Value-added selling is being replaced by value-metric selling
by Frank Hurtte
Did you hear? Value-added selling is dead – dead as a doornail, deader than dirt and colder than a corpse. I know what you're thinking. I, too, once considered myself to be a value-add seller. As a matter of fact, I was a walking and talking value-add machine. I went so far as to give awards to the employee who went the furthest "above and beyond" to help a customer. For our ragtag little team, no customer request was too great. If the customer wanted our stuff delivered in a plastic tote, we complied. When they asked us to put it on their shelf, we did it. Safety training was needed at a couple of accounts and we found an expert for them.
Value-add was my middle name. But now value-added selling is dead. And, I fear that if you are one of those folks out there who doesn't realize it, you may soon follow value-add to the grave. Let me explain why.
Most knowledge-based distributors are intrinsic providers of value. Rather than just shuffle commodity products from Point A to Point B, most of us combine application expertise, troubleshooting skills and other valuable tidbits with everything we sell. We don't just sell widgets. We used to call all of these human-factor things our "value-adds."
Our customers have grown to depend on our value-adds. In many organizations, whole departments have been eliminated or scaled back to a mere shadow of
their former state. And, as the baby boomer generation pushes against retirement, millions of years of application experience are shuffling out the door. Not only do they need our expert guidance, customers will need it in larger doses in the very near future. So far, all of this probably sounds like a good thing, but it's not.
The term value-add has become a hackneyed phrase. Today, everybody claims to be a value-adding supplier. Let's test this theory. When was the last time you
heard someone say they don't add value? How about salespeople? When was the last time one of your competitors raised their hand and publicly said, "Don't ask me, I only take orders." In literally thousands of interviews with wholesale distributors, not a single one has ever told me they pick up their customer service reps downtown right behind the mission after breakfast every morning. I was coldheartedly reminded that value-add was dead when a late night kitchen gizmo infomercial devoted the last 30 seconds extolling their special – you got it – "value-add."
To make matters worse, our friends over on the purchasing side have discovered value-add too. They've learned to beat down our value-adding sales techniques by repeating this phrase:
"Of course you add value, all of our suppliers do. That's why you're here. But I want to work with you to help sharpen your pencil and provide us with some good solid cost savings in the form of price decreases."
Your value is discounted, decreased, commoditized, stapled, folded and mutilated.
Still not convinced? In spite of 20-plus years of singing the partnership song, many purchasing organizations are still compensated on their ability to drive year-over-year price decreases. Your service doesn't count in this equation. At least your value doesn't pay for their kid's braces or their family outing to Keokuk.
If all of this sounds a bit gloomy, don't be disheartened. As they said in days of old when knights were bold before distributors were invented, "The King is dead; long live the King." While value-added selling is in fact deceased, a young squire stands ready to improve our world. And the blood line is pure. Long live value-metric selling. Let me introduce you.
Indiscriminately applied value
The young scion resembles his forefathers in many respects. Like we said, knowledge-based distributors produce value by the bucket load. Product specialists, application engineers and technically competent sellers have a hard time not generating value. Wherever they pass, they leave a massive wave of value in their wake. And herein lies the problem. It's often indiscriminately applied value.
Let's explore this concept of indiscriminately applied value. Suppose you are deeply moved by the issues surrounding the homeless in America's inner cities. Additionally, you are committed to doing something about it. Reasoning that providing these people with a few bucks for a hot meal and a change of clothes would be helpful, you devise a plan for distributing money to them. Sound good so far? Here's where the indiscriminate part comes in. Instead of carefully selecting exactly where to provide the money, you spend the afternoon driving around town tossing bundles of sawbucks out the window.
There is no measuring, no targeting. Sometimes a homeless individual finds your ten dollar bill and magic follows. But just as easily, your ten-spot could be picked up by someone who really didn't appreciate it or meet your value target.
In value-metric selling, we focus our value on those who appreciate it. If an organization is price driven, you purposefully turn off your value stream. We practice the same care with our service as we would with our money.
Just like money, we keep careful accounting of our value. Most people don't carry money uncounted in a paper sack. Instead, we keep track of it. I give you $20 and you pay back $20. In value-added selling, we treated our differentiating knowledge as if it were a low-cost commodity; we tossed it around everywhere. It was like the proverbial spaghetti against the selling wall and we hoped some of it would stick.
In our new value-metric world, we think about where we share our value. We measure our value rather than tossing it like confetti. A few folks are tracking their activities, things like numbers of emergency deliveries, warranties tracked, broken parts fixed and hours invested designing new systems. Like a rhinestone crusted cowboy in the big parade, I tip my sombrero in recognition of these innovators of the value-add days. Tracking activities is a great start. But it's not enough. One would expect that customers can translate our work into some form of value, but life doesn't work that way, especially in these modern post-recession times.
Tracked activities run the risk of not being fully understood. Further, they can be commoditized. Here's an example: You get a call at midnight describing a massive customer emergency. Rousted from deep sleep, you slip into your jeans and pull an old sweatshirt out of the dresser as you stumble to the car. You drive across town, grab a spare part and then drive another 30 minutes to the customer. You're a hero. You feel good and drive home in a good deed-induced euphoria humming the super distributor song. Dutifully, you log your nocturnal navigation. But what's that trip worth? Minimum wage is $7.25 an hour, truck drivers make $15.00 and a cab could have delivered the stuff from your competitor for $53.00. The point of this is your trip just got turned into a commodity.
The real value that counts is customer-focused value. Your little jaunt in the dark may have saved the customer thousands or tens of thousands of dollars. If you don't
understand value to the customer, you will always be asked to join the long line of commoditized vendors. Within value-metric selling, value is customer specific.
Going back to our midnight delivery example, your midnight drive has far greater impact on your customer than the cost of your time, even if you bill at Hollywood divorce lawyer rates. Things like lost production, idled workers, damage to plant facilities and defective product, all quickly create impacts in the thousands of dollars.
Understanding the value to the customer puts you into a special place. When you understand customer value, you position yourself to provide the best kind of advice. You think not like a vendor but like a business partner. This point allows you to speak not only product level techno-geek but gives you the language of the business leader. Business leaders think about value in dollars and cents. Our engineering and maintenance friends speak techno-geek. We need to be bilingual. Because if ever there was a time to communicate with business managers, it's now.
An undisputable accelerant of the recession comes via the rapid rise in status of the company CFO. Their newfound impact on company culture is to reevaluate their spending. According to a recent article in a publication catering to manufacturing executives, over 43 percent of the companies surveyed are currently evaluating their current vendors for better value. If you aren't providing your customer with metrics on the value you provide, you may be on the wrong side of that analysis.
I believe recessions accelerate environmental change. For wholesale distribution, survival is based on our ability to quickly adapt to these shifts. In medieval times, those who failed to recognize the new king in a timely manner found themselves starving in the dungeon. In modern times, failure to recognize this critical change may create a similar effect.
Frank Hurtte, founder of River Heights Consulting, brings 28 years of distribution industry experience and a lifetime in sales. Reach him at (563) 514-1104 or firstname.lastname@example.org.
This article originally appeared in the May/June2011 issue of Industrial Supply magazine. Copyright 2011, Direct Business Media.