Is it time for value based selling to bow its head to consultative? For the third round of our sales strategy showdown we’re examining the merits of value based selling and how it compares to the consultative approach.
What is value based selling?
Value based selling focuses on highlighting the measurable business values a product or service will bring to a customer. The values include expenditure, cost savings, production and productivity – all the measurable factors that affect a business’s profitability.
In layman’s terms, it’s about explaining (in-depth) how a product or service can help a customer address a problem. Salespeople often use this strategy to explain product pricing; products that offer greater value to the customer can justify a greater price tag.
Value selling is the most effective in B2B sales environments where companies want to use value to differentiate themselves from the competition.
The problem with value selling
Many of our industries are mature; they are highly commoditised and as a result, many companies often can’t "out value" each other. Often their products do the same thing, have the same features and if any company tries to set itself apart from the rest, it doesn’t take long for the others to catch up.
“If you sell a house and you have an open home, a person with an open home one block away has, just like you, four bedrooms, one bathroom and a double internal access garage––to the buyers it looks just the same,” says Alex Chan, Head of Learning and Development at SalesStar Global. “If you sell a legal service, your opposition can provide exactly the same services.
“In this situation where there are no unique features, or if the features are the same, then it's often going to come down to price.”
And while most salespeople know there’s more to cost than price (downtime and labour costs for instance), many struggle to convey these other measurable outcomes.
“Most salespeople are really weak on the measurables because they're not accountants,” says Alex. “But if you can, that's where the real competitive advantage lies in the value based strategy.”
How is it different to a consultative sales strategy?
Like solution selling, value based selling is also seen as a sub-strategy of consultative selling; “one string of the bow”, as Alex puts it. While the strategy has major weaknesses given today’s economy, all that changes when it’s incorporated into a consultative approach.
Think of it like the icing on a cake. On its own, value based selling is not that good or effective, but when combined with the thick, rich layers of a consultative approach, it provides that little bit of extra sweetness that can make or break a cake––or, in this case, a sale.
“While we define consultative selling as ‘enhancing client profit’ we still need to outline what measurable returns a client would get,” says Alex. “What sets it apart from value based selling is that it also includes what the non-measurable returns are.
“A CEO’s primary objective is the enhancement of shareholder value. That is usually on the front page of their job description,” says Alex. “So, if we can help them to enhance their profits, we're definitely talking their language. But there are other non-measurable outcomes that they are looking for, such as health and safety, and brand enhancement.”
In a nutshell, a consultative strategy uses a two-pronged approach – measurable and non-measurable outcomes – to win the client over. The value approach relies just on measurable.
“In our own consultative proposals, we have a major chapter heading called 'outcomes' and that is broken into two subheadings, 'non-measurable outcomes' and 'cost-benefit analysis',” says Alex. “That cost-benefit shows the math on how they get their return on investment and enhanced profit.”
So, which is the better sales strategy?
While value based selling can work well in certain circumstances, it can often dissolve into a pricing war with competitors, especially when sales reps are unable to provide strong measurable outcomes to set themselves apart from the competition. Meanwhile, consultative selling provides a more well-rounded approach that emphasises the client’s profitability and outcomes, rather than the price of the product.
What makes a great consultative seller? Find out in our free guide, Stop selling, start consulting: the power of a consultative sales strategy.