Building an Effective Go-to-Market Strategy in a Highly Competitive Market – Part 2 of 4 – Selling Value

January 13, 2012

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In my previous post I explained that the conditions in many technology markets are highly competitive. Today’s software companies must be able to determine and execute on a go-to-market strategy that is effective in those conditions. Last year, there were three strategic components that helped some of our portfolio companies succeed in highly competitive markets:

 

  1. Sell value
  2. Build brand equity
  3. Focus on the target customer segment

In this post I will discuss how selling value and maintaining price can be critical to a software company’s success in a highly competitive market.

What I mean by selling value is that everyone on your sales team really understands the value that your solution brings to your target buyers. This goes way beyond knowing the value proposition and what the features and benefits are. I mean really understanding the problems that your target buyer is faced with, and what that means to them in terms of financial cost, time, risk, and the opportunity cost of not switching to your solution. Only then can you really communicate the value that your solution brings in the same terms.

For most sales organizations, this would signify a cultural shift in the way they do business, and can impact everything from how people are managed, to hiring, to compensation plans.

In highly competitive markets, prices will have a tendency to decrease over time. In order to stay competitive, most of the 2nd and 3rd tier competitors in the market will lower their pricing, but doing this will have a significant impact on the financial model and business plan. Instead of following their lead, when you see your competitors lowering their prices take a different approach. Pursue a strategy of coaching your sales team to sell on value, not on price. Here are two initiatives you can implement that will help turn your sales team into a value selling machine.

Embrace a sales methodology

I am most familiar with the Sandler sales methodology. In this post however, I want to emphasize the embrace and not the methodology. While Sandler is a widely used and proven methodology, especially in software sales, there are many other methodologies that could work just as well. What most sales methodologies do in a nut shell is help the sales person uncover a real or perceived need, then put a value on having that need met specific to the prospect, and then position whatever they are selling as the best solution to meet the prospect’s need. This is an oversimplification, and each methodology has its own way of doing this, but the general concept is the same.

Embracing a sales methodology means more than just a 2-day session where you go through training, get a big binder and then go back to doing things the old way.

  • Whichever methodology you decide to embrace, make training on that methodology required at all levels in the sales organization.
  • You should also have a programmatic approach to training. Schedule monthly training sessions with the whole team to review and practice key concepts. Bringing in a professional trainer to do this is a good idea, because sales leaders at expansion stage companies often don’t have the time to step back and focus on the concepts enough to put together a real curriculum.
  • You should also embed training in weekly one-on-one meetings between each manager coaching their subordinates, and also encourage peers to coach each other in lunch and learns. Providing the format to let this happen will result in people taking the material seriously and drive better results.

Embracing a sales methodology creates a structure that will allow your team to focus on specific areas of the sales process that may need improvement, rather than just trying to figure out why they aren’t exceeding their number. As a result sales people at all levels of the sales organization will become experts at communicating your value by helping prospects quantify the cost of not having their needs met, and showing them a perspective from which your product is actually a much more cost effective solution (even if there are cheaper alternatives).

Know the competition

In a highly competitive market, there may be too many competitors for you to really know all of them. In this case you need to have an informed view on the market and the direction it is heading, and do your best to group your competitors into categories and understand how you compete with each category. For example if you own a pizza shop your competitor categories might be Italian restaurants, neighborhood sub-shops, high-end pizza shops, pizza franchises, and other fast food. Within each category you would probably be able to name several specific competitors, but only need to develop a strategy to compete with category, not each specific competitor within the category. You should also know the strengths and weaknesses, for the top 2 or 3 competitors with in each category inside and out.

If you disseminate this competitive intelligence and market view across the organization, your sales people will be able to recognize a competitor category even if the prospect doesn’t tell them explicitly which competitor they are using. That is usually enough to dig into the most common pain points that prospect might be experiencing. If you do this well, your team should even know roughly the costs of the pain points that are associated with different competitor categories and top competitors. Being armed with this knowledge helps the sales team keep all conversations focused on the pains associated with the prospect’s current solution, and the costs associated with those pains. Not on the price of the solution relative to the market.

That fact is that no matter what you are selling, there will always be a cheaper alternative. Analysts and bloggers across the industry have commented on the commoditization of technology. While that may be an overarching trend, when you really get your buyer to feel pain, or imagine an opportunity, it is hard to put a price on that.

Technology providers who lack the competency to communicate the value of the service they offer from the buyer’s perspective are forced to lower their pricing or loose the deal. Selling on value can help your company maintain the price basis for your financial plan, while still offering your service at a fair price. Executing this strategy effectively is one of the key factors that can help technology companies succeed in highly competitive markets.

VP, Sales

Ori Yankelev is Vice President, Sales at <a href="https://www.ownbackup.com/">Own Backup</a>. He was previously a Sales and Marketing Associate for OpenView.