The Value Proposition

No, the value proposition is not something on a ballot in the next California election. In fact, it’s the thing you offer to prospects and customers that justifies their investment in what you’re selling. Sometimes it’s called ROI – return on investment. Before customers buy, they are demanding a credible, accurate estimate of the return they will earn on their investment. For example, more than 80 percent of IT buyers expect vendors to quantify the value proposition, according to a survey from www.searchCIO.com. The problem is, few salespeople are prepared to deliver those estimates, according to Michael Nick, founder of West Bend, Wisconsin-based ROI4Sales Inc., and author of ROI Selling (Dearborn Trade, 2004).

Nick finds this inability to quantify value for customers manifests itself in various forms – long sales cycles, sales lost to competitors, customer indecision and the demand for discounting, which plagues so many sales organizations. “Most salespeople don’t realize the cost of discounting,” he says. “If you are in a $15 million company and the average discount is 30 percent, you are leaving millions on the table. That’s huge.”

Value Versus Cost

In today’s new game, you need hard figures that specify the revenues customers can expect to gain or the costs they will eliminate or avoid. Value quantification is also a potent weapon in the battle against what Nick calls “cost justification.” He says, “If you have to cost justify, you’ve probably lost. When you go in at the end of a sale and say, ‘Okay, here is the price,’ and then need to cost justify, you have probably lost. If you start with value and sell value throughout the process, there is no reason to cost justify – because the value justifies the cost.”

Most salespeople, however, are entering customer engagements without the right table stakes. “[Salespeople] are intimidated by the financial metrics. More and more, I am seeing that salespeople run from financial figures,” says Nick, whose firm has developed automated value quantification sales tools for such companies as Oracle, Hewlett-Packard and Rockwell Software. “They don’t want to read a balance sheet or a financial statement or an annual report. They are afraid of the information that is in there. For lack of a better word, it’s a fear of having to learn how to do that.”

That fear, however, is not well founded. “Salespeople think that an ROI or value justification model is all about financial metrics. And it’s not,” says Nick. “That is the misconception that everyone seems to be under. You don’t have to be a financial analyst to talk about ‘what is your problem’ or ‘what is the cost of that problem.’ That doesn’t take a rocket scientist.”

Get Out the Calculator

There are calculations involved in value quantification. These days, however, most of the heavy lifting is done with software based on programs, such as Nick’s ROI Financial Dashboard, created long before the sales engagement. Typically, value quantification software is based on models that align customer issues, pains and goals with the features and benefits of the seller’s offerings.

In the field, the essence of value quantification lies in the questions salespeople ask their customers. “One of the things you will notice about salespeople is that they ask a lot of questions. That is what we teach them, right?” asks Nick. “But they never give you anything to do with the answers. And when you go in asking foolish questions, wasting people’s time, you lose before you begin. Salespeople work like hell to get in to see somebody, and when they finally get in, they disrespect the person’s time.”

Instead, in ROI selling, sales professionals receive a “quantified” list of questions that show results and prove value. At a banking software company that sells teller automation, for instance, the salesperson would ask such basic questions as, what do you pay a teller? What is the average customer wait time? How long does it take to process a transaction? How many transactions do you process in a day? How many days a year are you open? How many tellers do you have on staff? What is your average number of tellers per bank? How many branches do you have?

“We are asking questions to capture the status quo,” says Nick. “Many, many organizations don’t have all these numbers in one place, so when you capture them, you move from being a salesperson to being a consultant.”

The customer’s answers to these questions are plugged into software that calculates such metrics and percentages as net present value, internal rate of return, payback periods and ROI. In turn, these measures become a valuable deliverable that salespeople can offer back to their customers.

“This is something that every customer gets once they answer the questions,” says Nick. “So, it’s not like the customer is going to answer your questions and get nothing. Sales is give and take.”

Increased Awareness

Even better, the value quantification process raises customers’ comprehension levels as they become aware of the cost of their pain and the cost of delay. “Once you have helped them capture those current costs, you apply the estimated value that you could deliver,” explains Nick. “And that value isn’t just a number you pick out of the air. These are proof points within your ROI model.”

With automated-value-quantification tools, customers can participate in the process of determining the value via the salesperson’s laptop. “Have your customer estimate the value you can deliver,” advises Nick. “Your prospects and your customers can take complete ownership of these models. They are telling you what their pain is; they are helping you help them capture their current cost of that pain; and they are helping you estimate the value you can deliver.”

What do value-quantification tools do for the sales professional? “ROI selling gives you the questions to ask, a place to put the answers and gives you a deliverable to give back to your prospect. No matter what process you are using, you have to ask the right questions, you have to collect the right data and, then, you gotta do something with it,” says Nick. “If you are a mediocre salesperson, it will make you great. If you are a not-so-good salesperson, it will make you pretty good.”