additional revenue and profit do you think you would get in such a switch?” But that question isn’t specific enough to gauge the compounded gains which occur when you begin to sell value.

Buyers believe the stories they tell themselves. Your job is to make your company’s value story believable. Here are three ways in which a shift to successfully selling a higher perception of value to buyers can increase your company’s bottom line behind the scenes.

1. Higher Close Rates

When you demonstrate value to each buyer in a way that matters to them, they can more easily recognize why your offer is worth their investment. The more value a buyer perceives from your product, the more likely they are to buy from you.

Let’s return to my conversation with your VP of sales. I might follow up by asking: “What do you think will change once the team learns to sell value?”

“That’s easy; we win more deals — close rates go up,” she might say. “Right now, they’re at about 20%. Maybe we could get it to 30%?”

“How much is that worth to your company?”

“We’re currently earning $500 million per year in revenue. Winning 50% more deals would put us at $750 million, or an additional $250 million.”

“Don’t forget to take into account your gross margin,” I would remind her.

“Since we run about 10% gross margin, that’s an additional $25 million to the bottom line.”

Notice that your VP just identified our first dollar value, which would result from such a higher close rate, in addition to revenue, by successfully increasing the value of your product in the eyes of the buyer.

2. Higher Average Selling Prices (ASPs)

As buyers come to believe you deliver higher value than they expect, their price sensitivity decreases. Sure, purchasing agents will still negotiate the price. But when you have the confidence and backing of the true decision makers, you don’t have to discount as much to win a deal.

I would now ask your VP: “What else do you think would change when the team is able to increase the perceived value of your product in the eyes of consumers?”

“I’m pretty sure we could reduce the size of the discounts we give,” she might say. “Our average is 25%. We should be able to get that down to 20%.”

“That’s a 5% increase in ASP, all profit. So what’s the overall dollar impact on your company?”

“If we’re doing $750 million in revenue and can increase that by 5%, that’s an additional $37.5 million in pure profit.”

Add that up, reader. The $25 million from a higher win rate, plus this $37.5 million due to the higher ASP, adds up to $52.5 million.

3. Shorter Sales Cycles

Let’s face it. You don’t have control of your buyer’s schedule, but you can influence it by reducing the amount of time they have to spend looking. By understanding value from the buyer’s perspective, you can help them figure out what they need. When you demonstrate that you really understand your buyer’s needs, their trust in you grows. And they simply don’t need as much time to decide.

I would finally ask your VP: “Do you think anything else will change with the adoption of value selling?”

“I’ve heard our sales cycle times should go down.”

“I’ve seen that happen, too. What’s your current average sales cycle time?”

“About three months. We could probably get it down to two-and-a-half.”

“Let’s figure out what that’s worth. How many deals can any salesperson handle at a time?”

“They each actively manage ten deals at once. With a faster sales cycle, they should be able to increase from closing 40 deals a year to 48 deals.”

“What’s that worth in dollars?”

“That would increase the $750 million to $900 million. An additional $150 million in revenue, or $15 million in profit.”

This, reader, brings our running total to $67.5 million.

A Scenario In Review

I know what you might be thinking. Is it really possible for a company with $500 million in revenue and $50 million in profit to nearly double both in a year by shifting to selling value?

To that, I say: Yes. Value makes the world go round. Value drives every buying decision, and it should be the main consideration behind your sales process.

You may not agree with these numbers, and that’s okay. This is meant to be a demonstration. Every sale and buyer is different. But however you want to frame it, the key is to make sure you identify the possible sources of value for your company and help your buyer calculate their own. Selling value means understanding your buyer’s specific situation — and successfully communicating your own value.

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