Steve Laborda is a CEO of Valuebizbooster, Consultant, Coach, Author and Speaker. He is a practitioner in B2B sales and marketing, focusing on improving profitability, how to capture value, and developing the competencies of the commercial people through customer orientation and commercial excellence.
In this episode, Steve delves into the intricate blend of art and science involved in the sales process. He emphasizes the importance of incorporating intangibles alongside hard facts, highlighting that both are essential for success and reaching a deal. Furthermore, he underscores the collaborative efforts of individuals within the company, working cohesively as a team to uphold a value-based approach throughout the entire sales process.
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Why you have to check out today’s podcast:
- Find out the three essential components to value selling in which without each one no decision is reached
- Discover how value-based selling works in the whole sales process within the company
- Uncover the effective use of the ROI calculator as a value driver
“Don’t forget to work with sales when you do your pricing.”
– Steve Laborda
Topics Covered:
01:00 – How he got into pricing
01:30 – The many roles he played
02:41 – Pointing out the ‘art’ in value, pricing, and selling
04:16 – The intangible benefit other than the emotional, and cognitive aspect of value selling
06:24 – How was his experience different from any other salesperson who’s good at building relationships
9:47 – Examples illustrating the three components of the sales process of relationship building, the science part, and the intangibles
11:38 Defining cross-functional value selling
15:04 – Why companies often fail at value-based pricing
17:55 – Calling it a value calculator and not the ROI calculator
20:10 – Why a collaborative way of using the value calculator instead of leaving it to the customer alone
23:36 – Reasons customers likely buy from you
25:35 – Pricing a highly volatile product in the chemical industry
29:23 – Steve’s best pricing advice
Key Takeaways:
“Yes, you need to do value quantifications, but you need to be able also to be emotional and to read body language and to read the skills that people have in front of you.” – Steve Laborda
“You need to have sales, marketing, pricing, the technical people, if it’s a technical context, to have all those people together to develop that value-based approach so that everybody is behind it…” – Steve Laborda
“The value calculator is there for me to give confidence to the salesperson about the price that you can defend to the customer.” – Steve Laborda
Connect with Steve Laborda:
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Steve Laborda
Don’t forget to work with sales when you do your pricing.
[Intro]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the artistic relationship between them. I’m Mark Stiving, and our guest today is Steve Laborda. Here are three things you wanted about Steve before we start. He is the CEO of Valuebizbooster. His recent book is Master the Art of Value-Based Selling. He’s an expert in the chemical industry, and oh, by the way, he enjoys rock climbing. Welcome, Steve.
Steve Laborda
Happy to be here, Mark.
Mark Stiving
Oh, it’s going to be great. I know you don’t call yourself a pricing person, but I want to ask the question that I always start with anyway. How did you get into pricing?
Steve Laborda
By coincidence. From my background, I’m in chemicals and I have been moving to more and more topics. And one was pricing. Kind of, oh, Steve, you are the closest who knows what to do with it, so let’s start there. And then suddenly I had to implement a pricing tool. Yeah. And then it got more and more towards pricing during my career.
Mark Stiving
Yeah. When you say, you were in the commercial, you mean more of a sales role inside a chemical company?
Steve Laborda
Sales was a part of it. I had various roles like business management, marketing, bits of pieces of product management. So for me, commercial is really the cost function, market cost functional team actually between sales, marketing, pricing, product managers, customer service because they need all to work together anywhere. So
Mark Stiving
Yeah. And it almost sounds like it’s a profit and loss responsibility role.
Steve Laborda
Yeah, that’s true as well. Yeah. You can summarize it that well.
Mark Stiving
Which means you’re running your own business. Which is pretty cool.
Steve Laborda
And that’s a good one, because typically what I say is that you need to have an entrepreneurial spirit when you are in those commercial roles. Yeah. So then you understand really what it means to earn profitably, money in a sense, and drive a business that way.
Mark Stiving
Yeah. in the few seconds that we talked before I hit the record button, you mentioned, and in fact you chose the word, the artistic relationship between them. And you mentioned that you were emphasizing more the art of value and pricing and selling. Let me just ask you a wide open question. What do you think the art is? What do you mean when you say, the art?
Steve Laborda
The art part is actually, especially when you’re on the sales side, it is more the emotional part because, especially now chemicals, but if you take it broader on a manufacturing business, typically it’s very technical. People are working on the sales side or in a broader sense, commercials. And they’re very fact based. So, they talk about features and everything, and they forget about the people behind the purchaser or the technical decision maker. And that’s why I like to play with both topics in a sense, because yes, you need to be fact-based. Yes, you need to do value quantifications, but you need to be able also to be emotional and to read body language and to read the skills that people have in front of you. and so that’s more the odd part in a sense.
Mark Stiving
Okay. So first off, let’s frame what you just said. Are you familiar with Danny Kahneman’s book Thinking Fast and Slow, system one, system two?
Steve Laborda
Yep.
Mark Stiving
Okay, perfect. and so I personally think of the value selling part as the system two part, right? It’s the cognitive deep thought, let’s quantify value. How much more money am I going to make my customer when you use my product? So it’s really mathematical, logical and cognitive. And then I think about what you just said as the system one part, it’s the reactionary, oh, you’ve made me feel good. I may not have thought about why I like you more than I like the other salesperson. but I do like you more than I like the other salesperson. And so that’s an important part of the sale. Is that a fair analysis of what you just said?
Steve Laborda
It’s a part of it because where I would like to extend it is that a part of the emotional part is also that your customer might give you signals of intangible values that it gets, that you don’t quantify that are not fact-based necessarily, but it could be peace of mind because you’re just providing safety or less work or, thinking about his work life balance behind it. So that’s what I mean is that you don’t look only at the quantification, the hard facts from a value that you provide, but also the intangibles that can be really related to the individuals you’re talking to and that you might impact. Okay.
Mark Stiving
So, yeah. So, I’m an engineer by nature and so I don’t like this, I just want you to know that. So, I’m going to try to find a way to make it so that it makes sense to me. Now, I could very easily see quantifying the value to the company that I’m selling to. And it’s really hard to quantify value when we think of a B2C type product, right? It’s hard to quantify the value of a shirt or even of a car, right? Whatever I’m going to buy in the world of B2C, it’s hard to quantify the value. So I could see in the world of sales, I’m talking to an individual, that individual, that persona, that single person I’m talking to, they’re getting value. Not only are they trying to buy the best value for the company, but they’re trying to buy the best value for themselves. And the best value for themselves is more like a B2C type value. It’s not measured in incremental profit dollars. What do you think of that?
Steve Laborda
Exactly. That’s fantastically summarized, Mark. So that’s exactly what I meant with it in a very sentence. Fantastic.
Mark Stiving
Okay. You said it way more elegantly than I did then. And so, in my mind, I always thought salespeople excelled at that part, and they were horrible at the let’s quantify value for the company customer. And your experience is different from that?
Steve Laborda
No, I would say, there’s a third dimension. So there’s this art and science of value selling, and then there’s this big chunk, which is called relationship selling. And I would say they excelled at the relationship part. So building great relationships. And in the old days when they were allowed and there were no anti driving rules and everything, they were going golfing and going to restaurants and having fantastic… They excelled at that part. But then looking at now, I mean, more and more companies are moving to value selling, which surprised me because I was so. I mean, for the business it’s great, but on the other side, I’m still surprised how many companies are so far away. And there, when I see that part, I see that some companies struggle already in depth in the science part, in quantifying because they don’t understand the customers well enough, or they try to make it too scientific.
And they are not doing the Pareto in a sense when quantifying. So 80/20 is good enough, so they have a certain number and then they talk to the customers to validate. So that’s one challenge that I see. But on the other side, what I see as well is that many customers, when they have quantified everything, they wonder why customers still don’t buy even if they’re able to save millions of euros. And there I see that that half part is missing often, is that they are so focused on the hard facts that they forget the stakeholders inside of a company. So it might be that for one stakeholder, fantastic value, but it means, for instance, for a production manager, he needs to completely revamp his process, which means a lot of risk, a lot of work, and those type of things are not considered. So I see in three pieces, if you want to summarize the relationship part, yes, they excel, that’s the best sales guys do. Well, then comes the hard facts, the science part where some companies start to excel. And then the last part is really the one where you really look at your stakeholders, look at the intangibles, and we look at the value in a B2C perspective, as you mentioned. So more, the people correlated values that you can create.
Mark Stiving
Okay. I actually really like this way of thinking. Steve, this is nice. so here’s an example I often use, and if you have a better example, I’d love to hear it, but I often say let’s imagine that you’re selling a new piece of medical equipment to a doctor, and this new piece of medical equipment is going to make the hospital several million dollars in cost savings or productivity, or however we want to look at it. Does the doctor care? Absolutely not. Right? So the doctor cares about how many lives are we going to save? Right? That’s the doctor’s focus. And yet there’s somebody, the hospital administrator who cares a lot about the millions of dollars. So if we could save lots of lives, but it would cost the hospital money. It didn’t make the hospital money, it’s harder for the doctor to buy this. The doctor might love us, but it’s harder for them to buy it. And so once we can convince the doctor, hey, not only are we saving lives, but we’re also making millions of dollars for the hospital, that makes it easier for him to say, yes, I want to buy it. I’m going to go sell it to the hospital administrator. So I use that example a lot, but I’d love to hear, do you have an example that you like to use?
Steve Laborda
I’m just trying to think because I was so deep in your example because I like it, it’s exactly the way I tell it as well. but yeah, I would go back to the example I was saying earlier with the manufacturing part. So imagine you’re in a chemical plant, you have a fantastic solution that you sell to a purchaser who is measuring it in total cost of ownership. He’s happy, you’re saving a million. but then you need to go to the production team and tell them they have to do three more steps every morning before they start, and that’s not going to fly. Right? Because they will do everything to avoid that. And that’s exactly a similar perspective in a sense that they are not going to buy into it even if they believe that you will save money, but it just means more work for them. That’s not going to work
Mark Stiving
And so the production manager in that situation is likely going to sabotage the sale. They’re going to do whatever they can to say, no, we don’t want this. It’s not going to work. they’re overcommitting they can’t deliver on those problems, whatever it takes to sabotage the sale because they personally have not bought in and they see it causing them a negative consequence in this case, more work.
Steve Laborda
Exactly. And that’s where art and science meet together. So that’s exactly the example. So you need to understand the hard facts. You need to be able, because without that, it doesn’t work either. But you need to understand all the little challenges that you might have with your stakeholders around those numbers that might influence the deal. Yeah. Or the decision.
Mark Stiving
Nice. Okay, you had sent me that said, hey, let’s talk about this. And you had said, how can we successfully implement value pricing in a cross-functional value selling world? And so what does that actually mean? Let’s start with defining cross-functional value selling.
Steve Laborda
Actually I would turn it on because typically the story flies better when you explain. In value pricing in many companies has been kind of built that ivory tower where marketing product managers and why seeing people have a great plan. They have all that typical waterfall, it looks fantastic. And then they send this little document down to sales and say, look, that’s the price that you can sell based on our assumptions. And it’s three times the current price. Yeah. Or compared to the competition if we take the NB and what happens on the sales side, we’re back to the data and science thing, right? Because salespeople say, you guys are just crazy. You don’t understand the market, you don’t understand anything about sales, we’re never going to be able to sell it. Yeah. So that’s how in many companies value pricing happens.
And I observe it in many companies. So the first question is in companies, are you doing value pricing? Yes. is it used by sales? The question is typically no. Yeah. So it’s a bit kind of like strategy and execution. I see value pricing, like the strategy part, if you make the analogy and the execution is the value selling part. And typically what happens, like with strategy marketing, throw it over the fence with a little post-it, good luck and nothing happens. And that’s why I say you need to have value selling as a first part. So you need to ensure that you equip your sales team with the right toolbox to understand what marketing, product management or pricing did, but you need to do it in a cross-functional way. So that means that you need to have sales, marketing, pricing, the technical people, if it’s a technical context, to have all those people together to develop that value-based approach so that everybody is behind it in a sense that not at the end sales says, your assumptions are wrong. No, because sales was part of making the assumptions was part of building from the features through the benefits, through the value drivers. And so you had that kind of, as a team all working together, and you don’t have that typical scrolling over the fence. So that’s what I meant with it. Does that make sense, Mark?
Mark Stiving
It does. I like the outcome of what you described, but I don’t like the straw man that you described, right? So the beginning which said, hey, marketing and product management, they’re going to get together and say, here’s the price that’s going to be, and by the way, I agree with you, that happens way too often. But I wouldn’t call that value pricing. I would call that pretty much what they’re going to do is cost-plus pricing, right? They’re going to look at our total cost. They’re going to say, yeah, can we get away with three times the price or three times our cost? And let’s make sure we look at our competitors. And they’ll make some of those things, but they don’t really step back and say, what’s the value of our product to our customers? And so if we go back to the conversation we were having earlier, which is, hey, there’s these three different types and I want to think specifically about how much incremental profit am I going to make my customer, right? So I’m going to quantify the dollar value to my customer. Then in that one instance, marketing hasn’t done that, product management hasn’t done that. And if we can learn how to do that, then we can figure out what the right pricing should be. I’m, I’ll let you answer that.
Steve Laborda
Yeah, I think I agree that it is not value pricing how I described it in a sense, because I agree with you. If you don’t interact with customers, it can’t be value-based because it means you don’t understand what your customers are doing. So how would you identify the value, though, as you said as well, I see far too many companies still doing that in one way, as you described it, like kind of a mix between cost-plus competitive pricing. Sometimes I have seen companies where marketing is investing a lot of money in doing market research. So trying to understand through interviews and through conduit analysis and everything, finding out kind of what could be the value. so kind of more towards the B2C if you want, but it doesn’t really work because, I mean, it’s just too complex.
The processes are every time different and so forth. and so I agree with you, that’s not really value pricing, how I would call it either, but that’s what they name it, let’s put it that way. And so I agree with you from that perspective, but indeed, you need to talk to customers to understand what is the value. And actually the challenge is that every customer has a little bit of a different setup and has different value drivers, and the importance is different. So, and that’s also where I see the importance of value-based selling, because in many companies, they do maybe that first part in the best way, we described it now, but then they forget to tailor it for the different customers. And then the sales guys hit the wall at like 50% of the cases because yeah, they all go with, let’s take the example of cost savings. So yeah, we can reduce cost in your case, blah, blah. And the customer looks at them and say, yeah, but we don’t care about cost savings. We want to grow now. So that is a very typical pitfall where they just go with one elevator pitch, kind of with one value proposition and a set of value arguments without really interacting with the customer. And went back to that art and science exercise, right?
Mark Stiving
Yes. I often see companies create ROI calculators, and can I tell you how much I hate ROI calculators?
Steve Laborda
Go ahead, tell me.
Mark Stiving
So, an ROI calculator in my mind is what you just said, which is, hey, here’s how we deliver value to our customers. Mr. Customer put in these three numbers and we’re going to tell you how much money we’re going to make you. And two things. First off, your customer doesn’t believe it. So that’s one. And number two, your customer may care about different things than what you’re measuring and putting in your ROI calculator. And so it really is, have we talked about where the value is? Have we helped our salespeople understand where to look for value, but it’s up to the customer as to where they want value, where they’re going to get value?
Steve Laborda
So, and that’s a very valid point. And the question is what is the job of a value calculator? I like to call it a value calculator because ROI calculator, it is narrowing it down again already in a sense. So, the question is what is the role of the value calculator? Is it to define the price? Is it to make a teaser to your customer that it gets excited about your offering? So that’s also something where many companies are kind of too stiff in the sales process. They do. And they say, okay, you do all the discovery and now it’s time to use the value calculator. So you ask a few questions with the numbers, and then you show the number to the customer so that he agrees on the price. Worst case is you do it in the negotiation, right?
I have seen that happening as well. Never do that, but I have seen it. Yeah. But so, and I think that’s important. The value calculator is there for me to give confidence to the salesperson about the price that you can defend to the customer. That’s the main role of a value calculator for me. And then you can derive it, of course you can use it to base your pricing, but you can also use it as a teaser. So if a customer doesn’t have a clue, you can show him, look, that’s what we have done for other customers. Let’s just enter your numbers just to get a feeling. Is it worth it or not? In the best case, it’s yes. And you continue the discussion in that way, it’s no, then you can continue and say, okay, then let’s talk about the other things that might be relevant to you. Because sometimes the challenge is that your customer doesn’t even really know what he needs and what he wants. So that can also help in the discovery phase, obviously.
Mark Stiving
Yeah. So my preference in this, and the reason I don’t like ROI calculators at all, and possibly the value calculator could be a little different, but my preference is instead of giving an Excel spreadsheet or having an Excel spreadsheet and entering my customer’s numbers and saying, look here’s what happens. My preference is always to just ask them the leading questions and let them do all the math. And when they do the math, they believe it. And when we use our magic Excel spreadsheet, it’s like, oh I don’t believe that. For whatever reason, I can’t believe it. But if they do the math, it’s way more believable.
Steve Laborda
I agree. though the challenge is also that sometimes either your customer doesn’t see it as a priority, so you will not do the calculation or he doesn’t have either the full picture. So that’s the other tricky part. so I would do it in a collaborative way. So I agree with you just having a finished calculator where you have a black box, then whatever the customer enters as number, it’s always a high price. I caricature now, but yeah, that doesn’t work. But if you do it in a collaborative way so that you work with your customer, building up in a sense the model even you should know what is behind it, that can help a lot to build up the confidence. But I wouldn’t like to leave it completely to the customer, because also there, you don’t know if someone has the capability to do it.
Mark Stiving
Oh, I agree completely. So the sales, I think the salesperson should be walking them through the math so that the customer can do it. and that’s why we that’s where our salespeople need to understand where that value comes from. That’s what makes a huge difference. One of my ways of thinking about this is that, look, does your customer actually know how much value they’re going to get from your product? And the answer is no. They’ve not bought it before. They don’t know your product as well as you do. They don’t. Does your salesperson know how much value any given customer is going to be able to get from your product? And the answer is no, because we don’t know that customer situation and what’s going on. And so the only way we could figure out the value is to talk about it, right? To have that collaboration between the salesperson and the customer to say, hey, let’s jointly figure out is this worth it? Right. Does this make any sense for us at all to be continuing our conversation?
Steve Laborda
Yeah, definitely. I fully agree. So that’s the only way you can really do it, but that means at the end, you need to educate yourselves people to do that because especially in the manufacturing world, I see far too many people that are kind of doing that monologue who believe that they’re going to convince the customer just by talking, talking, talking to the dead end. And then they are lucky sometimes customers buy because they say, okay, now it’s going to stop talking. So I’m quiet now for another 12 months. Yeah. And I’m always surprised how salespeople feel that asking questions and listening is difficult. And I find it actually relaxing because you have so much time to think about while you’re listening, while you ask a question. But then I always get that argument, yeah, but I can’t show my expertise then. I said, that’s not true. Because if you ask the right smart questions, you can show even more than that. You have the expertise than if you’re just talking through a desk by PowerPoint, for instance, with 256 slides in 30 minutes. Yeah. So yeah. So that’s where I get many customers struggling, is really to lean back to listen and to ask questions. And I mean, that’s the key element obviously for, for that discovery and that collaborative approach.
Mark Stiving
Yeah. I often think that buyers won’t trust you. They won’t buy from you until they think you understand their problem and you don’t understand their problem if you walk in and spew a bunch of technology and features, and, but when you ask questions and listen and then regurgitate what they said back, now you understand their problem and they’re much more likely to listen to your solution.
Steve Laborda
Yep. So, and like that’s interesting because there’s another thing. So I agree with you. You need to build that trust and credibility through solving, understanding their problem and ideally solving it. But what is interesting is that when you ask salespeople what is the most important thing for purchase, they still believe it’s price. But if you look at last year’s surveys and everything, most of the purchasers are also looking for value. They want to hear what is the value, what is the total cost of ownership production that can make up, and which problems can you solve? And that’s interesting that there is still this clash, but I’m not surprised because if you look at how much purchasers are trained nowadays and becoming more and more professionals compared to how often salespeople are trained. I mean, I still have customers who tell me quarterly. Yeah. We train our salespeople once a year. I agree. Still better than the ones who got the last training 10 years ago. I agree. That’s an improvement, but I mean, purchasers are trained slightly more than that. Yeah. so you see the clash also there, and that’s what I think that makes it also difficult for salespeople from that perspective.
Mark Stiving
Yeah. Not only that, but procurement people make many, many, many more purchases, do many more negotiations than any salesperson does.
Steve Laborda
I think so.
Mark Stiving
Level of expertise is very lopsided. Hey, before you get off the call here, there’s a question that I really want to know the answer to that has nothing to do with everything we’ve talked about so far. In the chemical industry, the cost of goods frequently varies a lot, right? So there’s a wide variance in the inputs. I despise cost-plus pricing, but if you’re not going to use cost-plus pricing, how is it that you manage the pricing of a chemical output when the input costs are varying so quickly and rapidly?
Steve Laborda
I mean, how many hours do we have, Mark?
Mark Stiving
You got three minutes.
Steve Laborda
It depends a lot so that you can’t really generalize the answer. So that’s the tricky part because of course, depending what type of process you have, what is coming out of it. So also what is the margin that you have? So you will have variances obviously, but you will have elements like, I mean the contractual terms in lengths for instance, is something that will help you to drive that thing. Yeah. So you will just try to have, if the situation is such that you have a high volatility, you try to have the lowest price for the longest time. Yeah. So that’s one way of doing it. Sometimes you play with the formulation. So if you’re not just very early in the value chain, but a bit further where you have blends of formulations, then you optimize your formulations and you have a range of formulations which are kind of in a similar performance bandwidth, but from a cost perspective, they’re varying So that you can play with that. And then you have of course different sources. So those are the things that you’re doing, but you’re always playing in a kind of a range where you know that you are on the safe side. So that would be my three-minute summary.
Mark Stiving
Got it. So, here’s what I always thought of as a solution to this problem. Although I’ve never been in the situation, so I didn’t have to worry about it, I’ve always thought the solution could be something like, we’re going to do cost-plus plus value. So in other words I’m putting gold into my product, I put this much gold in, so we’re going to charge you for this cost, so as the cost fluctuates, your price fluctuates, but there’s also this value kicker that says, here’s the real value I’m adding on top of the materials. And so that’s my price. So is that feasible, not feasible?
Steve Laborda
Yeah. I would say is it really feasible? There’s a lot of variability also for the customers then. But I mean obviously there are formulation-based approaches as well, so that you could blend it there. So it depends again on the ratio of the cost part and the value part. But I mean, also in the overall, if we take the commodities and the specialties, what you see is that you can do value-based selling for both of them. It’s just the ratio in a sense of value that you add that is different. For a commodity, it might be services or something, and then it’s a little piece of value for a specialty. It might be a huge part of value. And of course then as a supplier, you need also to match the new cost with the value bridge, because sometimes what I have seen is people try to do value selling on products and they are surprised that the price is lower than the cost plus the cost plus the margin they want to add and they don’t understand. But then it’s clear the differentiation is too low.
Mark Stiving
Exactly. Exactly. And we get out of that business.
Steve Laborda
Yeah, exactly. So, you need to and that’s important. Just to summarize, I think many people believe that value selling is the holy grail or a silver bullet, whatever you want to call it, right? But that’s important, especially in the chemical industry. I have seen it, it doesn’t work everywhere. So you need to widely select where you do value selling and where you simply maybe do just cost-plus pricing or supply demand or formula-based pricing and sell it that way, but then the consequences, no services or limited services and lean and mean, right? So that’s a bit, the consequences.
Mark Stiving
Yeah. Steve, we’re going to have to wrap this up. This has just been fascinating. I’ve loved talking to you. but I’m going to ask you the final question. What is the one piece of pricing advice you would give our listeners that you think could have a big impact on their business?
Steve Laborda
That’s easy. Don’t forget to work with sales when you do your pricing.
Mark Stiving
Nice. It’s okay. I’m going to restate what you said. And that is price relative to value and make sure you understand what value really means, and salespeople probably understand it better than you do. So, excellent. To our listeners, thank you so much for your time today. If you enjoyed this, would you please leave us a rating and a review and to Steve, if anybody wants to contact you, how can they do that?
Steve Laborda
I think the easiest is really just to go to LinkedIn or get the… I’m sure you are going to share the link to my LinkedIn profile and send me a message or a contact request.
Mark Stiving
Perfect. Thank you so much. And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me, [email protected]. Now, go make an impact!
