Over the past year, we have heard a number of CEOs present their new value-based approach to doing business with their customers. The lure is providing salespeople with a foundation for customer negotiations that is not based on price. In markets as varied as computer hardware and financial services, senior managers see this approach as a means to avoid the relentless commoditization of products and services. While the pursuit is noble, the mistake these managers make is relying on the rhetoric rather than the substance of value. The rhetoric of value focuses on words alone. While these words accurately describe the end goal, they fail to capture the essential drivers of customer value. The substance of value details the process by which products and services create economic value for customers and salespeople are provided with and use appropriate knowledge and tools to leverage that value in their customer negotiations.

Recent research shows that many value-based selling efforts fail (McKinsey& Co., Solution Selling, Is the Pain Worth the Gain?). While numerous causes are cited for these failures, we believe that the primary reason is management’s failure to adopt an integrated, systematic approach to value throughout the multiple functions of the organization. This systematic approach supports the sales activity as the final step of value creation within the firm. Prior steps align key activities, such as how products are rationalized to meet the range of customer needs relative to competitors, how they are organized around value and whether managers provide salespeople with the right tools and messages to assure their success. The process also links marketing and sales activities to a common goal of ser-vicing the varied needs of the customer in a manner that supports the need for increases in both volume and profits.

Unfortunately, it is never as simple as it seems. To be successful in value selling, organizations must develop their capabilities in three critical areas:

1. Strategic: Allocate resources where they can return the highest value to the
organization
a. Prioritize high-value markets
b. Identify and pursue high-value customer segments in those markets
c. Understand how customer behaviors might differ even within high-value
segments
d. Develop offerings portfolio that meets the varying needs and behaviors of
customers
e. Exploit operational excellence for competitive advantage

2. Execution: Assure that activities in the go-to-market process are in alignment with the strategy to assure success:
a. Provide sales teams with target customers, the appropriate value messages, and the tools to prove that the value is tangible
b. Set pricing to reflect value of the offer to a customer relative to competitors and implement with controls and discipline
c. Focus the sales teams on developing the appropriate negotiating approach for price, loyal and value customers
d. Develop an overriding plan on how to win against various competitors in local market situations
e. Create the appropriate metrics to evaluate results and make improvements

3. Elements of Transformation: Software and systems are necessary to smooth the tran-sition process and provide managers with quick access to the information they need to make better decisions. And finally, a healthy dose of senior management support is required for overall success.

It is only when firms have this type of systematic process in place that value-based selling programs can support the salespeople with simple, credible tools, and the right offerings to assure success with customers. We call this process The Value Discipline. One important element of The Value Discipline is a planning process that helps salespeople prepare for customer negotiations on stronger ground. And it assures that salespeople are backed with the right offerings and tools to survive and flourish in the battle of customer negotiations.