Impact Pricing Podcast

Ep140: Understanding the ‘Value Mystery’ and Get Paid of What It’s Worth with Mike Wilkinson

 

Mike Wilkinson is called ‘The Value Selling Expert’ and he helps Sales Directors/VPs and sales teams understand customer value and get paid what they’re worth.

In this episode, Mike shares how you need to get to the generic issues of the business first, document and understand what the company faces so you know how and where to add value, and ultimately defend your pricing. 

 

Why you have to check out today’s podcast:

  • Learn how to solve the ‘value mystery’, so both customer and seller discover how much value there is going to be
  • Find out why salespeople should need to have business acumen, so you understand how your customer’s business works and know where to look for value
  • Discover the right approach to the ROI calculator, so you know where you add value

              

Don’t apologize for your pricing. Be proud of it and look for the value. Don’t discount first. Value first. Then think about if you need to discount. 

Mike Wilkinson

           

Topics Covered:

01:59 – Sharing his thoughts on an ROI calculator gap being pointed out

03:33 – What for Mike is ‘Value Discovery Conversation”

05:01 – Value is a mystery

06:06 – Why salespeople have to understand what business acumen is

07:02 – How to make value conversations better

09:24 – Big gap between expectation and reality

11:12 – Addressing a ‘which one’ decision scenario

12:27 – What’s the biggest differentiator when there are no other differentiators

15:07 – Talking about ROI of the differentiation

16:19 – What truly is differentiation

17:48 – Talking about the concept of ‘generic issues’

20:18 – Salespeople operating on a ‘rat-up-a-drain-pipe’ selling

22:38 – How to let customers perceive something to be a real priority

24:16 – A great way to build up the perception of pain

25:46 – Mike’s pricing advice that can greatly impact one’s business

         

Key Takeaways: 

“The value discovery conversation is so much more than just having a chat to establish customer needs. I really think it is about taking the customer on a journey of value discovery, helping them to understand the things that they actually do need, the possibilities, the challenges that they have, what impact those are having on their business.” – Mike Wilkinson

“If value is a mystery, we need to understand what customers value. We need to solve the value mystery.” – Mike Wilkinson

“I have to have that business acumen of understanding how the hell does the customer’s business work? Where does their income come from? Where do their costs come from? Because if I don’t understand either of those, I’m just shooting in the wind.” – Mike Wilkinson

“What a lot of salespeople forget is that one of the biggest differentiators is themselves. Just the sheer feeling of comfort people get when dealing with somebody that they know, trust, like, respect — that is still massively valuable. But you have to be able to deliver.” – Mike Wilkinson

“The thing about differentiation, as I always say, being different isn’t differentiation, differentiation is being different in ways that deliver real value to the customer.” – Mike Wilkinson

“Thinking about value and thinking about the value that you believe that you can deliver to your customers is hugely important. But you need to take a step back from that in the initial stages of the conversation you’re having with your client.” – Mike Wilkinson

              

Connect with Mike Wilkinson:

                    

Connect with Mark Stiving:   

                          

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.)

Mike Wilkinson 

Don’t apologize for your pricing. Be proud of it and look for the value. Don’t discount first. Value first. Then think about if you need the discount.

[Intro]

Mark Stiving 

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the financial relationship between them. I’m Mark Stiving; today, our guest is Mike Wilkinson. And here are three things you want to learn about Mike before we start. He is called The Value Selling Expert. And that’s pretty much all he works on. He’s written a couple of books, most recently being The Seven Challenges of Value. And he spends his days helping companies deliver and get paid for value. And by the way, I think he was guest number three on our podcast series. So, welcome back, Mike, for your second visit.

Mike Wilkinson

Yeah, brilliant. And thanks a lot, Mark. It’s a pleasure to be back.

Mark Stiving

So, we had a chance just to chat a little bit beforehand. And it’s always fun talking to you; we were laughing at all. But I wanted to talk a bit about ROI calculators. You’re the one who put me on to Mike Farber, who we had on the podcast a few weeks ago. And I thought he was brilliant. I thought he did a great job. But I saw a gap in ROI calculators. And that’s what you and I started talking about. So, let’s revisit that conversation and then take it a little bit deeper. So, in my view, the gap is, most ROI calculators help us understand how and if we want to make a ‘will I decision.’ So, is buying this thing going to give me good ROI or not? And it doesn’t go on to the next step, which says, ‘Okay, which one will I buy?’ Once I said, ‘Yes, I need to buy one of these things.’ And so, let me just pause there and say, what do you think of that thought?

Mike Wilkinson  

Yeah, as we were saying, I think it’s a really interesting thought. Actually, just before we move on, I have to say that the thing that I like most about Michael’s ROI calculator is, it’s simple. And you know, these are things that we’re going to put in the hands of salespeople, who I think actually run the risk of being inundated with ridiculously complicated tools that they are never ever going to use. So, the thing I liked about Michaels was, I can see people using that. I mean, I use it; I just think it’s a really simple tool. But you’re right, what it does help you to do is to make the decision, should I do something? Is there value in my doing this? It doesn’t necessarily answer the question, ‘Which one should I choose to help me to do it?’ However, as you and I both said, the one thing those first movers we’re going to have is, we will have established credibility. So, you might be fortunate enough never to get to a point where they make that comparison because you’ve convinced them of the value of your solution upfront.

Mark Stiving 

Yeah, and I actually think it’s bigger than the first mover to tell you the truth. Because imagine that somebody is coming to us, and we’re the second or third person that they’ve looked at, but nobody before has really helped them understand value. And we sit down and truly help them understand what value means and how do you do this, and we’re helping them sell up the chain inside their own company, to say, ‘Hey, here’s where we need to make this decision. I think we leapfrog the competition when we do that.’

Mike Wilkinson

I completely agree. And I think there are many examples where people still fail to understand the value that the customer is looking for, assuming the customer understands what that value is and our ability to communicate it then. But I think that that’s really all part of that value discovery conversation. I think the value discovery conversation is so much more than just having a chat to establish customer needs. I really think it is about taking the customer on a journey of value discovery, helping them to understand the things they actually do need, the possibilities, the challenges that they have, what impact those are having on their business. Because very often when, certainly when I’m sitting down with people, sometimes they are making discoveries during the conversation that they had never thought about.

Mark Stiving 

It makes all the sense in the world when I think about value conversations, what I call them. But when I think about these value conversations, I often describe them to people as there is no way your customer knows how much value they’re going to get from your product because they don’t know your product that well. And there’s no way you know how much value your customers will get from your product because you don’t know that customer’s situation that well. And if the two of you sit together and try to figure out what value means to us, both of you are going to learn, and it takes both of you actually to have this conversation and discover truly how much value there’s going to be?

Mike Wilkinson   

Yeah. And beyond that, you may well remember that my definition of value is that value is a mystery. And I think when we were first utilizing that, it was all about sales people having to solve that value mystery. That was our number one job. If value is a mystery, we need to understand what customers value, we need to solve the value mystery. But I think you’re right, there is far more conversation between us to help solve the value mystery for both of us, for the buyer, as well as for the seller.

Mark Stiving   

Yeah, and so I often think that salespeople should understand this thing we call business acumen. And I say the word business acumen, as in, if I understand my customers’ business, I can help them figure out how they make or save more money by using my product. Now, this is exactly what an ROI calculator does. Yeah, but if it’s business acumen, I don’t even need an ROI calculator; I just need to know where to look for value.

Mike Wilkinson   

Look, if I mean, in using a tool like the value triad, I cannot have a conversation with a customer, and demonstrate to the customer how I can help them improve their revenue if I have no idea where they generate revenue. And I certainly can’t help to demonstrate how I can save them money, reduce their costs if I have no idea where they incur a cost. So, I have to have that business acumen of understanding how the hell does the customer’s business work? You know, where does their income come from? Where do their costs come from? Because if I don’t understand either of those, I’m just shooting in the wind.

Mark Stiving  

Yep, yep. Okay, Mike, you said that you do value conversations or ROI calculators, with your clients with your potential clients. And I want to push you on this because I want you to coach me, I want to learn how to do this better.

Mike Wilkinson

Yeah. And I think the starting point for me is taking this customer on that value journey, not getting into starting to talk about what you perceive to be the benefits too early on in the process; you have to understand the challenges, the issues, the problems, the opportunities the customer has. And I think you need to have explored the impact on their business of failing to address them with them. And even at that point, we should be monetizing that. So that they need to recognize the downsides and costs of doing something before they then recognize the potential upside of actually addressing it. So, when I look at the value calculator, I think that comes from me, at any rate, a little bit later on. I know some people use the value calculator right upfront to hit the customer; this is all the fabulous things you can get. I don’t know, I think often isn’t the way I tend to approach it. I think that’s too much of this is what we can do for you. But before I’ve actually understood exactly what it is the customer actually needs done. I think they need to know that we can add value. I think that perhaps a very quick case study of how we’ve helped somebody else might help. But I don’t really think I’m ready to explain to you, for example, exactly how much money I’m going to help you make or how much cost I’m going to help you reduce until I understand your business in a bit more detail. And then I think it is about sitting down and together as much as you can together going through that conversation. So, if I’m with a sales director, for example, I might say, well, how many, just as a matter of, how many salespeople do you have? What’s their average target for each of them for the year? How many deals do they close in the year? What’s each of those deals were? So, very quickly, you can begin to come up with some numbers which say that we need to close that number of deals of that value. How many deals are you pursuing every year? How many are winning? Admit it, is that just taking them through that structured conversation? I have to say every time I do that, even with sales directors that you’d expect to have their finger on the pulse, it almost always makes them sit back and go, ‘Wow, I hadn’t actually thought a bit quite like that.’

Mark Stiving

I got to say that almost. That almost sounds embarrassing, in that I would expect sales directors to do that every day.

Mike Wilkinson

Yeah, but you know, they don’t. There’s a big gap between expectation and reality. And often it’s because there are so many things going on that stop them from doing some of the things that you’d expect them to be doing as a sort of matter of course. I’d expect sales directors to be spending huge amounts of their time coaching their teams.

Mark Stiving

That would not be a bad thing either. Yeah.

Mike Wilkinson

It would be a wonderful thing. But it doesn’t happen. It doesn’t happen as much as it should.

Mark Stiving

So, I want to tie what we’re talking about right now back to what we started talking about in the beginning. And that was this gap in ROI calculators. And I’m going to do it in the following sense. You and I, as pricing people, we can probably, or value people, I’m sorry, we can probably move…

Mike Wilkinson

I’m not a pricing person.

Mark Stiving

We could probably move revenue of a company, conservatively 1% without even changing a cost structure, right? That’s super conservative. So now you take a billion dollar company, and you move the number 1%, that’s $10 million. Now, if I could go through the value conversation, I can convince you I can do this, I can make a $10 million impact on your business. And I say, and I can do that for only a million dollars. Here’s the problem. They look at me and they go, ‘You, a million dollars? No, no, no, I can hire Joe over there. And he’s going to do it for 100,000.’ And so suddenly, we’re making a ‘which one’ decision, even though I convinced them that, ‘Oh, my God, this is something that you need to go do.’ So how do we address something like that?

Mike Wilkinson 

I think the instant answer is that it’s not easy. But I think it’s about establishing trust. It’s about establishing credibility. It’s about generating that perception of risk. If I’ve done the journey with you, and taken you on that value journey. And they’ve got to a point where they think, yeah, I can actually do this, I can actually generate an additional $10 million worth of business. Then I should have built the trust and credibility to make them think, ‘Hang on a minute, there is a risk associated with going with somebody else.’ And what’s at risk isn’t the difference between my million and that 100,000. That’s the difference between my million and 10 million, or 1000, and 10 million. So, there’s a big, big gap. And I think you’re down… Logic says if somebody says to you, I can do 100,000. And I’m saying to you, I can do it for a million. Logic says, ‘Well, you’d be wrong in your head to go for the guy who’s trying to charge you a million dollars, a 100,000 is a much better deal.

Mark Stiving

Especially if there are multiple people offering the 100k-ish price points. And it really comes down to, does the buyer believe that the products are similar or not?

Mike Wilkinson

Well, the bottom line is if products are the same, and you have no other differentiation, and I can demonstrate them, my $100,000 product will give you the ten million pound return, then you’d be wrong in your head to pay me $10 million. Or sorry, a million dollar Well, actually no, we’re delighted for you to pay. So, the question is, where is your differentiation? How do I differentiate? Why should you pay me a million dollars when you could buy it from somebody else for 100,000? So, I have to have a differentiation. Now, what a lot of salespeople forget, is that one of the biggest differentiators is themselves. Just the sheer feeling of comfort people get with dealing with somebody that they know they trust, they like, they respect, that is still massively valuable. But you have to be able to deliver. I’m not going to buy from you just because I like you.

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Mark Stiving

I think that the salesperson can get you and I’m just making this up. But I think the salesperson could probably get you 10%, 20% more because of the relationship because of the way that they’ve done their job. 10x more, I don’t think the salesperson could pull that one off.

Mike Wilkinson 

Now that’s going to be pretty damn tough. Right?

Mark Stiving 

But that brings us back to where I really wanted this to go. And that is, I’m now charging $900,000 more. I better have real differentiation here that my buyers believe, what’s the ROI of the differentiation? Well, that’s…

Mike Wilkinson

Well, that’s it, isn’t it? Because what I’m asking you to do if I’m asking you to pay me a million, and somebody else is going to do it for 100,000, effectively, what you’re asking yourself is, what am I going to get for my additional $900,000 investment? And if I don’t have a really good answer to that question, then the answer is, thanks, but no, thanks. We’ll go with $100,000 because it’s common sense. So, that’s the answer to that, but I do find that frequently, I mean, if you know, with sellers who’ve got products, who are perhaps not quite that much more expensive, you know. If my product is $10, and yours is $5, I still have to come up with a reason why you spend $5 more with me. What am I going to get back for that additional $5 investment that I’m not going to get if I just buy the $5 option?

Mark Stiving 

Yes. And now we’re back to the gap in the ROI calculator. Because what that just says to me is, ‘I’ve got this differentiation, I’m charging $5 more, are you getting more than $5 worth of value because you pay me $5? more? And now what’s…

Mike Wilkinson

Demonstrate. Yeah, if I cannot demonstrate that, and I can’t demonstrate an ROI, I’m going to say, ‘Well, thanks, but no thanks.’ That’s for sure.

Mark Stiving 

Yeah, absolutely.

Mike Wilkinson

Don’t forget that differentiation, the thing about differentiation, as I always say, being different isn’t differentiation, differentiation is being different in ways that deliver real value to the customer. So again, I go back to the fact that if you do not understand your customers in infinite detail, if you haven’t taken them on that value discovery journey, effectively, then your ability to defend your prices against this kind of downward pricing pressure, there’s going to be much, much harder. Now I have to say, I think being able to defend your prices against a $900,000, downward price pressure could be something of a struggle. We are talking about quite a big gap there. But under normal circumstances, the question is, do you have a differentiation that has value for the customer? And that you can use as your defense against downward pricing pressure? Because if the answer is no, you don’t, then all you’re left with is price. And you have to make a decision whether you want to drop your price or not.

Mark Stiving 

Yep, absolutely. I’m loving this conversation, Mike. So how do you coach your companies, your clients, to create a list of places where they’re looking for value when they go talk to their clients or potential customers?

Mike Wilkinson

Yes, I do, actually, we have a concept which are called generic issues. And generic issues are all the issues you can imagine a customer in a particular business segment is likely to face and you understand them, because that’s what happens with all the customers who go to. You know, these are the things that you’re going to find. Now, the next question is, can we actually do anything to add value in these areas, because somebody has got an issue doesn’t mean we can do anything about it. So, we need to be making sure that we’re targeting the sweet spots, from our point of view, where we actually truly believe that we can add something to the client experience that adds real value to what they are doing. And often that means added value to what they’re doing for their clients. So, yeah, I do coach them a lot. So, we will spend time thinking about right, what are the issues that you actually solve for your clients? What is the value you deliver to your clients? But there’s one caveat that I always had about this. And that is there is a danger now that you’ve gone through that thought process that you go straight in and you lead with it. So, you stray into that, that product. And I say no, no, no, no, no, that’s not what you’re doing. The whole reason for understanding what the issues are almost certainly going to be is that you can now test those assumptions in an educated way. The customer will know straight away that you’ve given some thought to the conversation, and you’re not talking about you, you’re focusing absolutely on the customer and their challenges. So, I think thinking about value and thinking about the value that you believe that you can deliver to your customers is hugely important. But you need to take a step back from that in the initial stages of the conversation you’re having with your client.

Mark Stiving

Yeah, I agree completely. I think that salespeople in particular want to pitch their product, want to pitch their benefits, and the problem that we really have is we don’t know what resonates with our buyers. We don’t know what matters to them. If we’ve got this list of, let’s use the word value drivers for a second and all of a sudden I hear the buyer say, ‘Your turnover rates are too high. Ding, ding, ding. I’ve got that one on my list of value drivers, I happen to know how to turn turnover into dollar value using my business acumen. Let me walk you through that, Mr. customer.’ And that just makes a lot of sense to do it that way instead of, ‘Hey, do you have a turnover problem? Let me help you with turnover.’

Mike Wilkinson 

Yeah, I completely agree. I still think it’s probably too early to come up with a solution. Again, I don’t know whether this translates into American but I think lots of salespeople operate on what I call rat-up-a-drain-pipe selling. I don’t know what that translates well into. But it’s actually just hearing something. I’m thinking eureka, I’ve got a solution to that and going with it, rather than just saying, right, that’s really interesting, make a note of that. Now, are there any other issues that you’re facing right now? And then getting the list? Because what I want to see, at the end of a really good an effective value discovery journey with a customer is the ability for the seller at the end of that process to say, ‘Right, Mr. Customer, let me just summarize my understanding the big issues that you’re facing right now, are this, this and this, and the impact that they’re having on your business is so and so. And I think we’ve agreed that there is some real benefit in actually beginning to address those. Yes. So, the next thing I want is, so are you committed to doing something about this?’

Mark Stiving

Yep. Nailed it. That’s beautiful. And I agree completely, that we’re not trying to pitch the solutions. We’re trying to document and understand value, how big is the problem? Right? Is someone going to spend money trying to solve this problem or not?

Mike Wilkinson 

Get down to that classic pain stuff, isn’t it? You know, if the pain isn’t big enough, I’m not going to change it. Because you know, it’s a bit like going to the dentist. Yeah, there is nothing which will get me to the dentist, until the pain is crazy enough that I go, I’ve got to go and do it.

Mark Stiving  

Okay, I was going to make a British joke here, but I chose against it.

Mike Wilkinson 

Feel free.

Mark Stiving

How do you coach or teach people to do the following? As a salesperson I’ve gone in, I’ve got my list of, you know, there’s probably 20 value drivers here. But there’s five of them that are usually really important. And my customer tells me three of them. And I’m thinking this is awesome. Do you recommend that you say something like, you know, other customers that I’ve talked with also feel this pain? Is this an issue for you or not?

Mike Wilkinson 

The answer to the question is very often I probably countenance than to say to do that. And let’s just see where the priorities are. At the end of the day, what I do want to say to me is that we’ve identified a number of issues that seem to be important for you. But if you were to prioritize those, which would be the really important ones, from your point of view. So, I think that probably looked to exclude things, rather than necessarily add loads and loads. I think the reality is, we both know that every business we ever come across has got hundreds of issues, hundreds of them, the vast majority of which they will never ever do anything about because frankly, they never get that high up the priority list for them. You know, and they get used to them, they find workarounds, they find ways of actually dealing with them. Those are not the ones we want to be looking at, we want to be looking at the ones that we can make them perceive to be a real priority to them to address and those need to be the ones that we could do something about.

Mark Stiving 

Yes, yes. I think the only exception that I would give to that, as I think through the process, is if I’m talking to someone who’s not a CEO, right, the CEO says this is the priority. Okay, that’s the priority, I get it. But if I’m talking to someone who says, look, the priority is, I need to make this more efficient. But we don’t really have the ROI there to be able to justify it up the chain. Now, what I want to do is help that person find more ROI so that they can justify it up the chain. Yeah. And so, I can see that as a process. But the idea that says let you choose what’s important, and let’s talk about that. Love that.

Mike Wilkinson

Yeah, I think going back to the point that you make, again, I think when you’re taking people on this journey of value discovery, sometimes they fail to really, really understand the implications of some of the problems that they have. They’ve never actually sat down and really monetize the impact on the business of the issue that they’ve got. Now, that’s not to say, of course, that every time we do now we’re going to come up with a winner. Of course, it isn’t. But what it does is it does take them; it opens their eyes sometimes to what the impact really is. I love the old concept of what a colleague of mine, my friend of mine, Peter Thompson calls the magic formula, which is what it costs you this month, $5,000. So that’s $60,000 a year. Absolutely right. How’s this been going on for? Well, a couple of years at least. So, it’s not a $60,000 problem, then it’s about 120, $180,000 problem. And if you don’t do anything about it, how much longer would you expect it to continue? and get a number out of that. So instead of the $5,000 a month problem, you’ve now got a $240,000 problem. That is a lot more interesting to work with. That’s it’s just a great way of actually building up the perception of pain.

Mark Stiving

Yes, yeah. Nice. Nice. Mike, we are running out of time. I have so enjoyed this conversation, as always, but final question for you. What’s one piece of pricing advice you would give our listeners that you think could have a big impact on their business?

Mike Wilkinson

Employ somebody who knows what they’re doing. But I think the one piece of advice that I always give to sales guys is, be proud of your price. Don’t apologize for your pricing. Be proud of it and look for the value. Don’t discount first. Value first. Then think about if you need to discount. Yep.

Mark Stiving 

Love that. Great answer. Mike, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Mike Wilkinson 

Easiest way I guess is mw@axiavalue.com.

Mark Stiving 

And axia is A X I A

Mike Wilkinson

A X I A, as you and I talked about just before we came on, your spelling A XI A value dot com. That’s it.

Mark Stiving 

Perfect. Episode Number 140 is all done.

Mike Wilkinson

That’s amazing. We started with number three.

Mark Stiving 

I know, so that means it’s been well over two years.

Mike Wilkinson 

Amazing, amazing.

Mark Stiving

To our listeners, thanks for listening. If you enjoyed this, would you please leave us a rating and a review? They’re very valuable to us. Thank you for listening. And if you have any questions or comments about the podcast, or pricing in general, feel free to email me at mark@impactpricing.com. Now, go make an impact!

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