Some months ago I wrote a series of blogs on how technology might be utilized to help facilitate complex B2B selling by fostering collaboration and transparency with a focus on value. I suspected this would be challenging, but I have to confess it is really hard! Below is a blog that describes our first module the Value Alignment Assessment tool. While the screenshots are not always easy to read, I hope you’ll get the gist of it. As always, I welcome any comments and suggestions and if you would like to try this tool and process, please let me know and I’ll arrange a free trial. –Steve
The Outcome Disconnect
More and more companies are transitioning to a service or subscription business model like SaaS (what we’ll refer to as “Something as a Service”). Many existing service providers are finding a much more competitive landscape. In this environment it is more important than ever that the supplier align their offering to the value (outcomes and success metrics) that the customer is looking to achieve. Otherwise, the customer is more likely to leave them because they didn’t achieve the outcomes they expected. This often leaves the supplier confused because the product or service “performed as advertised.”
Unfortunately, even when the supplier believes they are aligned to the customer’s outcomes, there is still a significant risk. When outcomes and objectives are garnered from the customer, too often only a few voices (primary contact or supporter) weigh in and are heard by the sales team. The inherent assumption is that the information is complete. But everyone on the customer side may not necessarily be aligned on the outcomes, priorities, and success metrics. Therefore, gaining alignment is a task that must be shouldered by the sales team and the customer.
Implications of the Outcome Disconnect
The implications of an unhappy customer, particularly in the SaaS model are significant:
- Over 50% of SaaS/cloud providers experience a 15% churn rate (Pacific Crest 2016)
- It costs $1.13 on average to acquire $1.00 of ACV from a new customer. Only $0.13 to retain $1.00 ACV renewal (Pacific Crest 2016)
- The probability of selling to a new prospect is only 5-20%. Probability of selling to an existing customer is 60-70% (MarketingMetrics)
- 80% of future revenue will come from only 20% of current SaaS/cloud customers (Gartner/CMO 2016)
- Average SaaS/cloud provider leaves 15% of additional ACV on the table by not effectively up-selling and cross-selling existing accounts (Pacific Crest 2016)
When over half of SaaS/cloud providers experience a 15% churn, something is wrong. Losing 15% of ACV each year means that in five years, the SaaS supplier will have a business that is half the current size (assuming no growth)! The same can be said for missing out on an additional 15% of ACV through upselling and cross-selling. The company will miss the opportunity to double in size in slightly less than five years. That’s a lot of foregone sales commissions and operating profits!
Not every unhappy customer results from a disconnect pertaining to expected outcomes. Sometimes it is failure of delivery or product performance issues – which are business issues. Other times it may result from significant changes with the customer’s business after the initial purchase (which can be managed but is outside the scope of this topic). However, as sellers there is much we can do to head off those soured supplier/customer relationships that are the result of an expectation mismatch.
In short, it is imperative both parties (which includes all key players) mutually align on expectations of success. Experience has shown it is easier if this mismatch is addressed early in the sales process to give the supplier and customer common objectives and ultimately a scorecard for measuring the value delivered after the sale.
Aligning on Outcomes – A New Assessment Capability
Ecosystems and Value Lifecycle have developed an online tool and process that provide transparency and help align the supplier and customer on mutually agreed outcomes. In addition, it helps the customer gain internal alignment on expected outcomes.
What follows is a brief description of the tool and process:
As shown above, the assessment is comprised of three basic steps:
– The supplier and customer independently define the expected outcomes
– Then both sides share and compare the outcomes each developed
– Both sides collaborate to refine and prioritize the mutually agreed to outcomes
In the following sections we will briefly walk through each step. Note that the screenshots do not show the interactive nature of the tool and process but should give you a reasonable representation of the power of the conversations it helps generate.
Here is a sample of the results when the supplier defines the expected outcomes. Typically this exercise is facilitated by us and takes about one hour. Using the online assessment tool, the sales team will simply complete the following fields:
– Outcomes they believe are important to the customer
– Success metrics for each outcome (how value will be measured)
– Strategic value on a sliding scale (1 is LOW and 5 is HIGH)
– Ease of execution (1 is HARD and 5 is relatively EASY)
The first time we facilitate this exercise with a sales team, it is often challenging for them to think in terms of the outcomes that are important to the customer. They tend to think more about what they are selling (product / service) versus why the customer is buying. However, we have found that after a couple of sessions, most teams become adept at this.
In parallel, we also facilitate the same exercise with the key buying influencers at the customer. Typically this exercise will take several sessions as different buying influencers weigh in. We have found most key decision makers like the process and see a lot of value in discussing exactly what they want to achieve. Additionally, we have found the most interesting and animated discussions have been around success metrics, strategic value, and ease of execution.
After each side has defined the outcomes independently, we facilitate a session between the supplier and customer where we share the results from each side. The value of the insights from this discussion are immense. For example, this may be the first time the supplier has even heard of some of the outcomes that are important to the customer. From the customer’s perspective, they have often been surprised at some of the potential outcomes the supplier believes can be delivered. Often these were outcomes they were not even considering. The net result is a more transparent view of potential outcomes and sets the stage for a collaborative discussion on what are the right outcomes to pursue.
Now you can see how each side scored each outcome in a visual representation. The final step is to mutually prioritize the outcomes that both sides expect to achieve through the engagement after the sale. The goal is to pare the list down to three and perhaps no more than four mutually agreed to outcomes. This step typically takes two to three hours and several iterations to complete. By providing a graphical representation, we have found some of the decisions are relatively easy. For instance, any outcome that scores as “low value” and “difficult to execute” is usually dropped.
Some of the most interesting discussions result when both sides determine an outcome such as Lower Costs is important, but they each assign different metrics for success. Naturally, this may very well have resulted in an outcome mismatch if not addressed. Additionally, we have found the conversations around how to take a High Value outcome that is Difficult to Execute and move it to High Value and Easy to Execute (upper right quadrant) to be invaluable as both sides openly discuss the hurdles and issues that must be overcome in order to more easily achieve the desired outcome.
Because the Value Alignment Assessment tool is online, it is available for viewing and to make changes by any designated individual on the supplier and/or customer side. While the tool and process does not solve all of the challenges of selling in a complex B2B environment, it does provide a framework for a transparent and collaborative discussion about potential value.