The Complete guide to value recognition

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The Complete Guide to
Value Recognition
Marketing, Selling and Negotiating
Based on Value

Global Partners, Inc.
The Complete Guide to Value Recognition
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Preface .......................................................................................................................................................... 3
Introduction .................................................................................................................................................. 4
Chapter 1: Define Value Selling and Marketing for Your Organization ........................................................ 6
Chapter 2: Develop Quantified Value Propositions ...................................................................................... 9
Chapter 3: Identify the Value Buyers in Your Customer’s Organization and How to Get to Them ............ 12
Chapter 4: Define Compelling Value Messages .......................................................................................... 18
Chapter 5: Consistently Apply Value Selling and Marketing Techniques to Get the Prices You Deserve .. 22
Chapter 6: Confront Value Leakage and Secure Your Margins ................................................................... 29
Featured Offer: Value Selling Toolkit eBook ............................................................................................... 34
Meet the Global Partners Team.................................................................................................................. 35

Table of Contents

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Preface

Value Recognition and negotiating with customers on the basis of value have been at the top of most
company’s list of areas for improvement for the past decade ‐ at least. Suppliers have seen their products
and services commoditized by increased competition, shortened product life cycles and aggressive
negotiating by their customers’ purchasing groups. Despite the best efforts of these suppliers to train their
sales and marketing people in methods to counter these trends, they continue to struggle to get the value
they deserve for their products and services.
All too often we hear sales people complain that while quantifying and positioning the value that their
products and services create for their customers should lead to achieving fair prices, their customers
continue to resist value arguments and insist that the lowest supplier price will get the business. Value
price negotiating sounds good, but in reality it simply doesn’t work!
However, it does not have to be this way. There are suppliers, including many of ours, who have succeeded
in getting fair value prices for their offers; ones that reflect the improvement in their customer’s business
resulting from the supplier’s products, services and solutions.
In this ebook, we will present practical approaches, tools and techniques that can be applied by any
supplier company to achieve fair value‐based prices with their customers. We define value pricing as an
approach that clarifies and emphasizes the added value or benefits of a product/service to a customer, in
a way that improves the chances of a getting a fair price. Like any business improvement initiative, Value
Price Selling and Negotiating requires commitment and patience. Applying the approaches presented here
takes time and persistence and since these approaches are applied directly with customers, a fair amount
of ‘courage’ as well. However the payoff is significant in terms of higher prices and margins.
The articles in this ebook begin and end with the role of Procurement in driving down suppliers’ prices in
order to capture more of the value that customers deserve. We have found that all too often this happens
because suppliers allow it to happen. We hope that this ebook will enable and empower sales people and
their companies to resist this pressure and maintain positive and profitable relationships with their
customers.


Paul Hesselschwerdt
President
phesselschwerdt@globalpartnersinc.com

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Introduction

"Value is the worth, in monetary terms, of the technical, economic,
service and social benefits a customer receives in exchange for the
price it pays for a market offering, taking into consideration
competing suppliers' offering and prices." – Harvard Business Review

This classic definition of Value from HBR is relevant in any age but, today, there
are also new demands for sales organizations. How they adapt is by building
Value‐Based relationships with their key customers.
Here are 6 imperatives for global organizations that wish to build Value‐
Based relationships with their key customers, which will be covered in the
following chapters of this book.
Chapter 1: DEFINE VALUE SELLING AND MARKETING FOR YOUR ORGANIZATION: We define Value
Selling as the critical sales techniques that position the embedded value of a product or service as a key
differentiator. Value Selling is a company's strongest capability for getting the prices it deserves for its
products and services. Value Marketing is about positioning the supplier company's brand as a Value‐
Based business partner.
Chapter 2: DEVELOP QUANTIFIED VALUE PROPOSITIONS: Value is only meaningful (and therefore
sellable) to a customer if it is quantified. Value quantification must be Credible, i.e. the customer must
believe that they can capture the quantified value in your proposal. Value quantification must also be
impactful, i.e. there must be enough quantifiable improvement in the customer's business results to
overcome price‐only negotiations.
Chapter 3: IDENTIFY THE VALUE BUYERS IN YOUR CUSTOMER'S ORGANIZATION AND HOW TO GET TO
THEM: Account Managers and sales people typically know how to identify and influence Decision Makers
and Influencers. Nowadays, however this is not enough to Value Sell effectively. Account Managers and
sales people need to understand who the people in their customer organizations are who care about value
‐ and are willing to pay for it. Building relationships with these people is far more beneficial when the time
comes to sell value and negotiate based on value.

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Chapter 4: DEFINE COMPELLING VALUE MESSAGES: The messages used in marketing campaigns as well
as presentations to customers must enable the customer to clearly and easily make the link between the
supplier's proposal and impact on the customer's business results. And these value messages must be
delivered to the right value buyers.
Chapter 5: CONSISTENTLY APPLY VALUE SELLING AND MARKETING TECHNIQUES TO GET THE PRICES
YOU DESERVE FOR YOUR PRODUCTS AND SERVICES: This comes down to discipline and skill on the part
of sales people and Account Managers to resist the arguments from 'commoditizing' negotiators that
there is no value (or not much value) in the supplier's solution. In some cases this may mean walking away
from opportunities rather than giving away the supplier's value through price discounting. Sales
management therefore needs to also be disciplined and consistent in their support for Value Selling.
Chapter 6: CONFRONT VALUE LEAKAGE AND SECURE YOUR MARGINS: Winning opportunities based on
Value Pricing is the important first step. However, even then customers will attempt to erode the Value
Price (and therefore your margins) by attempting to gain additional products, services and features
without paying for them. Suppliers who allow this value to leak out of their customer relationships not
only erode their margins, but also make it very difficult to sell value in subsequent customer negotiations.

Key Questions to Consider for Your Business
1. How has your organization defined Value Selling and Marketing?
2. How clearly can your sales people describe the quantified value that your products and services
create for customers?
3. How have your sales people identified and established relationships with the value buyers
within their customers?
4. Has your marketing organization created a portfolio of quantified value messages, examples
and collateral material?
5. How are you ensuring that Value Selling and Marketing techniques are consistently being
applied throughout your organization?
6. How do you prevent Value Leakage in your key accounts?

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Chapter 1
Define Value Selling and
Marketing for Your
Organization

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3 Ways to Avoid the 'Commodity Trap';
3 Ways to Create an 'Escape Plan'

“Identifying and quantifying the differentiated value
of what we can offer to our customers and
presenting it in a compelling way to the various
buyer types who care about value.” ‐ Definition of
Value Selling from a global semiconductor supplier

How often, in Value Selling, have you heard someone in your organization say:
“My customer keeps pushing our products into a low value‐added,
commodity status, even though we both know that this is not the
case and he only does this to keep the price down.”
If you have heard this, your company may be in the 'Commodity Trap' – and
you are not alone, the 'Commodity Trap' occurs in every industry and in all
economic cycles. With increases in global outsourcing, it is more common than ever to hear these types
of statements.
How do you avoid the 'Commodity Trap'? Start by defining Value Selling and Marketing for your
organization. One of our clients defines Value Selling as, “Identifying and quantifying the differentiated
value of what we can offer to our customers and presenting it in a compelling way to the various buyer
types who care about value.”
This is about as complete a definition as we have found because it covers the 3 key elements of Value
Selling and Marketing:
1. Know your differentiated value and know how to quantify it at some level. Many companies
understand the importance of quantifying value, however, sales reps are often unaware of the
impact that their products and services have on the customer’s business. In addition, they fail to
appreciate that each person in the customer’s organization, from procurement to senior
engineers to the CFO and CEO, has different value drivers, i.e. low price vs. time to market vs.
payment terms vs. strategic partnerships. The value‐based supplier must quantify the impact of
their products and services on each of these value drivers and present it to the relevant customer
in a credible way.
2. Present your quantified, differentiated value in a compelling way. Fewer companies spend
enough time creating consistent value messages. Formulating and communicating a consistent
Value Message results in anchoring the supplier’s offer to the quantified value it creates for the
customer. Ensuring this firm connection means that when the price discussions and negotiations

8

occur later on, the customer (and especially the Value Buyers) realizes that if they buy the
supplier’s solution, they will get the value payoff. On the other hand, if they buy on the basis of
price only they will potentially lose the potential value.
3. Identify the real ‘Value Buyer’ for each purchase decision. Very few sales reps identify and build
value‐based relationships, specifically with the people in their customer organization that care
about value, are willing to acknowledge it, and (at some level) pay for the value they get from
their supplier. The real Value Buyer in any situation is the person (typically at a senior level) who
is directly responsible for the business results that your proposed solution will impact. In
manufacturing for example, the Value Buyer will typically be the head of production and his/her
quantifiable Value Driver will likely be Cost of Goods Sold, Manufacturing Yield and Process Cycle
Time. In Research, the Value Buyer will be the Director or VP of Research & Development. His/her
quantifiable Value Driver will be Time‐To‐Market, Innovation and Design Productivity. Even
Procurement, which seems to focus only on price, has an even more compelling Value Driver,
which is reliable supply. After all, if the production line goes down because of poor quality parts
or the late arrival of supplier materials, the cost to the customer is significantly greater than a few
cents saved on the purchase.
Escaping from the ‘Commodity Trap’ is primarily the job of sales people. Avoiding it altogether is primarily
the responsibility of marketing and requires longer term, strategic actions.
Harvard Marketing Professor John Quelch writes:
“Intense global competition, outsourcing and offshoring are all squeezing margins, increasing
customer price sensitivity and making it harder to sustain inter‐brand differentiation. The product
life cycle suggests that, as product categories mature, they become more susceptible to the forces
of commoditization.”1

Quelch suggests that “Marketers can do three things to fight the inevitable forces of commoditization.
1. Innovate. A new product that better meets consumer needs, even an upgrade of an existing
product, can one‐up competitors and force them to invest in matching or exceeding the new
specifications.
2. Bundle. Selling a commoditized product with differentiated ancillary services (such as after sales
service) can appeal to buyers willing to pay a premium for the convenience.
3. Segment. Mature markets are large markets that can be divided profitably into multiple
segments. Marketers can focus on providing applications expertise to less price‐sensitive
customer segments for whom the product is still important."
"However you approach commoditization, try to innovate at all costs to beat it back. Because, as Peter
Drucker said, 'In a commodity market, you can only be as good as your dumbest competitor.'"


1
Quelch, John. "When Your Product Becomes a Commodity — HBS Working Knowledge." HBS Working
Knowledge. Harvard Business School, 14 Dec. 2007. Web. 22 Feb. 2012.
Key Questions to Consider for Your Business
1. How well do your sales people understand and believe in the value your products, services, solutions and even your
organization creates for customers? Are they confident enough in your value propositions to defend it against customer
‘commoditizers’?
2. Do your sales people create strong relationships with the true value buyers in their customers’ organizations far in
advance of the time that they will be negotiating with Procurement?
3. How effective are marketers at combining commodity products and services into differentiated offers?

38


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Guide to Value Recognition ebook today!

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36

Meet the Global Partners Team

Global Partners, Inc. creates customized business growth solutions for global companies whose success
requires a deep understanding of diverse cultural markets, profitable business decision making and
financial results.
For the past 20 years, we have worked in partnership roles with global companies:
‐ Developing new internal capabilities and processes for Global Account Management, Value
Selling, Marketing Team Effectiveness, Total Customer Focus, Business Acumen and Ideation
‐ Creating workshops that engage participants in highly realistic action learning simulations and
experiences
‐ Facilitating new ideas and fresh perspectives that are globally‐based but have customized, cross‐
cultural applications
Our team has not only worked in global markets but lived in them. We have worked with over 300
global‐based companies in more than 100 countries.
Our client relationships are long term because our clients view us as their business growth partner.

PAUL HESSELSCHWERDT
Global Partners President
Paul has been a senior executive in consulting and industry for more than 20 years. He has
worked with companies in the Americas, Europe and Asia. Together with the Global
Partners team, he has designed and implemented programs in leadership, management
development, sales and marketing, and project management across a range of industries,
including pharmaceuticals, biotech, retail, chemicals, consumer products, electronics and high
technology. Paul’s career began in finance and accounting and half of his professional life has been as a
Finance Director and Chief Financial Officer for industrial, life sciences and global media companies.
Based in the US and Europe, the Global Partners team is comprised of:

FABRIZIO
BATTAGLIA

DAVID
SANDERSON
JAY
GRONLUND

CHARLES
KELLOGG
BOON CHYE
LIM
RODNEY
ROCKWELL
MICHAEL
WOLF

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Image Credits

Page 13 image of org chart: Flickr user ‐ commanderjaygold
Page 15 image of social media buttons: Flickr user ‐ KEXINO
Page 19 image of microchip: Flickr user – existentialism
Page 23 image of valves: Flickr user ‐ Jason L. Parks
Page 27 image of cards: Flickr user ‐ Jim B L
Page 33 image of faucet: Flickr user ‐ r. nial bradshaw

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