Delivering value in the Information Age

Customers have changed.

In the past, sales reps would be tasked with “solution selling“—i.e. being adept at discovering customers’ needs and selling them solutions to those problems. In other words, the sales rep would ask the customer questions to diagnose their problem (need diagnosis) and would “sell” them a product that their company produces which provides a solution to the customer’s problem (need fulfilment).

But in recent times, customers require less help from salespeople to find solutions to their problems. This is likely because:

  1. the wealth of information available to customers has multiplied exponentially;
  2. the access to such information has become ubiquitous [in Western nations] (predominantly due to the internet); and
  3. customers have become increasingly dexterous at researching, curating and analysing information.

The result of these developments is that customers are able to self-diagnose problems and research solutions themselves.

Why does this matter?

Under the conventional “solution selling” method, salespeople are trained to align their company’s solution with an acknowledged customer need and then demonstrate their company’s value over a competitor’s offering. But when customers can self-diagnose and do their own research before they interact with a sales rep, they come to the conversation with a deep understanding of their problem and leave little room for the sales rep to offer value. Research discussed in a recent Harvard Business Review [HBR] article found that customers completed nearly 60% of a typical purchasing decision—researching the problem, finding solutions, ranking options, benchmarking pricing, etc.—before even speaking with a supplier (note that this was in a B2B context, but the idea is certainly applicable and possibly even more pronounced in a B2C context!). Customers come to the (metaphoric) negotiation table armed with all of the options and specifications they require, essentially relegating the sales team to a fulfilment team.

Because customers have such a wealth of information, it has forced many companies to compete on price instead of competing on other elements of an offering. Customers know what they want, how they want it and what they should expect to pay for it. Furthermore, if companies cannot meet these demands at the specified price, the customer will opt for a competitor who is willing to slash their prices. The wealth of information available has shifted even more power to the consumer and has forced companies into enduring price wars. There are plenty of recent examples to illustrate this.

What can marketers do?

Since marketing is all about delivering value to customers, companies need to find new ways to generate and deliver value beyond just “being the cheapest”. Because, price—per se—is not an element of the marketing mix which is indefinitely defensible.

My initial thoughts are that companies need to invest more in their brand; in particular the product and promotion Ps of their marketing mix. In terms of Keller’s Brand Knowledge framework, the benefits a customer attaches to a particular brand are based on the functional, symbolic and experiential aspects of that brand. Companies need to make better products (functional benefit), that are perceived as more cool and valuable (symbolic benefit), that are more enjoyable to use (experiential benefit) than a competitor’s offering. Customers recognise, attribute and attach value to these kinds of benefits. Additionally, differentiating on these brand associations—instead of differentiating by being the lowest priced provider—will allow companies to generate competitive advantages that are maintainable and operate business with healthy financial margins.

Do you agree? How else can companies fight this trend?

 

This post was inspired by the HBR article The End of Solution Sales—by Brent Adamson, Matthew Dixon, and Nicholas Toman—which featured in the July–August 2012 edition of Harvard Business Review.

10 Comments

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  1. Krista says:

    You raise a good point Adam. However I think it involves more than brand. You mention customers already knowing what they want before they see a salesperson but I think the key is delivering a product that is what customers recognise as fulfilling their needs/wants. This can be assisted by marketing – to make people aware of the product and convince them they want it.

    • Adam Jaffrey says: (Author)

      Thank you for your comment, Krista!

      The point I’m making is that there is now less opportunity for companies to deliver value during the search (pre-purchase) phase of a transaction. Because they are delivering less value, the cannot charge the same price premiums which they once were able to—reducing their capacity to generate revenue. Companies now need to look for new ways to deliver value like the suggestions you have outlined in your comment.

  2. Sammydoyle says:

    Totally agree with you. The old approach to selling goods will never work in a marketplace where consumers are so equip with knowledge. To me, for companies to get out of price competition, it comes down to having integrity with your offering and providing a service that has a lot of dynamic value (predictability and low variation in the way it is consumed). Take Maccas for example. They don’t necessarily have the best product, but are consistent in the way you consume it (you know you are always going to get a disgusting high fat burger :)) To me this is the most important part of developing a competitive advantage in this environment. The more consistent you are with your product and service, the more trust you build with the consumer. Now with social media and public forums, the consumers will decide whether the product/service is consistent or not, not the brand manager. In my view most forms of traditional advertising will be obsolete soon, so a focus just on the customer experience and the systems are the key. That’s just my view :)

    • Adam Jaffrey says: (Author)

      Hey Samantha, thanks for the comment!

      That’s a very interesting point that you bring up—the concept of consistency and predictability in an offering. I agree that it’s important for companies to be consistent because consistency builds trust (provided they are consistently good!), and trust builds strong brands.

      I do, however, disagree with you that most forms of traditional advertising will soon be obsolete. Whilst it is true that online advertising spending is the fastest growing sector, many other advertising media are still growing (with the exception of print). Traditional media still serves many purposes which cannot yet (and may never) be replicated by new media. It will be a long time before traditional advertising is dead.

  3. Sammydoyle says:

    A fair point. Yes whilst that article shows an increase in spending on traditional forms of advertising it doesn’t indicate that it is generating a return. Maybe it just means companies are becoming more desperate so are throwing money at everything in hope it will lead to a positive outcome? There are many companies out there that invest no money in traditional advertising and rely purely on consumer generated content (online traffic), reviews and word of mouth. Trying to convince a consumer you are the best through fancy tv ads, magazine ads and direct marketing just won’t work anymore. In my view the only thing a consumer will trust soon will be another experienced consumer.

    • Adam Jaffrey says: (Author)

      Samantha, I do not agree.

      Traditional media is not dead, and the notion that “[companies are] desperate so [they] are throwing money at everything in hope it will lead to a positive outcome” implies said companies are stupid. Companies are not stupid; they analyse their media spends thoroughly. In fact, the marketing department is likely the single most scrutinised department in terms of the expenses it incurs to the business. If traditional media wasn’t generating a positive (and sizable) return on investment, companies would not continue to use it.

      Though, your final sentence—which suggests a future of consumers being marketed to by other consumers (presumably brand advocates?)—is an interesting concept …

      • Sammydoyle says:

        With so much noise and clutter out there for consumers, I just find it hard to see how traditional advertising is going to play a role in the future. I don’t know about you but I tune out and am immune to ads now? To me, firms are still trying to hang onto this old theory of pushing marketing messages onto consumers, in hope that something will stick. In my view that is just a waste of money and a focus should be on building quality relationships/experiences with the consumer. This will lead to positive WOM, more advocates and in turn high retention and low acquisition costs. I guess we’ll just have to wait and see what the future holds….

        • Adam Jaffrey says: (Author)

          I’m going to continue playing devil’s advocate, Samantha.

          If traditional advertising is dead, then why do some of the worlds biggest brands keep using it? Some recent examples include: Visa, Samsung, McDonald’s, Qantas, Telstra and even Twitter [US only].
          Okay, maybe it’s not fair comparison to use only television as my proxy for “traditional advertising” during a time when TV is booming—i.e. during the Olympic Games.

          Instead, consider a prolific company that virtually only uses traditional media: Apple. The only new media that Apple uses is a Facebook page and Twitter account for its App Store and iTunes Music services (and a few others). And, Apple is the most valuable company in the world. Granted, they are undertaking many other marketing and non-marketing related activities to build their brand, but it’s an interesting idea to consider.

          I’m not saying new media isn’t valuable. Nor am I saying that you haven’t made some magnificent points (in fact, I think developing meaningful relationships with customers should a primary focus area for all brands), because you have. What I am saying is just don’t write traditional media off … yet.
          Maybe there’s a blog post in analysing this topic. ;)

  4. Hey man good stuff. I absolutely agree with your views on this matter. The old way of relying on salesperson will sooner later disappear as people are more dependent on customer and expert reviews to determine consistency and the value worth of that product. This element of word of mouth is what companies should focus on instead of wasting money on trying to look good through advertisements but fails to deliver. I think combining this with product customization (how customers want their product to be specifically built for them) would be good for example, like what Dell is doing with the way they’re selling laptops. I’ve expanded some ideas in my post as well. :)

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