Enabling Value-based Selling with Rapid Targeting

Much of the work we do at Ibbaka is centered around value-based pricing. In one of my previous posts, I reviewed one of the key inputs of pricing strategy—market segmentation. Now, I would like to explore another critical business process—value-based selling. How can we enable our sales people to practice value-based selling? The key is to have a way to rapidly categorize our prospects and existing customers so that we can focus our communication tactics and keep the focus on value.

To be good at value-based selling, we really must begin by understanding how our prospects and customers see our offering in terms of value and their willingness to pay. We have found this 2 by 2 matrix a useful way to categorize prospects. Looking at our prospects' understanding of our value on one axis and their available budget on the other provides guidance.

When trying to optimize the monetization of our offer, we want to identify prospects in the upper right. These are Good Prospects because they understand the value of our offer, have the budget and can justify a higher willingness to pay. Sales efforts should focus on prospects that appear in this category. Marketing and pre-sales should shift other prospects to this space.

Potentially Good Prospects are those who have budget, have the willingness to pay, but do not understand our value. As sales and marketing professionals, we need to understand and show how these types of prospects can derive greater value from our offering. Ask yourself, how can we communicate differentiated value to prospects who have budget but do not have a clear understanding of how we contribute value to their business and how we differ from the alternatives?

The upper left quadrant represents prospects to Nurture. These are prospects which recognize the value we offer but have limited budget. Because of their limited budget, they will have limitations around the willingness to pay. How do we communicate value if the prospect has a low budget? For these prospects, we have to be disciplined and help them to recognize our differentiated value. We have to nurture their willingness to pay.

The lower left quadrant represents our prospects who we continue to Educate and Make Aware. While we will not focus as much attention on these prospects, we will continue to soft touch these prospects. It will be a long road to convert these prospects to buyers because they do not understand the value we provide and they also do not have the budget to afford our offering.  

Let’s now examine our proposed categorization for our current customers. Here is another 2 by 2 matrix. This time, we will be look at getting value on one axis and pricing perception/pricing level on the other.

Again, we want our customers to be in the upper right quadrant. Our customers here are Happy because they are getting value. Also, they are paying fair price for this value that they receive.

Customers in the lower right quadrant are At Risk. They do not feel they are getting value. These customers are paying a fair price, our customer success team needs to find ways to increase value for these customers and to help them to recognize the value they are getting.

The upper left quadrant represents customers who are getting value but are underpriced. We need to Upsell based on value and get a higher monetization. This category of customers represents those customers with whom we are leaving money on the table. Our customer success and sales teams need a playbook to help these customers to convert to a higher tier of pricing. The way we do this is by communicating differentiated value supported by the right pricing structure. A lot of handholding and communication is needed to do this successfully.

The bottom left quadrant represents customers who are not getting value and they are not paying fair price for our offering. Continue to reinforce and Build Awareness. It will take time and effort to move these customers to the upper right position. We will need to find a way to increase value while shifting these customers to a higher price point. 

Sales and customer support need to know which quadrant each prospect and customer lies in and have a plan to move them to the upper right or to coach them out. This should be built into CRM and customer support tools.

Effective, rapid and actionable categorization of prospects and existing customers will enable business development teams to better focus efforts and come up with better ways to communicate value to optimize the monetization of offerings. The goal is to align customer success with our own success.