Value-Based Selling Execution Bolsters Company Growth in Tough Economy

EVANSTON, Ill., Nov. 16, 2011 /PRNewswire/ -- Corporate cost-cutting may generate more headlines, but a study of 214 companies released today reveals the best firms have increased profits by improving the way they sell goods and services.

The study, commissioned by global sales and marketing consulting firm ZS Associates and completed recently by the Aberdeen Group, a Boston-based research company, showed that the majority of industry-leading companies are excelling at value-based selling.  Instead of selling primarily on product/service features, personal relationships and price, these companies are tailoring their offerings to customer needs, communicating and proving compelling benefits and worth relative to alternatives, and reinforcing value delivered.   And while value-based selling is by no means a new idea, the report further demonstrates that many companies, those that are not performing as well, have yet to move from concept to true execution.  

"This is the first study that demonstrates a growing divide between the companies that engage in value-based selling and those that do not," said Peter Ostrow, research director of sales effectiveness for Aberdeen Group.  "You read about companies cutting expenses, but those that can transform how they sell see the biggest improvements in sales and profits."  

Aberdeen surveyed companies in the United States, Canada, Europe and Asia with annual sales varying from less than $50 million to more than $500 million.  They spanned a range of industries, including information technology, software and education.  Aberdeen divided company respondents into three groups:

• "Best-in-class" companies experienced 91 percent customer retention rates, an 11.7 percent year-over-year increase in annual contract or average deal size, and an average year-over-year profit growth rate of at least 16 percent.  
• "Industry average" companies experienced 42 percent customer retention rates, a 1.7 percent year-over-year increase in annual contract or average deal size, and an average year-over-year profit growth rate of 1.8 percent.  
• "Laggard" companies experienced 31 percent customer retention rates, a 3.7 percent year-over-year decrease in annual contract or average deal size, and an average 1.9 percent decrease in overall year-over-year company profits.

While the advantages of value-based selling are well-known — especially in a highly competitive category — many companies are unable to adopt effectively the requisite sales techniques.

"This study is very consistent with our experience helping companies transform their selling organizations," said ZS Associates Managing Principal Ty Curry.  "In today's highly competitive market, where buyers are becoming more sophisticated, and where reliable product information is readily available on the Internet, the salesperson's role is changing.   Except for true, lowest-price competitors, every sales and marketing leader must be thinking about how to win on value.  Not only does this practice increase win rates and deal margins, it is also a powerful lever for increasing customer satisfaction and loyalty."

Know the customers better than they know themselves

While most companies segment customers based on size and industry, value-based sellers invest in a deeper level of insight into customer needs, buying processes and priorities.  Two-thirds (67 percent) take a systematic approach to understanding customer or prospect needs, and then tailor their selling messages accordingly.  Nearly three in five companies (59 percent) also use such information to categorize customers based on needs and preferences.

At these companies, marketing and sales form a truly collaborative way of working together to design market offerings and value proposition strategies for each target segment.  They again collaborate to provide the tools necessary for sales people to effectively articulate, demonstrate and reinforce that value at relevant stages of the sales process.  This powerful approach to collaboration keeps best-in-class companies at the top of their respective industries.  

In contrast, only 38 percent of laggard companies demonstrate this type of collaboration between sales and marketing.

"The best companies approach many aspects of marketing and sales in strong alignment," Curry said. "They have moved beyond the baton hand-off that has plagued marketing and sales alignment in so many companies."

Sticking to a formal sales doctrine

The study also found that a disciplined, well-articulated and well-adopted sales process distinguishes the sales forces of best-in-class companies from their laggard competitors.  Fifty-nine percent of top companies use formal, published sales methodology — supported by management and regularly implemented by most sales representatives.  Only 24 percent of laggard businesses use a similar sales process.

"The backbone of value-based selling success is a formal, well-understood sales process adopted by the sales force," Curry said.  "This provides guidance and serves as a road map for members of the sales team.  It also provides a critical basis for coaching, training and sales enablement efforts."

Best-in-class companies regularly monitor progress and ensure sales forces understand how best to engage the customer.  Sixty-six percent of the top companies surveyed said their sales representatives and managers meet regularly to evaluate and track progress — while only 28 percent of laggard companies followed suit.  Many of these best performers further differentiate themselves from the competition by closely monitoring customer satisfaction after the sale.  

"First-line managers who effectively coach skills and behaviors will see much greater results from their salespeople," Curry said.  "An apprenticeship model is critical for success.  The sales force needs a manager to guide and reinforce the right activities and maintain enthusiasm throughout the transition."

Follow this link for a copy of the report: "Value-Based Selling: Building a Best-in-Class Capability for Sales Effectiveness" (http://research.aberdeen.com/1/toolkit/overview.html).

About ZS Associates

ZS Associates is a global leader in sales and marketing consulting, outsourcing, technology and software. For almost 30 years, ZS has helped companies across a range of industries get the most out of their sales and marketing organizations. From 20 offices around the world, ZS experts use analytics and deep expertise to help companies make smart decisions quickly and cost effectively. ZS comprises multiple affiliated legal entities. Learn more at: www.zsassociates.com.

SOURCE ZS Associates