Does Your IT Have Value Or Are You Selling A Commodity

by Paul DiModica, Editor, BDM News

So, what is IT "value"?
According to the Merriam-Webster Dictionary, it is a 14th century word derived
from both French and English words that mean:
"A fair return or equivalent in goods, services, or money for something
exchanged."
When talking about selling technology, software and professional services to
senior management, the sales technique of selling by value is used quite often.
But to sell based on value, it is important to understand what value is . . . and
what it is not.
Value pricing is not what you or your management team assumes is the right
price based on your sales or development costs plus required gross profit.
Value pricing is what the customer perceives your technology, application or
professional service to be worth.
In IT sales . . . perception is reality.
To see if your firm uses value selling to market your technology, take this short IT
sales value test and then score your answers at the end.
Take The IT Sales Value Test
1. Does your firm get asked to drop your IT price more than 50% of the time
by the prospect before they will buy? ___Yes ___No
2. When you lose a deal, do prospects tell you more than 50% of the time
that your price was too high? ___Yes ___No
3. Do you sell your firm's IT product or service horizontally to everyone or do
you sell vertically to specific markets? ___Horizontally ___Vertically
4. Does your firm lead with price being your sales value proposition when
presenting to a prospect? ___Yes ___No
5. Does your sales team have a standard price discount they are allowed to
give to a client without management approval to close a deal? ___Yes
___No
6. Is your sales staff paid on gross margin or gross revenue? ___Gross Margin
___Gross Revenue
7. Is the word "price" mentioned anywhere on your web site, advertising,
sales brochures or standard sales letters to prospects? ___Yes ___No
8. In the final sales cycle steps of closing your IT deals, do clients ask you to
explain why you are different after seeing your proposal and all of your
competitors more than 50% of the time? ___Yes ___No
9. Is your IT pricing metrics based on your competition's price? ___Yes ___No
10.On repeat sales to existing clients, do your clients hold you hostage for

discounts to get add-on business? ___Yes ___No

Recommended
Answers
1-no; 2-no; 3-vertically; 4-no; 5-no; 6-gross margin; 7-no; 8-no; 9-no; 10-no.
Scoring
Each correct answer gets 10 points. Each incorrect answer gets 0 points. Now add
up your score. Did you get a passing grade?
Creating IT Sales Value
The key for any successful technology or professional service firm is to create a
sales environment where the prospect's perceived value of your technology or
service is higher than the IT product or service's selling price.
This process of sales value positioning is a premeditated program that can be
integrated through the four pillars of modern technology business development
which include sales, marketing, and strategy and alliance management to be
more successful.
Sales value positioning is not a metaphysical strategic process gleamed from
some antiquated marketing book, but instead, is an active tactical procedure
that when implemented correctly will help your sales force sell more at a higher
sales price.
So, what can you do today?
We all know as professional IT salespeople that time is the quota killer.
So, following the test questions above, let's lay out the foundation for some
tactical sales techniques that you can use which will allow you to immediately
reposition your firm from a price-driven IT sales program to a value-driven
program.
7 Guidelines To Create IT Sales Value
1. To sell value, never market your firm's IT product or service as "Price
Competitive" or by stating "We have a price advantage." Instead, always
use the term "Value Competitive." By not using pricing as a value add, you
have positioned yourself as different from your competitors.
2. Change all of your company's marketing and web content to reflect this
new position. Never say "price competitive" in your marketing programs. It
is a huge liability for prospects to see your corporate marketing with the
"price competitive" term displayed. It tells them immediately that you are
going to lead with price, so the prospect will always pressure you to prove
this marketing statement over and over again - regardless of how low your
sales price already is.
3. When cold calling or giving your elevator pitch to a prospect for the first
time, communicate your uniqueness based on some element other than
price. But this uniqueness should never be technology. Customers don't
buy technology; they buy pain management. What makes you different?

What is your firm's unique sales value proposition?

4. If your firm is currently selling horizontally into several markets, you have
already positioned yourself as a commodity technology or service provider.
You may believe that horizontal marketing offers you greater market
penetration opportunities (more about this in a later column) but what you
have done is said "Mr. Prospect, I am a generalist and I have nothing special
to offer except price." By being a specialist, you can have a "Value
Competitive" position that warrants higher pricing. Like doctors, IT
specialists get paid more than IT generalists.
5. Never base your IT technology or professional service pricing on your
competition. Yes, be aware of what they charge, but establish your pricing
independent of their pricing. It is unfair to have your IT sales staff sell
based on someone else's business model. By using your competitor's price
point, you only reinforce to prospects that you are a commodity-based IT
product or service and are the same as everyone else. If you cost more
money, tell the prospect up front and then tell them why!
6. Never give existing clients a large price discount. If you must, then your
firm has failed in delivering your "Competitive Value" with the client's most
recent purchase. It is not good business to cut pricing in order to keep
business you should already have earned. Yes, you may be reducing your
sales capture costs, but simultaneously you will be setting up a pattern of
discounting that just keeps pushing your firm back into a commodity
technology supplier position. If you have correctly delivered your
technology or service, then stay strong on your retail pricing to existing
customer add-on sales.
7. When asking clients what their IT budgets are for a particular acquisition,
remember, as soon as you ask, you are automatically packaging their
funding availability from their point of view (and from your point of view).
In most IT firms, as soon as the client says my budget is $500,000 many
sales reps start trying to custom fit their firm's pricing model to meet the
client's stated budget and the "selling by price" game has begun. Yes, we
want to know if the prospect has a budget to buy within your firm's pricing
model range, but the key word is "range." Don't start immediately
intellectually discounting your IT's product or services features or modules
to fit the clients' budget because if you do, you have already lost.
Instead, think of price ranges - always sell up, never down - based on your firm's
existing price models. If you use "Value Positioning" correctly, the client may pay
$600,000 for that budgeted $500,000 investment.
Remember . . . it's your sale and your commission!
Paul R. DiModica
President
DigitalHatch, Inc.
http://www.digitalhatch.com