Value-Based Selling to 20x Contract Size
Shifting from a technical selling mindset to value-based selling requires a comprehensive perspective. It transcends the mere presentation of features and functions, reaching beyond familiar contacts and responding to RFIs. Instead, it necessitates a profound understanding of the customer — their goals, strategies, and internal relationships. This understanding serves as the foundation for a top-down rationale, shaping the decision-making process in your sales engagement.
Simultaneously, a thorough comprehension of your own offering is essential. Translating technical components into tangible business value becomes the cornerstone of this bottom-up approach. Navigating both top-down and bottom-up strategies creates opportunities at various organizational levels. It enables you to ascribe value to different stakeholders and establish a network of business champions, fostering a more holistic and effective approach that all enterprise sales and value-based sellers embrace.
Below are two frameworks to start you on this journey.
The Value Pyramid
Effective research is pivotal in any value-based sale. Achieving a nuanced understanding of the customer is just as crucial as comprehending your own product. To streamline and optimize this research process, Greylock and others offer a valuable framework called the ‘value pyramid’ to their portfolio companies. Employing a top-down approach, this framework serves as a guide to unravel corporate-level objectives set by the CEO, influencing decisions throughout the organization. Additionally, it functions as an educational tool for your customer contacts, often positioned lower in the organizational hierarchy. This tool empowers them to advocate for and defend your solution to their superiors, utilizing language that resonates with each stakeholder’s preferences and priorities.
For instance, by examining Disney’s 10k report, I quickly found corporate strategy and business unit initiatives. This insight enabled the construction of a theoretical selling opportunity within the Media & Entertainment line of business which can be summarized in the context of the value pyramid. Armed with this knowledge, discussions about my offering can seamlessly traverse all levels of the buying process. This structured approach ensures that your research is not only thorough but also efficiently aligned with the overarching goals of the customer organization. I would discuss this initial understanding, or hypothesis, with my initial contacts at Disney and refine my understanding and positioning for a later conversation with the Economic Buyer (EB).
Feature, Benefit, Value
Supplementing the value pyramid is the feature-benefit-value framework, a structure that transforms the most technical aspects of your service or solution into tangible business value. While many organizations can translate features into benefits, the key lies in understanding your customer to translate those benefits into meaningful value. Here, value is synonymous with a business need, categorized broadly into making money, saving money, or reducing risk.
In the visual above, typical RFIs and initial prospect engagements often center on technical features. As discussed in previous articles, research and buying criteria are usually established before vendor involvement, placing you in feature/function battles. Even in productive benefit-based dialogues, competitors echo similar conversations about increased ROI, reduced TCO, and enhanced revenue. Ultimately, contract price often determines the winner.
Value-based sellers sidestep this cycle by seeking the true reason for engagement. They elevate conversations beyond technology to understand the overarching objective. In this instance, with a wedding on the horizon, the goal is to ensure the bride and groom shine on their big day, regardless of weather. Framing discussions around this objective positions the umbrella salesperson as a unique advisor and advocate for the fortunate couple, transcending typical product-centric dialogues.
To effectively navigate this landscape, a sales team should collaborate with founders, product, marketing etc. to construct a feature-benefit-value matrix highlighting the top tangible differentiators of their product or service. This matrix should then be translated into a series of benefit statements applicable to a broad audience. Complementing each benefit statement should be a collection of value statements drawn from customer case studies or correlated to discoveries made from the Value Pyramid. This strategic approach ensures that sales efforts resonate with the immediate needs and long-term objectives of the customer. Ultimately, the value statement will be refined to match the needs of the prospect account.
Multiplying the TD Ameritrade Deal 20x
Let’s delve into an opportunity between AppDynamics and TD Ameritrade in 2017, where the initial plan did not align with value-based selling. In this sales opportunity, the vendor solution was application performance monitoring to ensure the speed and availability of critical client-facing applications. During the early conversations with the prospect, two levels of contact were identified: the managing director, who facilitated our entry into the account, and the managers of the technical teams in Operations and Middleware. Additionally, there were tangential requirements from peripheral teams in Applications and an emerging HALO team.
In the context of the value pyramid, this was the information available at the onset, and the deal was forecasted for approximately $400k.
“In just a few weeks, that ballooned into a $7.8M win once value-based selling principles were applied.”
Technical-dominated success criteria without clear alignment on improving business functions or meeting business goals
As evident, these decision criteria are predominantly technical and lack a direct connection to business value or, for that matter, even technical value. The Managing Director, who was the technical decision maker, delegated the technical evaluation to his team of technical managers in Middleware and Operations. When we first engaged with these teams, outlining our solution’s capabilities from a Feature-Benefit-Value perspective, we had yet to uncover their personal wins or understand how their efforts aligned with corporate objectives and initiatives.
The conversation unfolded in a manner like this:
“What’s most important to you?”
“Less than 2% overhead in production… you need to support Coherence and WebSockets… I want monitoring intervals in 10sec increments…” and so on.
Encountering such a situation is common if a Value Pyramid hasn’t been completed, and where the business conversations and connections haven’t been established. Seeking guidance from the decision maker may result in a response similar to what we received:
“If that’s what the team needs to see to make a decision, then that’s the decision criteria.”
Consequently, relying solely on technical requirements in a sales process may lead to various challenges and potentially jeopardize or lose the deal entirely.
Moreover, the Managing Director had discretionary budget of around $250k and intended to collaborate with peers in Application and HALO for the remaining funds. Convincing them to allocate funds based on these technical decision criteria would likely prove exceedingly difficult.
When evaluating this deal within the context of MEDDIC, there was significant risk, prompting me to suggest a pause until we could better align with business needs. Interestingly, during this evaluation period, Tim Hockey, the CEO of TD Ameritrade, had been on CNBC defending his company’s decision not to engage in commission fee price wars.
“We’re constantly trying to redefine our value proposition. We’re all about the client experience… It’s around the tools, capabilities and experience, and all those factors.”
And later, in an investor relations call,
“There is an effort underway in our industry to redefine value. While some are leading with price, our clients tell us it’s much more than that. They have told us time and again that value is delivered via rich experiences that prioritize flexibility and client choice, coupled with a simple, straightforward price.”
These are corporate objectives — the cornerstone of value-based selling because it directly ties to the EB’s goals and decision criteria. A product or service that delivers substantial improvement to the client experience, at a reasonable return on investment, will be more likely approved than one under a different banner. Now that we understood the corporate objective, the subsequent tier of the Value Pyramid focused us into strategies and initiatives. Publicly available information again granted us valuable insights into how the CIO, Vijay Sankaran, was actively aligning the priorities of his organization with those of Mr. Hockey.
“Our CEO has introduced an initiative around corporate speed, looking at how do we work more efficiently and apply some of these agile methods across the business, thinking about how to optimize the organization as a whole.”
Armed with this information, we formulated our hypothesis, linking the Managing Director’s motivation for our engagement to improving client experience and fostering greater agility. Returning to the same technical teams, we posed a straightforward question:
How are you currently contributing or intending to contribute to Mr. Sankaran’s goals, ultimately aiding Mr. Hockey in achieving his objectives?
The responses this time were entirely different. Middleware aimed to reduce the time required to provision hardware and tooling, enabling developers to swiftly create new environments and conduct testing scenarios. Operations sought better information to address issues without escalating them to development teams. Application teams aspired to reduce their involvement in technical support calls, allowing them to focus on substantial development efforts. Meanwhile, HALO, arguably our biggest risk, clearly outlined the principles of their initiative, presenting a more tangible and easily alignable framework compared to a theoretical system.
Value Pyramid
Goal-oriented value pyramid, aligned to business objectives supported by key stakeholders
The visual above presents a simplified rendition of what we utilized to communicate our raison d’être across all levels within the account. The clarity provided by such well-defined alignment also heightened the motivation of individuals collaborating with us. It marked a novel experience for them, offering unparalleled insight into the purpose of their daily tasks. Once we successfully identified and aligned business value across each team, we proceeded to map desired capabilities with those offered by our solution. While the format may vary, I found the following structure to be intuitive enough for effective dissemination and resharing:
Problem | Goal | Owner
Issue | Impact
Quotes | Stakeholder
Exec Summary
Summarizing issues and impacts that restrict business goal realization.
Subsequently, we linked these goals back to the technical evaluation criteria. Each ‘Use Case’ is a reworded ‘feature’ from our Feature-Benefit-Value framework and each ‘Goal’ is a reworded ‘benefit’ tied to the objectives of the client. Once again, the specific structure and format are not paramount, but a spider diagram clearly visualizes how specific technical use cases correlate with measurable outcomes. This approach also prevents scope creep by avoiding superfluous test cases and prioritize criteria tied to business goals.
Engagement Plan
The technical evaluation plan is aligned to the resolution of use cases, mapped to business goals.
Ultimately, engaging in these alignment conversations established us as a preferred vendor early in the process, even before the POC kicked off. Our commitment to understanding, partnering, and showcasing relevant business results set us apart from numerous competitors competing for the sale. Moreover, our emphasis on client experience, particularly TD Ameritrade’s client experience, proved crucial during the Scottrade merger. We provided real-time client experience insights that were instrumental during the rollover event and were shown on Tim Hockey’s desk.
Despite not directly engaging with Tim Hockey or Vijay Sankaran, we successfully cultivated our Managing Director into our champion, whose efforts towards achieving CIO and CEO results made him the shining star within the organization. In the end, this strategic approach resulted in Tim Hockey signing a contract for $7.8M, a significant increase from the initial estimate of around $400k just four weeks earlier.