S L300 Alpha 1

Fix Buyer Problems With Value Based Sales

 

 

In my last post I shared how a Value Based Sales approach helped a marketing and positioning serve firm land a whale account. This was an example of how to sell a “to buyer”. A  “to buyer” wants to move to a future state. In this post I will share how a value based sales approach helped “away buyers”, buyers who want to move away from pain and how it resulted in a $38 million sales increase in just 18 months.

As we meet with buyers we need to quickly determine if they are a “to buyer” or an “away buyer”.

A “too buyer” wants to improve something, wants to be innovative and has an emotional attachment to a future state. As a salesperson our job to create a value based sales proposal to help them get to this desired future state. In my last post I shared how we helped a client enter a new market and increase incremental sales and profits.

The other type of buyer is the “away buyer”. An away buyer wants to avoid risk, pain if you will. They are singularly focused on moving away from current problems and avoiding future ones. As a salesperson once we clearly understand what they want to avoid it is our job to create a value based sales proposal that helps them move away from problems.

In the 1990’s I was the VP of sales and marketing for Alpha Enterprises Inc. We were a plastics injection molding company that provided plastic packaging and mechanical security devices for the music retail industry. (you know those plastic boxes and devices that have to be removed at the checkout counter? That was us)

In the mid 1990’s the music industry experienced a significant shift in how music on compact discs were going to be packaged. Prior to this time music on compact discs were distributed to music stores and other mass merchants in a 12” cardboard package. This cardboard package was designed to easily fit in what were once record album fixtures. This original packaging also added size to the compact disc jewel case to prevent and or slow down retail theft. Alpha Enterprises manufactures mechanical security devices in plastic for audiotapes and videos at the time. We had a design for a compact disc package, but we had very little sales prior to this market-packaging shift.

Recognizing this large shift in how compact disc music was going to be distributed, we hit the road meeting with as many music retailers, mass merchants and other companies that provided music to locations like book stores and so on and did voice of the customer research.

In our meetings we discovered a number of people in each organization that influenced the purchase of mechanical security products:

 

Merchandising

 

Loss prevention

 

Store design

 

Purchasing

 

Operations

 

We met with purchasing and all the other people who helped influenced the purchases.

 

We found each influencer was also primarily concerned with theft, since compact discs could easily be hidden in someone’s clothing. We also found each influencer had specific requirements and criteria they were looking for as well as pain and problems they needed to avoid.

 

For example: Loss prevention’ main goal was protect the small CD packages in some way to reduce theft and if possible help them reuse security tags that were costing them 6-11 cents per purchase.

 

Purchasing at mass merchants and music stores wanted devices that protected their product at the lowest cost. (and that was not us) They told us they did not have budget to buy loss prevention Keepers.

 

We took a value based sales approach to fix this sales problem.

 

Value based sales is about understanding the business of your customer’s business so we asked a lot of questions:

 

On average how many compact discs do you plan to merchandise per store?

100,000

 

What is your current loss due to theft for audiotapes and videos that have no security protection?

About 15% without a security package but we expect CD’s could be as high as 25%

 

We have heard some theft is internal, other words your employees, and do you have an estimate for those occurrences?

Yes about 2%-3%

 

One solution is to lock the entire product offering behind glass. Have you studied the impact on sales for product displayed live verse behind glass?

Yes, sales increase over 70% if product is merchandised live

 

Talk to me about those security tags you buy. What one do you use, why, and how do customers defeat them?

We use this brand and the customers defeat them by pealing them off or deactivating them.

 

And every security tag is deactivated at check out and leaves with the purchased product?

Yes

 

If I might ask, what do those little security tags cost you?

I won’t give you my exact cost but lets say around 6-11 cents

 

Help me understand your inventory turns how many turns do you want, do you see today?

They shared this number

 

We took all their data and created a value based sales proposal that included risk dollars based on their own numbers. And cost dollars of security tags.

 

We calculated the cost of security tags based on inventory and anticipated turns and shared that number.

 

Then we shared our hypothesis, a creative business idea as their business partner helping to solve this huge risk they wanted to avoid.

 

We created spreadsheets for buyers to plug in their actual numbers in each field to calculate their projected losses and some of those meetings became emotional. (this tool helped establish the cost of doing nothing)

 

Then we shared what we learned in our VOC work and how we redesigned our product to protect and reuse security tags as well as the compact discs.

 

We shared the test results other retailers like them experienced when using our devices and how it drove down their theft %’s.

 

Our buyers to win budget internally to fund our product purchases used our spreadsheets. Our presentations demonstrated the ROI for purchasing our products and it was often a 100% pay back within months.

 

When our competitor mass mailed a sample and a cover letter bound with a rubber band (really, I saw their direct mails on buyers” desks), we spent the time clearly understanding the pain this market shift would cause and the businesses of our customer’s business.

 

What was the result of gathering the “Voice of the customer”?

 

What was the sales growth impact from creating a value based sales proposal and not just selling on price?

 

We experienced a $38 million dollar sales increase in 18 months!

 

Or to put it another way: Market Dominance!

 

What happened next was even more fun.

 

Retailers started calling us because we did such a good job with music CD’s to solve other high theft problems. They shared other products they wanted to see 70% sales increase for but are behind glass but they wanted out live. They shared items in their store that had high theft rates that they needed to lower.

 

 

Large companies like Nintendo, Microsoft, and so on heard about us and asked to meet to understand how our products could increase sales for their retailers.

 

 

This led to many successful new product launches. Eventually this division was acquired by one of the world’s leading security tag manufactures at a high multiple and is thriving today with products.

 

Why?

 

We listened to our customers.

 

We qualified their fear and risk into real $’s.

 

We spoke the language of their business: sales, profits, ROI, inventory turns, shrink (how they described theft)

 

We had business discussions about how our products could impact their sales, reduce theft, reduce the cost of labels and increase net income. (Create value)

 

We showed them how to avoid a problem and pain.

 

After the sale we quantified value.( shared the impact of their purchase decision)

 

We did not “sell” our customers we “helped” them.

 

So how about your company….

 

Do you understand the voice of your customers today? Are you Sure?

 

Is someone on your team asking questions and listening for buyer pain? Who?

 

Have you turned the buying process into a value based business discussion and share how you can impact their bottom line?

 

Do your salespeople understand how to help “to buyers” and “away buyers”?

 

What sales tools have you provided for each buyer type?

 

What impact would an incremental $38 million sales increase have on your bottom line with high gross margins?

 

What shifts are your markets experiencing right now or in the future you can help solve?

 

What if your largest competitor is doing this process right now? (Ouch now that you’re your attention)

 

 

PLEASE take the time and dedicate the resources to clearly understanding what your buyers want and need to buy today, and the process they use. Once you do.

 

PLEASE create a repeatable sales process that mirrors what your buyers want and need to buy today.

 

The above is a value based No Smoke and Mirrors process I have used for over 35 years and it has always driven profitable sales growth. When one client converted to a value based sales approach their close rates went from 42% to over 80% in 18 months.

 

What impact would it have on your bottom line if your sales close rate were over 80% with profitable sales?

 

This strategic business development process always ends with a value based sales proposal and we discuss how what we are selling solves their pain and problem and we connect the dots to how what we are selling impacts their bottom line.

 

Do not “sell” buyers I “serve” them buy with a value based sales methodology!

 

 

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