value selling
TRANSCRIPT
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Selling Value Not Price
July 2011
Gary Owen Christian Horn
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2008 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 1
What Influences Purchasing Decisions ?
There Are Many Many Influencers. Understanding
How Each affects a customer is the Key to Selling Value !
Employee Acceptance
Design
Performance Price
Instructed To UsePrevious Use
Availability
Brand
Relationship
Fit For Purpose
Service
Response To Problems
Recommendation Contract
Budget
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2008 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 2
What do people buy ?
Price ?..........
What Would Our World Look Like If Price Was The Main
Factor In Every Purchasing Decision
The Lowest Price Tools Would Be On Every Machine , The
Lowest Priced Wear Parts
Lowest Priced Everything
Is Price The Only Factor ????.. We all know it is not !
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When Does Price Become Critical ?
When the value propositions of products can not be split When we fail to identify and sell our value to our customers
When we have failed to understand the customer needs
Fit For Use
Delivery TimeAvailability
Brand
Design
Fit For Use
Delivery TimeAvailability
Brand
Design
Price
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2008 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 4
What Can We Overcome Price With
With Our Main Competitors We Have To Work Hard ToDemonstrate Value
Fit For Use
Delivery Time
AvailabilityBrand
Design
Lower Price
Fit For Use
Delivery Time
Availability
Brand
Design
Higher Value
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What Do Most Customers Want ?
Our Products Our Deliveries
Our Technical Service
Our Innovations
Our Investment in new technology
Our Expertise at solving problems
ALL AT THEIR PRICE !
If Our Customers Control Our Prices And Our Margins
Who is running our business ????
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Customer Tactics
The customer has been trained in how to buy , just as you have beentrained how to sell , it is a game. You should have your game plan , the
customer will have his game plan. The customer will only generally engage in a price discussion if he has a
genuine interest in your product or service ( If a product or service was of nointerest to the customer , why would he be interested in the price ?)
When the customer starts to talk about price he is giving a buying signal
How many of you know how much an Ipad costs ?
The people who know, and also know where to get the best deal, are thosewho have an interest in buying one ! ( need has been established)
Price is generally the point the customer sees as the only negotiable IF wedo not portray our value in other ways
Also remember we educate our customers every time we sell to them , theylearn where the boundaries are and where to push
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How Can We Create And Leverage Value
It starts with the customer ! If we do not fully understand the customers needs we can not create
value
Value will vary from customer to customer the only by using FIND
questions will you understand the value(Facts,Issues,Needs,Drivers)
Value can also shift in a customer what is valued today may not be
valued tomorrow , you need to listen and adjust
Value may be perceived through some or combinations of
purchasing influencers
Attentive Listening And Confirming The Position With TheCustomer Is Vital !
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Understanding Value Example
You are in a discussion with a customer , he offers you theopportunity to test against a competitor
Do you
A Order the inserts , test and report back to the customer with the results
B Probe deeper with the customer to understand why you are being
offered the opportunity ?
In probing deeper with the customer you uncover that he is unhappy
with the performance of the product and needs to achieve an
additional 10 minutes of running time to balance operations
Do you
A - Order the inserts and promise you will do your best to achieve the
additional 10 minutes ?
B Probe deeper with the customer to understand the cost impact to his
business of the unbalanced operations
Follow the sales process to uncover the real customer needs
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Understanding Value Example
The customer goes on to explain that the imbalance is causingdifficulty with indexing time and the imbalance is costing 12 hoursper month at 40 Euro per hour and that his boss has told him it ishis number one priority
Do You
A Order the test tools and tell the customer that you will do your best for
him B- Recap the whole situation clarifying and getting confirmation of the
situation ? , Then ask the customer the following , If I can give you a costeffective solution for this and eliminate the downtime will you change toKennametal products ? If the customer answers NO then we have missedsomething and should probe deeper , If the customer answers Yes .. But..This would indicate you have missed something and should probe
and re calibrate with the customer. Once you have cleared up and minorpoints order the tools and test , When you have tested , present you resultsemphasising the savings made relevant to the stated and agreed problemfrom the customer !
When We Understand Where The Customers Pain Really Is ,In
most cases price will not play a prominent role in the scenario
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Customer Tactics
In the previous scenario , always remember the customer has beentrained to buy , he will know your tactics , sometimes when you
probe for deeper information , the customer may say he doesnt
have the information , or he doesnt know the hourly rate .. Or He
doesnt have the information to hand
Why ?
Because in his buying training , he was taught the tactics of the
salesman he knows you will ask for this information to strengthen
your case for a higher price !
If the customer can not provide the information immediately , you
should politely request the information until you get what you need ,
otherwise decline the offer you may find this brings a positive
response and also the information you requested.
Customers Have Been Trained To Buy
Your Are Trained To Sell !
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Example 2
When were you last in this situation Customer calls you in the late afternoon , he has been let down by a
supplier and needs a product from you to help him through !
During this conversation , when was price mentioned ?
What was important to the customer ?
The chances are he said Get me the goods here is an order number !
The customers most important need was delivery ! Price was not even
mentioned !
The Customers Pain Was Delivery For The Morning Price Was
Not An Issue !
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What Tools Can We Use To Present Value
Our Common Tools Are Tool Reporter
3P
Both Of These Tools Will Only Help If They Have Customer Sign Off !
Other Tools Customers Tracking Data
Customer Reports
Meeting Notes
2008 Kennametal Inc. l All rights reserved. l Proprietary and Confidential l 12
Only Validated Reports Will Help You With Your Customer !
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What Else Can We Use ?
Quarterly Reviews With Top Customers Ensure We Are Addressing Needs
Embed ourselves as part of their business
Build awareness of our activities
Agree Savings Achieved Keep To Support Price Challenges
Always Keep Close To What Is Important To The Customer
Use Some Of Our Reporting Tools
On Time Delivery
Year On Year Spend
There are many others.. Seek the one that fits the value your customerrecognises.
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Present Value The Value That Is Important To Your Customer !
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Plan your Customer Visit thoroughly
You must know more than our customer, before you go into a negotiation !
This requires thorough preparation and understanding of
Customers economic situation
Competitive situation
Pain points of our customer ( What Does The Customer Value)
DOCUMENTED Savings We Have Achieved
Know your value added for this particular customer, as well as competitor's performance and
what their value proposition is at this particular customer
Untouched potential at this customer ( Should you have to concede ask for this business)
Price negotiations are not everybody's favorite topicso prepare yourself and dont let yourself
feel uncomfortable the Customer will notice this !
Price Negotiations are also uncomfortable fro the customer
Againdont be surprised if the customer show you the recent cost development of certain raw
materialyou cant win that discussion better move on to the rational of value and productivity.
Plan The Meeting In Depth If You Are Well Prepared You Will
Have A Greater Chance Of Success !
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Negotiating
When do you start to negotiate ?
Only when there is a clear need identified and stated by the customer
If you are in a genuine negotiation scenario the customer wants youthere, he wants the product or the service from you why else wouldhe be talking to you ? The customer would not call you in if he didnot have a need.
When negotiating never make an offer without asking for something inreturn , how you behave in a negotiation will set the customersbehaviour pattern for future meetings.
Negotiating on price the customers favourite place he has theorder number you require.. He knows from his training you are hungry
for the order.. Never Ever go to a negotiation meeting without fully preparing yourself ,going through in your mind all the possible scenarios prior to themeeting and ensure you will be comfortable to answer all questions
Remember- You are at the table the customer has a need !
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Negotiating
Take A Little Time To Think When Asked Questions
Customer says we have your quote but we are not happy with theprice ! Your competitor can do this for 10% less !
Ask yourself this question !.. If the competition are 10% less why is he
talking to you ? , why did he not just order straight from the competitor ?
Does this imply the customer wants to buy from you ?
How would you respond ?
Always confirm the concern with the customer
Ask about the other aspects of the quote , delivery , design ,
(Remember , he wants your solution or he would not be talking to you !)
Always ask If I could do something with the price , what other
opportunities are available
If the customer refuses to give something refuse to concede on price
If the customer does concede something also concede a little , the
more you concede initially the more a customer will demand
The Customer Will Be Trying To Get The Best Price For HisCompany It Is Your Job To Get The Best Price For Kennametal !
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Negotiating Tactics
Always try to use all argumentation to maintain price Always stick to your plan
Be prepared to ask for time out to phone your boss
If the customer demands are significantly higher than your plan be
prepared to walk away
Remember Where ever this negotiation finishes , will be thestarting point next time the customer asks .
If you agree an additional 10% today The customer will start at
10% next time and will continue to erode your margins
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Always Promote Your Value
If You can not promote Value
You Will lose on Price !
N ti ti P i i l
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Negotiation Principles
Negotiations are an effective way to increase our Customer relationship in a positive way
but only if we create a Win-Win situation for both parties.1. Learn our Customers Business
Make sure our product and service offering create value for our customer. This means you
must learn the customers business and how they can save money with our products. Only
then we can set price levels and price structures based on value. Make sure you understand
the metrics of your negotiation partner before the meeting. Prepare accordingly ! A
Purchasing agent will want to hear something different than the Technician.
2. Value = Benefit CostLook at value as our customers do. Compare the economic and non-economic benefit to the
cost of realizing that benefit. Ultimately the customer will look at value not on price, so
increase the customers benefit without scarifying the price.
3. Take an optimistic approach.
Good negotiation starts with mind set. If you are afraid or your body language shows
uncertainty it will most likely fail. Make sure you are in the right mood.
Be assertive without arrogance and balance your behavior for an constructive, friendly andhonest atmosphere.
4. Our prices and potentially our price adjustment might be called high, this will depend on the
comparison. However, dont be afraid of a statement like that. It is the VALUE what need to
be compared. Once you are in the value discussion for sure we will be able to bring our
points across.
Pricing is the Mirror of the Value we as Kennametal deliver !
N ti ti P i i l 2
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Negotiation Principles 2
5. Make sure Pricing is not the only point you want to talk about.
Frame it with other positive messages, but announce the price adjustment right away. Dont put
it at the last point of your agenda. With that approach you have a fall back position to switch thetopic and revisit this later when everybody has calmed down.
6. This is a Price Adjustment not a Price Increase
Just from the different word you push the conversation to the value and not on the Price
solely. Just think about the rational new products deliver higher productivity. Therefore from a
production cost perspective a price adjustment is not felt at all.
7. Never feel Sorry
The price adjustment is the return for the value we have proven. So prepare your case with the
tools you have on hand. Use Tool Performance Reports, the result of 3P or CAP plans and any
other activity report which document what you have done and could do in the future for the
customer. Guaranteed Cost Saving programs are an alternative too. Those programs need to
be well prepared!
8. Dont call your Manager early in the process.
Some difficult customer may request to have your Sales Manager in the meeting. It is your
responsibility to handle the full range of business. Price adjustments are part of that. So you
need to take the full ownership. Prepare very well, act according to our core values und dont
delegate to your boss without a solid business case. Negotiations with Managers open other
challenges and depreciate your personal value.
9. Once you have reduced a price, you will really have a hard time to bring this back.
You are setting now the track for the future.
Stick with Your Value !
Negotiation and
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Negotiation andThe Fairy Tale of Price and Volume
Sometimes you may hear an argument like:
Well, if you reduce your price by 5% you will get 30% more volumeLet us illustrate the relationship between price and volume:
Trades between Price and Volume most of the time lead to
Price Concessions !
Not a good Deal !
In the case of a real tough negation here some more techniques:
a. First Offer
Never agree quickly to the first offer. Bad feelings will result because people will think they
could have done better. Always negotiate.
b. Trading Off
Never give anything away. Always ask for something in return. Find alternatives and present
different options.
Now the customer is offering a trade:
If we give him 5% additional Discount we will get 30% more Volume (Pieces)
CNMG120408 KC9145 per Piece Increases Quantity to 130 Pieces:
List Price 8,96 1.164,80
Todays Discount 30% -2,69 -349,70
Net Price to Customer 6,27 815,10
Additional Discount 5% -0,31 -40,30
Special Deal Price 5,96 774,80
The Profit Ratio Changes - as we still have the same Cost, but get less paid for it:
EBIT ~ Profit 5% 0,32 41,60
Assume our EBIT (Earnings before Interest and Tax ~ Profit)
is at the current discount structure 10%
CNMG120408 KC9145 per Piece Let's sell 100 Pieces:
List Price 8,96 896,00
Todays Discount 30% -2,69 -269,00
Net Price to Customer 6,27 627,00
EBIT ~ Profit 10%0,63
63,00
S lf M ti ti
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Self Motivation
How to motivate yourself for a Price Negotiation ?
In certain cases you might need to motivate yourself why we as a company
implement the price adjustment.
Draw a comparison between your personal life and the situation of the company. Just
like our company is valuing your work, you should expect your customers to value
your work through a price adjustment.
We as a company have delivered to our customers the value for the money and we
need to keep the balance so we ask for money for the value we provide.
On top of this we keep driving for more Increased Productivity !
Our customers now have the opportunity and time to explore even more new
products and technology. We are there to help them find the right value solution.
To Summarize:
Any positive price adjustment is helping YOU to achieve your sales targets.Any negative price change will deteriorate your result in terms of sales and price.
If You Really Believe You Deserve This Price Adjustment You Will
Achieve It !