In the broader pantheon of different sales models, two stand out:
- Relationship selling
- Value-based selling
What are they, exactly, and what works best for SaaS-style or services companies?
Product Splintering Guide
How software and services companies double the number of mid-market customers in 180 days.
What is relationship selling?
It’s exactly what it sounds like, friends.
If you hire a sales principal (either internal or outsourced) who promises you that he’ll focus on relationship selling, this is what it commonly means:
- He will sell to people he has pre-existing relationships with, but not necessarily your ideal customer profile
- People end up buying from you because of the relationship and not necessarily the value of the product
- Again, the sale is driven by relationship as opposed to buyer persona
Basically, this is guys and gals with good phone books or social presences.
What is value-based selling?
- What’s the problem in the market?
- What do people need?
- How are you providing or meeting that need?
- What’s the next need?
- How will you skate to that puck?
Value-driven selling creates relationships because people need whatever you have, so the relationship has to form. Relationship selling does work the other way — it doesn’t create value. The value is in the relationship, and that’s great for a while. But when the product erodes or the connection moves to a different industry, you can’t sell on that. You can always sell on value, however.
Which is better for SaaS and services plays?
That would be value-based selling.
We know from Matt Dixon in The Challenger Sale that 5.4 decision-makers are usually involved in the purchase process. (He’s actually ticked that up to 6.8 in recent years.) Similarly, research from Bain has shown that companies reaching a $5B valuation typically have 14 levels between the lowest employee and the CEO.
Because of this stakeholder complexity, you actually need to sell to buyer persona — selling to relationship gets you a few quick wins, yes, but it doesn’t get you long-term, recurring business. First of all, the relationship cog could leave the company. Second of all, when the sale is on relationship and not product value, the chances of renewing the contract when it’s over (1 year, 18 months, etc.) are not good. Other stakeholders will enter, assess the value, and decline the renewal option.
After those quick wins — after the relationship selling contact list is done — can you work a market strategically with relationship selling? It’s very challenging. Even if the sales principal has been in a specific vertical for 20+ years, eventually the lack of focus on buyer persona and ideal customer profile and his lack of value based selling to unknown people far outside his comfort zone will dry up the potential leads.