Wednesday, November 08, 2006

Business Value Selling and Sales Turnover - Continuous Working for Change

Many IT solution providers have recognized that selling the old way based on features, function and price just won’t cut it in today’s marketplace. The age of budget scrutiny, governance and accountability are upon us. As a result, customers are demanding business value proof prior to investing in that next upgrade or project. The statistics bear this out, with over 90% of customers requiring formal business justification on projects $50,000 and higher according to our research.

These same customers, even though they require formal justification, admit that they don’t have the time or resources to properly prepare business cases for all of the pitches and proposals they get, and as a result, many never get the fair consideration they deserve. Many fully expect vendors step up with their own justification. Vendor analysis is so important that over 61% rate a vendor’s ability to deliver an ROI business case justification as an important differentiator or requirement in the selection process.

The bottom line message for vendors – if you want your sales proposal to be a priority, it needs to be justified in quantifiable terms. The demand for business value selling is a fundamental and permanent shift.

In response, most sales forces have instituted initiatives to help align with a more demanding and frugal customer base. These programs have consisted of:
1. Solution or value selling methodology training and processes including CRM integration to help track the process
2. Value oriented advertising, direct mail, collateral, case studies and white papers,
3. Account intelligence tools to help understand customer issues and engage on a consultative basis
4. Dynamic ROI / TCO sales tools to make the case for specific projects and initiatives

We have seen many of these programs reap early rewards, but for some vendors, these initiatives seem to lose steam. For example, a large IT vendor we know of instituted a value selling methodology and asked sales professionals to track deals through progressive value steps. The program included tools to help engage customers on value opportunities and also help in developing ROI business cases.

The first year, intense training was conducted and adoption was driven through champion initiatives and management mandates– reaching 70%+ awareness in the sales force, but only around 1/3rd sales force adopted the program to even the most basic level. Why reluctance to adopt initially? The team found that it was not a demand issue – customers were asking for help – but the following internal issues:

1. Many of the sales team did not have prior experience in value selling methods or formal training – this was mostly new, and in many cases overwhelming the first time through

2. Many of the sales professionals being trained were new to the company – with over 30% having less than one year of service. Open to new programs, but overwhelmed with other education worries, the new way to sell and tools to help were often just one more thing to worry about.

Even with these hurdles, those who adopted the techniques and tools had quantifiable improvements via competitive wins, and additional revenue. The programs had positive ROI and a great value add for customers.

So how was the progress the second year? Because the sales team had other investments to make in staff, systems and programs, and because so much effort was put forth in year one, the second year education and program management budget was reallocated to other programs. By the third year with even less focus by education and program management, use of the new program was almost non-existent.

Why when the demand was so high and growing from the customer base for these value-based sales programs did the program not stick?

For IT sales forces, the average sales turnover rate as measured for 2004, 2005 and projected into 2006 is expected to be a lofty 30% according to well respected human resources research firm Culpepper. Each year, one in three sales professionals is new. For some companies, over a three year period only a few veterans remain. Over the course of three years, it is no wonder why any program that is not reinforced continually, supported by training, tools and management focus disappear.

We have seen many companies invest millions in value selling training programs and tools, but fail to advance this revolutionary change through centralized program management focus and education / support change.

As such, we recommend the following best practices

1. Revolutionizing the sales process – moving from well practiced feature, function and price selling to business value is not going to happen overnight. Such significant change requires significant training and tools.

2. Value selling programs should be kept simple in order to improve the chances for early adoption and usage.

3. Instituting change while attrition is in the 30% range is difficult, therefore, program investments need to occur over some time and be reinforced continuously

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