Acing Value-Based Sales

Imagine that burst of enthusiasm when a senior executive unveils a plan that promises a significant and lasting impact on the organization’s financial performance. “Our new product creates more value for our customers than anything else on the market, and we should get paid accordingly,” they proudly declare. “If we measure and communicate that value precisely, then we can finally get the return we deserve.”

The sales team buys into the logic. Now armed with a superior product, a sophisticated value calculator, and a host of new selling arguments, they quickly turn the senior executive into a prophet. Price, margin, and profit all improve significantly in the first quarter of implementation, with a smaller but still important increase the next.

A year later, however, few traces of the highly touted program remain. The selling arguments have gone stale. The state-of-the-art value calculator is dismissed as theoretical and complex. The early financial gains have evaporated as the sales team, under constant pressure from fierce buyers, returns to aggressive discounts to win the volume and customers lost at the outset.

Such sagas are an open secret in B2B markets around the world. Many companies embrace value-based selling programs, but few succeed in a significant, sustainable way. They invest heavily in product development, but frustration spreads when customers don’t understand the points of differentiation, never mind wanting to pay for them. The dream outcome of selling on value rather than cutting good deals never materializes, leaving a trail of demotivated salespeople and missed opportunities. Worst of all, lacking a clear return, companies postpone or cut back on investments — which reassures competitors that they can get away with mediocre offerings.

In our experience, value-based selling initiatives often start with the wrong premise. Senior executives assume that their company’s differentiated offerings deserve a higher price. In turn, this sense of entitlement lulls them into thinking that the only challenge is to quantify and communicate every advantage. Faced with hard numbers, they reason, any customer in their right mind would happily pay a premium.

However, in most commercial relationships, value is not at the sole discretion of the seller but cocreated with customers who play an active role in realizing desired outcomes.

“The MIT Sloan Management Review is a research-based magazine and digital platform for business executives published at the MIT Sloan School of Management.”

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