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How to Grow Both Sales and Margins

You can increase both margins (by 1 to 3 points) and sales (by $1 million to $50 million) at the same time. Here's how.

Executives of manufacturing and B2B services companies:

Concerned that you’ll miss your sales and margin goals?

Geoff, the president of a distribution company, faced a technology revolution threatening to obsolete his business model. In fact, their sales and margins were already eroding. Fortunately, Geoff’s team had developed a solution to meet the new set of customer needs resulting from the technology. But they could not figure out how to monetize the new solution and use it to profitably grow sales. Unless they could, the future looked bleak.

Even if your situation is different than Geoff’s, you may be experiencing some of these common challenges:

  • Revenue is below expectations, or under threat
  • Previously loyal customers demand lower prices, and competitive actions are also pressuring your margins
  • You sense that some of your prices may be leaving money on the table
  • The market is shifting dramatically and you won’t be able to keep up without changing your customer mix, your solutions, or your value propositions
  • You are under tremendous pressure to generate growth and you see opportunities, but can’t tell which one is most promising

Any of these challenges places your company’s future financial results at risk, and put pressure on you to find solutions.

Imagine attracting customers willing to pay more for premium value, and getting paid what your solutions are really worth.

Stop and envision what’s possible when you grow your business by attracting customers who are more value-sensitive than price-sensitive.

Picture a future Friday evening as you leave work. You reflect on what happened that week:

  • Your company is on track to hit your annual sales and profit objectives
  • Because your customers realize that there’s more to value than low prices, they treat your company as a contributor to their success—not as a vendor they can easily replace
  • Your sales team, equipped with a compelling value proposition, goes after the right prospects and lands a high percentage of them
  • The newest Employee of the Week just took over the sporty luxury car your company rotates among the winners. It’s the best-received perk you ever created, and just one more reason people like working at your company.
  • There’s enough money coming in to reinvest in technology, people, and other assets
  • Your board discussions can focus more on the future than on current issues.

So you start your weekend with confidence and peace of mind.

To increase margins and sales at the same time—without trading off one for the other—isn’t easy. And few companies have all the pieces required.

Just a guess… some or all of the following statements could have been written by you:

  • “Our sales team tells a conventional, features-and-benefits sales story. I’m not so sure we truly understand our value to customers, much less be able to explain it to a prospect or quantify it.”
  • “Our prices are based on a markup from our costs, and our best guess as what’ll win the business against competitors. We definitely add value for our customers, but we have no method for baking that value into our prices.”
  • “We have a hunch that some of our prices are too low. The problem is we don’t know which prices, or how much more we could get.
  • “We have the capabilities and capacity to serve new markets. But which ones, we don’t know. And we don’t have people on board with the skills and the time required to scope out new markets, research prospects, and start a sales dialogue.”

You can solve the problem of too many customers prioritizing price over value, attracting customers willing to pay more for premium value, and getting paid what your solutions are really worth. Here’s how you discover what to do:

1. Identify and Communicate Your Biggest Value

Even if you don’t realize it, your company does something special—and potentially valuable—for customers. You just aren’t getting credit for it in the marketplace. That’s because it’s not obvious, and your marketing and sales communications don’t tell your story in a way that prospects and customers get an “Aha!” about your full value. That leads to attracting fewer value-oriented customers, and diminished pricing power.

To make sure that you’re not missing your biggest value:

  • Define your distinctive problem-solving, value-creating capabilities
  • Develop a positioning and clear, strong value propositions that connect your capabilities to the outcomes your customers and prospects want
  • Develop a framework for estimating what your solutions can be worth to your target customers, and quantify the estimated financial value of your solutions
  • Prepare your marketing and selling teams to communicate how you help customers achieve these outcomes
  • Build skills in conducting dialogues with decision-makers that effectively convey the value that you bring

In these ways, you can demonstrate your value so that you don’t have to lower your prices in order to land or retain customers.

2. Incorporate Value Into Your Pricing

Your prices are probably based on marking up from cost, and adjusting those prices in customer negotiations. Value to the Customer should be a major consideration, but very likely isn’t systematically incorporated into your pricing decisions today. That leaves money on the table.

Price using an approach that balances value to the customer, prices of the customer’s alternatives, and your own financial requirements. Develop pricing practices that align with your goal of getting paid what your solutions are really worth. Equip your team to execute those improved practices, and align them with your pricing improvement goals.

The right approach to pricing collects for the value your company provides.

3. Assess If You Need to Move Beyond Your Current Market

Great Fit Customers are the ones to whom you bring value, are profitable for you, and don’t treat you as an adversary. If you don’t have enough of them in your customer mix, you’ll struggle to get paid what your solutions are really worth.

  • Figure out which of your current accounts are Great Fit Customers—the customers that consider you valuable—and which aren’t. If you don’t have enough Great Fit Customers to achieve your sales and profit goals, use your new value story to fix those that you can.
  • Structure your new prospect development effort to improve your future customer mix, bringing in Great Fit Customers so you can let go the adversarial, least profitable ones.
  • Do “Market Math” to decide if there’s enough potential in your current served market(s), or of you’ll need to find different types of customers and new uses for your capabilities. If you need to pursue new types of customers and diversify your customer base, research the new markets. Identify customer types that need what your company does well, and find out pain points and problems to be solved. Screen the opportunities and prioritize the most attractive.

Doing business with the right kinds of customers is a powerful formula for profitable growth.

With Marketwerks, grow sales and margins at the same time

We helped Geoff and his sales team to deeply understand the value that their new solution would create for customers. Then we helped them develop a pricing structure based on value to the customer, and a strong value story that supported the pricing and attracted the right prospects. To Geoff’s delight, his sales team easily presented the value story for the solution, sales grew again, and they significantly improved their operating margin.

Marketwerks, an affiliate of Chief Outsiders, serves proactive executives of manufacturing and B2B services companies who are concerned they don’t have enough customers in their mix that are willing to pay a premium for the value they offer.

Bob Sherlock and his teammates solve the puzzle of how to attract enough customers willing to pay more for premium value, and pay what our clients’ solutions are really worth. As a result, they help companies to grow both sales and margin at the same time—increasing margin by 1 to 3 points and sales by $1 to $50 million.

Bob started Marketwerks in 2002. Earlier, he founded and ran a venture-funded logistics service company, served as VP – Marketing for an $850 million distributor and retailer, and held increasingly responsible marketing and sales management positions at GE. He is the author of Daring Caution: The Executive’s Guide to Pricing Improvement.

Take the Next Step

If you’re tired of customers that prioritize low price over total value… And want to get paid what your solutions are really worth, and attract customers willing to pay more for premium value…

The outcome you want starts with a phone call. Click the button below to schedule a discovery session with Bob Sherlock, president of Marketwerks.

Set up a Discovery Session

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