CRO Council

Value Selling vs. Outcome Selling - What’s the difference?

Value selling is a hot concept in the technology industry, and one that sales leaders are researching and discussing frequently. Outcome selling is trending on a similar curve. Unfortunately, too many leaders think these two motions are similar and interchangeable. They are not. 

In this blog, we will discuss the difference between value selling and outcome selling and the importance of using the right tactic at the right time with the right buyer. 

What Is Outcome Selling?

Outcome selling is a new and better approach to enterprise technology sales that centers around two objectives:

1. Providing priority business outcomes that your customer is trying to achieve. 
2. Allowing the supplier to demonstrate how their solution contributes to the achievement of the outcome.

It is the optimal way to approach sales of XaaS offerings. Without understanding the outcomes the customer is striving for, you’ll have a very hard time driving adoption of your offering. After all, Customer Success isn’t really possible if you don’t know what makes the customer successful. Plus, in true XaaS models, your customer is far more likely to buy more and renew if they have achieved the outcomes that they set out to achieve.

Outcome selling is about leading with insights; sharing your knowledge of what other similar companies are doing and then building the connection between your offering and their highest priority business outcomes. And here’s the thing – you (the supplier) are providing insight and input as to what those outcomes should be. 

It’s not about saying that you understand their business better than they do; that can come across as arrogant and alienating. However, you’re in a position to share your insights and experience based on the fact that you’ve worked with dozens, or even hundreds, of similar companies before. It is obvious why this approach would be far more strategic and valuable to the customer.

If you’re doing outcome selling the right way, you probably already know what business outcomes the customer is likely to care about. And, you know how your offering can actually help them achieve those outcomes. That’s a big difference between solution selling and outcome selling. You know which key performance indicators (KPIs) that you can influence and measure, and which ones the customer should be thinking about and prioritizing.

These outcomes may be financial in nature (lower cost of operation, revenue growth, etc.), they may be operational (lack of downtime, enabling key functionality), or even functional (avoiding liability, meeting government regulatory statutes), or even all of the above.

What Is Value Selling?

When people generally refer to value selling they are referring to the development of a financial model that demonstrates the Return on Investment (ROI) of the proposed solution. However, as mentioned earlier, financial value is just one potential outcome.

Value selling is based on the notion that the customer will either achieve cost savings at many multiples of what they’re spending on a vendor’s offering, or the technology will enable new growth streams or efficiencies that will earn the customer far more than it costs them.  

However, cost savings and financial outcomes are only part of the story. In fact, anchoring around value selling can be detrimental to your sales efforts when used at the wrong time and with the wrong buyer. Here’s an example: let’s say you’re a hardware company selling a new Managed Services offering. You formulate a calculation of how much money a customer will save over the course of the next three years if they pay you to operate their infrastructure rather than purchasing and managing it themselves. Maybe your numbers are solid, and you’re confident you can stand behind your ROI calculations.  

If you present your calculations to someone who has operational oversight rather than financial, it will likely fall on deaf ears. Why? Because financial savings aren’t the operating KPIs that are of importance. Keeping the operation running is. What’s of importance is the insight received from your telemetry and the ability to add or reduce capacity on the fly. In fact, if your “value equation” involves laying off operational staff members, you may have just created a real adversary to your sales efforts.

Financial buyers care about financial outcomes, and they will be quite receptive to your value selling efforts. C-level executives, who have oversight of overall P&L will care about value, but they often see a bigger picture. They are the ones focused on what the business outcomes are that your solution will contribute towards. If your value to their company is merely financial, and you present it that way, then you may soon become nothing more than a commoditized vendor, just like all the rest.

Outcome-based selling is about being able to confidently articulate how your solution contributes to:

• Priority business outcomes 
• Financial goals
• Operating KPIs

And if you can show your understanding of all three then you’re not just a vendor – you’re a strategic partner.

Why Getting Started with Outcome Selling Is So Important

If you’re engaging in effective outcome selling, calculating value is not just a sales tactic, it’s an essential motion at every part of the customer lifecycle. Suppliers must be able to track and demonstrate the actual value they have created for their customers. They must be able to prove that they are indeed helping the customer achieve their outcomes. Why is this so important?

• In true XaaS models, vendors are in some way, shape, or form paid based on consumption. If they aren’t achieving their desired outcome (or at least aren’t moving in that direction) you won’t get paid and will leave revenue on the table.
• The best way to drive expansion, and get the customer to spend more, is to prove that what you’re doing is already working. If they spend more with you, there will be even more benefit for them. If you’re using your insights and telemetry in the right way, and have a genuine handle on the outcomes the customer is trying to achieve, then an expanded purchase is the natural outcome, and is, in fact, the right thing for the customer.
• The most effective time to bring the value calculation into play is at the renewal.  Purchasing agents, who are incredibly good at their jobs, will try to push for discounts with the threat of leaving the platform (and that’s way harder for them then they will make it out to be, by the way). However, if you can show them the value they’ve actually received, the discount argument falls flat. And, in recurring revenue models, discounts are killers. Every time you discount or lose revenue from an existing account, you have to make that lost revenue up from someone else before you can start to grow.

In Part 1 of this series, we helped clarify the difference between solution selling and outcome selling. In future, Part 3 of this series, coming mid-August, we will examine how to get started with outcome selling and the tactics you can take to help accelerate your transformation. 

In the meantime, start with this simple exercise: 

1. Get your team together, and figure out what outcomes your customers are trying to achieve (and remember...it’s their outcomes, not yours, that they care about.) 
2. Once you’ve formed that list, decide to which of those outcomes your solution can actually contribute. If you can’t do that, then all you have is a sales tactic. 
3. Finally, think about which buyer personas actually care about those outcomes. 

Financial results are indeed important and vital, but not to everyone, and not in every case. Financial value is just one possible benefit that your customers may be trying to achieve. And value selling is just one component of outcome selling.
 

  June 3, 2021