In this two-part blog series, Zilliant General Manager of Commercial Excellence Barrett Thompson examines what a total solution looks like in B2B, how it differs from line-item thinking and how companies can leverage technology to help sales reps shift to a solution selling mindset. Read Part 1 here.
In the first half of this blog series, I explained how B2B companies often miss the opportunity to 1) provide more value to their customers through total solution selling, and 2) extract some of that value back for themselves by charging a premium or reducing their standard discount structures. Now let’s explore three examples of a total solution in specific industries and how data-driven software can ease the shift to consultative solution selling.
Electrical Products Manufacturing
One of the customers that we work with delivers electrical solutions to building contractors. The contractor provides a blueprint they received from an architectural design firm that includes the electrical plan. The builder doesn’t know exactly what products it needs, but it knows it needs to deliver 240 volts at 80 amps from the main feed all the way over to the far corner of the building, and it needs to adhere to all applicable electrical building codes. The manufacturer has electrical engineers in its sales department who are tasked with taking the blueprint and turning it into a Bill of Materials that satisfies these electrical specifications and is then passed on for quoting. This “take-off” process adds value far beyond simply the product components that make up that BOM. It saves the builder time and headache, as they can move on to the next area of concern knowing electrical is in good hands. The electrical manufacturer has turned to Zilliant to ensure this relationship value-add is accounted for in its project pricing.
Food Service Distribution
One of the most difficult industries in which to avoid line-item thinking is food service distribution. Typically, sales reps default to rule-of-thumb margins to price thousands of high-velocity items quickly. If a distributor has invested in a sales intelligence tool, their reps may get an alert telling them they should go after the parmesan cheese business at a restaurant that is currently only buying tomatoes from them. This is highly useful to increase your share of wallet, but this focus on line items as a seller does also set you up to be compared to your lowest priced competitor. To go one step beyond that, hold the parmesan cheese for a moment and start a conversation with the kitchen manager about the benefits of consolidating. She may be getting her food products from 15 different suppliers, meaning that 15 different times per weeks she has to stop what she’s doing to let them roll in a pallet of food and make sure they delivered the right things, before signing off on the order and putting those items into the cooler.
Instead, your value claim can be: “You come to me for fresh tomatoes, but did you know I also sell a wide range of other fresh foods, dry goods, jan/san products, biodegradable to-go boxes and plastic cutlery? How much easier would your ordering, inventory management, logistics and accounts payable be if you came to me for all of these categories?” If you can get the kitchen manager on board with a total solution relationship, suddenly the parmesan cheese becomes a rounding error.
Food distributors can also add value by helping restaurants with menu planning and optimization as part of a total solution.
Finally, let’s take a look at an industry that is ahead of most in the total solution game. Imagine a Maintenance, Repair and Operations (MRO) distributor sells O-Rings, washers, fittings, bolts, lubricants, and other parts that its customer needs to perform 10,000-hour maintenance on a big piece of industrial equipment that runs 24 hours at a plant. The MRO distributor will put together all those parts in the right quantities and sizes, as well as all the safety gear needed for the job, in one kit. That kitted maintenance package actually gets its own SKU ID and the MRO distributor prices it 10-15% higher than the cost for all parts bought individually.
Why would anyone buy the kit then instead of buying a la carte? Because the distributor has solved for considerable risk and logistical complexity associated with the maintenance activity itself. Consider, when the factory takes that piece of equipment offline for two hours in the maintenance window, they’re stopping production and giving up thousands of dollars of revenue and profit per hour while the machine is sitting there and the shift workers are at home. Everything is dependent on them being back up in two hours, because the next shift is coming in, production schedules need to be met, trucks need to be loaded with product and those trucks have to roll on time. What happens if they begin the maintenance and realize they forgot to order that second O-Ring or have the wrong size hose? The consequences of a maintenance delay are horrendous. So, darn right they’re going to pay more for that kit, which proves that it is possible to charge more for the sum of the parts, as long as you articulate the value correctly.
Data-Driven Software: The Engine Powering a Total Solution
As addressed in Part 1, the sheer volume of products, customers and transactions make the solution sale difficult for even the most seasoned sales rep. That’s not to say it’s impossible, but it is impractical to attempt to scale a solution selling culture in an environment in which pricing and sales teams rely on manual or one-off processes. That’s where the intelligent software tools come in.
Think of it as a two-step process.
Bring more value to your customer (convenience, interoperability, consolidation, etc.)
Hold on to some of that value for yourself
Step one requires awareness of everything that you could be selling to the customer at any given time, which an intelligent tool like Sales IQ™ accomplishes by profiling customers and comparing those profiles to an ideal customer. From here you understand where you should be cross-selling and where you are missing categories within a given customer account today. Now, if you’re missing a lot of categories, chances are you’re not selling a whole solution, so you can’t get a premium price. But if the insights show you are approaching a total solution, i.e. if the missed category dollar opportunity is small, that’s a signal that you may be approaching what a total solution looks like. Cart IQ™, another AI-driven tool, identifies which other products expand the value of the current order scope and prompts sellers, customer service reps or buyers in direct channels to add those to their cart. For instance, if a customer is buying a processor and memory, they surely need to also buy an I/O chips. Cart IQ automatically surfaces that part as a recommended addition to the quote.
Moving on to step two: Once you’ve suggested everything your customer should buy and they agree to add it to their quote, you now must come up with a price for that order that reflects something greater than just the sum of the parts. By configuring discount rules and automating them through Price Manager™ and optimizing prices at scale with Price IQ®, you can consistently produce quotes that accurately reflect the value of the total solution you are providing. As an example, you can run the optimizer to come up with line item prices and teach it that the more line items there are, the greater indicator that your solution represents an exclusive value to the customer. Hence, the more line items that get added to a deal, the lower the discount percentage. It may seem paradoxical, but the bottom line is you’re not as concerned about losing the deal on price because you have proven your unique value. The customer is coming to you for a total solution for a reason, so atriculate that in your sales conversations and reflect that in your price!
To be clear, there is a place for line item thinking, especially when you are in growth or recovery mode with a customer. You can surely mine a lot of gold from transaction data to go after specific line item opportunities. But when you’re the main provider and you offer something to that customer your competitors can’t match, you have an opportunity to capture more value for yourself.
Just remember, as Harvard’s Theodore Levitt famously said, “People don’t want to buy a quarter-inch drill bit. They want a quarter-inch hole!” Reorient your selling mindset to target a total solution whenever possible and lean on industry-leading software tools to identify, quantify and price the best deal – for you and your customer.