Unlocking the Value


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In Part 2 of this series on dealing with the price objection, we saw that the first key to getting out of the commodity trap is to find points of differentiation and then connect those to customer benefits. Thus the two most important words in sales are: “SO WHAT?”

Suppose I say, “Our product is engineered to be the most reliable in the industry.” I might instead say, “This means that you know it’s going to work when you need it.”

Notice something subtle about that last paragraph. Thinking “so what” changed the pronoun from the first person to the second person. They don’t care about you—they care about themselves.

The next step is to get the right people in the customer’s organization to agree to the value. So, the next two critical selling words are: “HOW MUCH?” And, just as we saw that there are many ways to differentiate when you take a broad look at the offering, we will also see that there are many ways to assign value to these benefits.

Most salespeople equate value with cost savings. There’s nothing wrong with this—everyone wants to reduce costs, especially in this economy. But focusing only on costs can leave a lot of value on the table and hurt you when price negotiations begin. Let’s use an example to demonstrate value beyond saving money. The sales team is selling a wireless-enabled application for a beverage distributor that can automate a lot of the paperwork requirements of their drivers (who also sell). The first step is to consider the four elements of financial value: revenue, costs, asset efficiency and risk.

Revenues: Anything that increases the volume produced and sold or the average selling price of the customer’s product or service. In this case, the drivers could see more customers in a day, which should translate into added sales. Or, they could spend more time with each customer to enhance customer satisfaction and cross-sell more products.

Costs: The same revenue base could be maintained with fewer drivers and trucks. The reductions in head count, maintenance and legal expenses, less rework by eliminating manual data entry, etc.

Asset efficiency and cash flow: In my own experience this is the most overlooked and most potentially useful measure of financial benefit a salesperson can tap into. Anything that allows the customer to do more with less will free up cash. In this case, the customer could reduce trucks and associated equipment needed to service the existing accounts, or expand without buying more assets. Less obvious, but also important: more efficient billing could shorten the billing cycle and reduce days sales outstanding. The application might also reduce inventory by yielding better information about customer demand and buying patterns.

Risk: Risk reduction is hard to quantify but adds tremendous value. In this case marketing risk was reduced because quicker response times lowered the risk of lost sales due to unexpected demand and better documentation could lower legal risk. Sometimes the most pressing risk in the buyer’s mind is that their competitor could implement a similar system first.

These “Big 4” financial value elements may be enough to justify the investment, but as the late night infomercial says “but wait, there’s more…” Non-financial benefits include enhanced image, enabling corporate strategy, improved quality, employee morale and retention.

As you brainstorm different value elements, you will find that some can be quantified exactly, such as the cash flow extracted from speeding up the billing cycle by one day; some can theoretically be quantified if we could just measure all the variables, such as inventory reductions resulting from improved forecasting, and some are potentially valuable but unmeasurable, such as enhanced customer satisfaction. What should you do about these “soft” benefits? Should you leave them out because they can’t be placed neatly into a spreadsheet? I say, use them, but keep the following points in mind.

Of course, to business decision makers, hard dollars in the form of measurable benefits are best. Measurable numbers make the benefit more concrete in the buyer’s mind; concrete numbers add legitimacy because they are usually based on empirical experience; and that evidence helps the decision maker sell the idea internally.

However, I’ve often found in coaching sessions with sales opportunities that just because something has not been quantified does not mean that it can’t be. Sometimes it’s a matter of asking the right questions and digging a little deeper. Precision is not always a requirement—often you just have to be in the right ballpark to be in the game. Here’s an example to illustrate the point: suppose you sell a product that is a component of the customer’s end product. You’ve convinced the customer that your superior quality will improve the quality of their end product and thus potentially increase market share. How do you put a reasonable and credible number on that value?

You can begin with the industry benchmarks or the experience of previous customers, but use them only as a lead-in to ask questions. Everyone likes to think their experience is unique, so ask them how they would see it working in their environment. For example, you could ask, “One of our other customers saw a 5% reduction in their reject rate. What would that mean to you in terms of customer satisfaction?”

The answers you get to these questions will help you get agreement on a rough range. It’s important to use your customer’s numbers as much as possible, but be careful not to claim much more than the lower number in the range.

When you run this exercise, you will probably also find that some benefits are two-sided; for example, you can lower costs for the same volume of production or produce more for the same cost. You can’t count the benefits twice, so which one should you use? It depends on what best fits the customer’s strategy and business situation. This particular operational improvement could be used to benefit the customer in three ways:

  • Increase revenues by seeing more customers daily
  • Lower costs by reducing the number of drivers and trucks
  • Improve customer satisfaction and cross-selling by allowing drivers more time with customers

In this actual case, the customer did not consider the first two options to be feasible, but they were enthusiastic about the third. Another customer might see things differently, depending on their own strategies. This is extremely important to your sales strategy, because there is a different “problem owner” for each benefit—but that’s a topic for our next article: “WHO CARES?”

Republished with author's permission from original post.

Jack Malcolm
Jack founded Falcon Performance Group in 1996 specifically to combine his complex-sale expertise and his extensive financial background to design and implement complete sales process improvement initiatives at top national and international corporations.


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