“Every sales transaction is about identifying a gap - the distance between where customers are now (their current state) and where they want to be (their future state).” Jim Keenan, Gap Selling
In our customer projects we come across one issue again and again, whether we’re dealing with Disruptors, Incumbents, or provide coaching to individuals involved in sales cycles: a lack of understanding of the value they bring to the individual decision maker.
Let's be clear here: Customers buy value propositions, not products or services! If they can’t find it in your proposal they won’t choose it.
Actually, if there is no defined value, there isn’t even an opportunity.
So let’s start with the very basics, the question of what determines an Opportunity.
Customer Reward
We define Reward as the gap between the current and the future customer state.
In researching for this we came across a great contribution by Matteo Consoli in their review of Gap Selling by Jim Keenan. Matteo lists the indicators for identifying the gap between current and future state as follows:
The literal and physical facts about your customer
Their problems
The impact of those problems
The root causes of the problems
What effect those problems are having on your customers’ emotional state
We only have an opportunity if we can resolve the root cause of a customer problem preventing them from achieving the desired future state, the Reward.
Customer Risk
Achieving the Reward means change and change means Risk regarding the stability of assumptions, skillsets of people, maturity of technologies, developments within the external environment, and any estimation made on these topics.
Value = Risk/Reward Ratio
Other than Jim and Matteo we don’t define Value as just the gap between current and future state, but as the relation between Reward and Risk in getting to the future state. As a consequence, an opportunity exists if the Risk/Reward Ratio is compelling enough for the customer to make a buying decision. The mere existence of a gap between current and future state and its resolution by solving the root cause doesn’t automatically constitute an Opportunity for a seller as the Risk perceived by the customer might overcompensate its Reward.
So, to influence the Risk/Reward Ratio in your favor you must first relate your offering to the Reward the customer can expect from acquiring and deploying your offering. The product or service constituting your offering is meaningless for the buyer unless its positive impact on changing the current state to a better future one by resolving the root cause is evident.
Next, you must work with the customer to drive down the perceived Risk of choosing your offering to achieve an acceptable Risk/Reward Ratio. Not addressing Risk leaves a seller blind to how it is perceived by the buyer. And what you don’t know is your own biggest risk for winning the opportunity.
Lastly, you need to establish your Risk/Reward Ratio as the best one the customer considers for their decision. In other words: you need to drive the Risk/Reward Ratio of your own offering up and the competition’s one down. For this you need to exactly understand the Risk/Reward Ratio the competition is offering your customer.
The Risk/Reward Ratio of your offering constitutes the Value you sell and this is all the Economic Buyer will ever care about!
Conclusion
So here we are: To secure the buying decision for your offering you must know the Value of your own offering and exactly understand the Value of your competition’s offering. Only praising the generic and technical advantages of your offering (the infamous feature - function - benefit pitch) will not make you understand either of these.
Ideally you manage to develop the vision of a future state jointly with the customer and work backwards from there.
Eventually, you must be able to express your offering’s Value Proposition in the following form:
Customer will be able to (achieve future state) by (resolving the root cause) as a result of (deploying your resolution).
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