by Cindy Barnes
The airline industry, for example, has customers ranging from individuals to travel agents to large corporations. In this market, the airlines try to deal with individuals (high-volume transaction, single transaction, low-value transactions) via low-cost channels such as the internet. Corporate sales, on the other hand, would be handled by a direct sales force, and large customers would have key account managers.
Figure 4.2 Summary sales approach
SOURCE Howard, 2014
All key functions and processes, as well as business behaviours, have an impact and should be re-evaluated after value proposition work, especially sales approaches and behaviours.
In Chapter 5, we highlight some of the key differences between consultative and transactional selling and the skills necessary to sell anything.
Frame the sales proposition in the right story
Stories provide a foundation for shared context and verification of mutual perspective between the salesperson, the company and its customers. The crafting of the sales proposition within the sales story is a crucial part of the sales process. See Chapter 6 for detailed information on this topic.
Make sure that everything you do supports your sales propositions
It is not enough for sales staff and sales channels to be geared up to support your new sales propositions: everyone who deals with customers needs to be on board. Otherwise all the good work can easily be undone. Business areas that also need to think differently about how they work and behave include:
customer service;
marketing;
technical support;
delivery staff;
accounts;
receptionists, PAs, secretaries;
senior management.
In Chapter 8, we explore this need for broader organizational change in more detail.
Case studies: value propositions to sales propositions
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CASE STUDY National Vehicle Distribution (NVD)
Irish vehicle distribution company NVD built on Value Proposition Builder™ and Value Pyramid™ work to create a successful new sales proposition. This example illustrates how it followed the eight-step process we have just outlined.
1 Understand what customers value
As part of its value proposition work, NVD identified four core characteristics that its customers valued:
forward thinking;
seamless delivery;
industry leadership;
relationship building.
2 Understand how they see you
As a next step, NVD assessed where its customers positioned it on the Value Pyramid™. Management found that all its offerings sat firmly in the bottom half: they agreed that commercial discussions were mostly focused on price and delivery time, both of which are attributes of commodity positioning. They did not question this because they understood this type of negotiation is very much in the ‘comfort zone’ for car dealerships and distributors. Could these customers engage in a different sort of negotiation process? And what could NVD offer them that they might buy in a different way?
3 Identify your core skills and capabilities
Management analysed NVD’s core skills, assets and capabilities, listing the most important as:
trucks;
drivers;
logistics systems;
tracking systems;
vehicle storage facilities – both dockside and centrally;
vehicle repair and customization facilities;
company culture.
NVD invests a great deal of time, effort and money in delivering each of these services in the most high-quality and cost-effective way possible. At this point it is worth noting that the items listed all have ‘product-focused’ descriptions: they do not yet refer to the value that they provide for customers.
4 Decide where to place propositions on the Value Pyramid™
All the characteristics identified by customers during the value proposition work (forward thinking, seamless delivery, industry leadership and relationship building) suggest a Solutions positioning on the Value Pyramid™. This outcome implies that NVD is well positioned to attempt to shift to a higher-value market position because its customers already believe that it exhibits good leadership and competency. A business with these characteristics is a powerful partner. Yet customers viewed NVD’s offerings as commodity items, concentrating almost exclusively on price and delivery times.
5 Create customer-centric propositions
First, NVD’s senior team had to ask themselves: what could provide greater value to dealers and distributors? What would customers like to do that they cannot do today? In the past, NVD simply gave new features and products to its customers as part of the service. It was difficult to help customers understand the value of these extras because in its domestic market NVD was by far the largest supplier of vehicle distribution services, so customers had no readily available benchmarks. NVD could have exploited this position and (like some UK rail companies, for example) focused on its own business and cost efficiencies at the expense of customers. Instead, it placed customer service at the core of its delivery, but failed to show domestic customers that they were receiving a world-class service.
In most countries, the various steps in transporting vehicles from factory to dealer are all contracted separately to multiple providers. As a result, the incidence of damage to vehicles is much higher than in Ireland, where one provider is responsible for the whole process. With a single provider, timing from port to end dealer is also much faster, and there is an increased possibility of locating individual cars and expediting selected deliveries. This high level of service has become the norm for Irish dealers. They value it highly but do not pay the extra that it might cost in other countries. Dealers also felt ‘trapped’ because although NVD’s service was excellent, they felt they had no choice in what they bought.
The usual commercial transaction undertaken by dealers was to pay for a vehicle customs clearance, storage, repair and customization (if required), and delivery to the dealer destination. No matter what changes NVD implemented, dealers would still require some combination of these services.
So the challenge for NVD was how to give its customers choice and offer added-value services without impacting business as usual.
After discussions and IT development, NVD developed an added-value service called ‘Dealer Track’, software that enabled dealers to query the location of any particular car that had left the manufacturing plant. Instead of giving this away as part of their offer, NVD decided to sell it separately after an introductory period of free use. Now, NVD had something for existing customers at several Value Pyramid™ levels.
6 Choosing the right sales approaches
Until this point, selling had consisted of negotiating over price. Introducing a new add-on solution – ‘Dealer Track’ – would be a departure from this approach.
7 Framing the sales proposition in the right story
The next big challenge was: what to say to current customers and how and who should introduce this new offering. The answer was to allow customers to buy and negotiate as they had previously, while, in addition, offering the new service as an option – without breaking down the components or using it as a negotiating lever for the commodity price list. This solution introduces change slowly, but it does separate the price list items from the new offering. This separation is very important: the new, higher-value offering should be seen as something very different in the customers’ minds and they should feel as though they are given a choice about buying it.
8 Make sure that everything you do supports this sales approach
Creating a new service is the first step. The next is to examine current customer touch points and see if other processes needed to be changed. Let’s look at the possible impact of the new ‘Dealer Track’ service. On the one hand, when dealers now know exactly where a car is in the delivery system, this might decrease the number of phone calls to NVD customer s
ervice. On the other, the number of calls requesting ‘expedited’ service might increase. Should NVD therefore add another service, say ‘Quick Dealer’, to provide exception expediting of individual cars? What would the demand be and how could they deliver it without disrupting regular deliveries? Because new services can have knock-on effects, it is always important to look at them holistically.
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CASE STUDY Aircom
Now part of TEOCO, which acquired it in 2013, Aircom International was the market leader in end-to-end network planning and sharing tools and optimization for IP and cellular networks. Over half the world’s mobile operators used its products to improve network coverage and quality for over 1.1 billion mobile subscribers worldwide.
The issue
Aircom had been seeing sales reduce by around 8 per cent yearly. Despite having commissioned nine research studies over the past five years to explore why, the decline was accelerating. The company had tried a number of tactical initiatives, to little effect:
annual sales team reorganizations and new sales director hires;
new pricing models;
sales training programmes;
redesigning marketing and sales materials.
Director of Strategy and Transformation Phil Blades then took a different approach. He commissioned a value proposition design process founded on ethnographic and phenomenological research and observation work among customers and employees. This approach provided important insights into Aircom’s problems.
Market insights
The research showed that only strategic innovation could deal with the long-term (5- to 10-year horizon) trends that were buffeting the telecom industry. Over-the-top (OTT) apps like iMessage, which could bypass the networks of mobile operators, were hitting operators’ revenues; consumer expectations were constantly rising and technology change was accelerating.
Customers were looking for a more collaborative, ‘business partner’ approach from suppliers to help them address these challenges. It was becoming apparent that to sustain margins in the long term, suppliers needed to become more than just providers of products and tools.
The big picture
Figure 4.3 Telecoms value chain
SOURCE 2003–2017 © Greener Consulting Ltd T/A Futurecurve. All rights reserved
Aircom had other, short-term issues that were revealed by the research:
While individual products were good, they had not been bundled or packaged well, and they were not helping operators to grow their businesses.
The company’s approach was rational – focused on technical expertise, tools and skilled people, and promoting benefits around productivity, cost saving and security. However, its customers placed a higher value on emotional factors, such as the frequency of meetings and the depth of relationships. This trend was noticeable in specific countries – and it was in these countries where sales were falling most.
Real competition came from the customer buyer, who was taking control of the network optimization journey.
Using the Value Proposition Builder™ methodology (see Chapter 3), Aircom built its Value Proposition Blueprint™ using four elements (Figure 4.4):
customers’ emotional value drivers;
customers’ rational value drivers;
Figure 4.4 Aircom Value Proposition Blueprint™
SOURCE Futurecurve, 2016
offerings;
solutions.
The emotional drivers identified by the research were particularly important:
Closeness: Aircom was good at this. It had people on the ground in local offices, even at a remote location in Afghanistan. Its staff understood local culture and customers had access to senior people, not just technical staff, at Aircom locations around the world.
Clarity: this was an area for improvement. Customers wanted to be clear about business cases and outcomes and wanted to understand how projects would be implemented with a clear ROI.
Confidence: customers needed to feel their technology was future-proof and that Aircom was going to continue supporting and implementing the best tools. Again, Aircom needed to work harder in this area.
Aircom’s sales propositions
Using this process together with its value proposition framework, Aircom grouped together new solutions to focus on its customers’ priority areas. It re-emphasized benefits, taking into account emotional issues such as local culture and personal service.
It painted a picture for its customers of the high-level industry drivers, the customers’ specific drivers and how customers – and Aircom – fitted into this bigger picture. Aircom then explained how it could help customers to achieve their long-term goals in this context. This approach was a radical departure from its previous approach to sales propositions, and it reframed what the company did.
One new sales proposition was ‘spectrum refarming’. Aircom created LTE Fast Track to ensure the migration to 4G was more cost-effective for operators by enabling them to use their current spectrum. Aircom also offered this capability as a managed service.
Here’s how Aircom told the customer story:
LTE Fast Track Managed Service
Many operators find it both difficult and expensive to manage and optimize networks so they run smoothly and securely and accommodate new migrations without any downtime. It requires ongoing investment in hardware and software, endless updates, new staff hires and staff training.
Most operators contract with many vendors, all of whom optimize different parts of the network with different tools. Our research has shown that managing more than six different vendors who all use different tools will increase your management time by an average of 67 per cent and raise purchasing costs by 32 per cent. Both time and costs increase exponentially as you add more vendors.
This is where managed services come in. A managed service provider has the expertise and equipment to optimize and monitor your network and deliver applications efficiently and safely. And instead of requiring upfront capital expenditures, managed services let you shift all network management costs from capital expenditure to the operational side, paying for what you actually use (instead of what someone thinks you might need). Managed services let the customer free up internal resources to work on more strategic issues that relate directly to your core business.
Using multivendor toolsets, Aircom’s managed service gives you all this with an average 37 per cent reduction on your purchase costs and reduction in network downtime of up to 62 per cent.
The sales propositions for each customer group and for different solutions from Aircom now had a different story, a different emphasis and priority of messages within the story. Most importantly, the story was now based on truth and on what customers actually experienced and wanted.
It now focused on helping the customers to migrate and grow their business; the things that were important to the customer and in line with their strategic objectives rather than purely offering tools that could do a particular job of optimizing a network. Their value proposition and related sales propositions now displayed a richness that had been previously lacking, articulated in the customer’s language. As a consequence of these changes, sales from both new and existing customers increased by 16 per cent in just one geographical area within the first year.
The value proposition to sales proposition illustrated in this case study relates to just one of the sales propositions that Aircom was able to create for one specific customer target group. Each clearly defined customer target group required a specific sales proposition based on the behaviours and worldview of each customer group.
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Sales propositions can be developed on their own. However, they are at their most powerful when they are created from a total value proposition, so both are important. Figure 4.5 shows how sales propositions flow from value propositions.
Figure 4.5 Your value proposition gives you the design framework for how you want your customers to buy once they h
ave made contact
The value proposition gives you the design framework for how you want your customers to engage with and experience your company. Sales propositions and their accompanying stories help them buy once they have made contact.
As sales propositions need to be created at the product, service or customer level, a company may need to generate a good number of them. Developing the total value proposition provides the framework for generating those sales propositions and gives an organization the capability to do so. Such sales propositions will also be consistent with each other and with a company’s overall strategic positioning, ensuring coherent communication. Therefore, creating your total value proposition first gives you one version of your company truth that is drawn from your customer truth, and one master blueprint from which all your sales propositions and stories can emerge.
This framework saves huge amounts of expense and effort, including the time and resources of your salespeople, marketing staff, internal communications and product people, who otherwise end up creating multiple ‘truths’ for multiple purposes.
As well as helping your sales and marketing people to be more effective, defining your value proposition first can also significantly reduce marketing agency spending by ensuring that a company has the right customer-validated and researched content from the start. Insights can also feed back into the overall value proposition, allowing the business to refine and strengthen it.