Total Cost of Ownership – A BIGGER deal than you might think

All sales professionals need to be deeply versed in the concept of Total Cost of Ownership.  Unless of course what you’re selling is a commodity with no differentiation, and your company provides nothing beyond the bare essentials of customer service and support.

If that describes you, then by all means stay laser-beam focused on your low, low price.

But it doesn’t describe you.  Those sorts of sales reps have already been fired and those sorts of B2B companies are already out of business.

It can be a challenge though, to get your customer – particularly those hard-nosed, old-school purchasing types – to think in terms of TCO.  Thanks to Harry Moser, Founder & President of the Reshoring Initiative, I’m able to share three tools you can use to help get the message through.

One:  Listen to the brief audio clip above.  Get your price-focused customers to listen.  If 10% more US manufacturers used TCO-based instead of low-price decision criteria, they’d create at least one million new jobs.  If 20% more US manufacturers used TCO-based instead of low-price decision criteria, they’d create at least two million new jobs.

Two:  Listen to Harry’s entire Manufacturing Revival Radio interview.  He’s talking about manufacturing management, but wow what a professional selling lesson!

Three:  Study and use the Reshoring Initiative’s TCO Tool.  Better yet, use it as the basis for building a TCO tool that tells your unique story.

Like I always say, they don’t care about you.  They don’t care about your company.  They don’t care about your products and services.  They’re all in the money-making business.  They care about TCO!

The BIG (& only) three elements of a strong Value Proposition

I almost agree with the following statement:

“In B2B marketing, your value proposition can be about two things. Only two. Dos. Deux.

  1. Time
  2. Money”

From Barry Feldman in The Most Valuable Lesson a B2B Marketer Will Ever Learn

Actually I more than almost agree, I think the whole blog post is right on the money and I strongly recommend you read and heed it.  There’s just one thing that’s missing – RISK.

Risk is a big deal in the B2B world.  It’s a big deal because some projects do not meet expectations.  Some don’t succeed.  Some fail spectacularly.

Let’s say I’m a plant manager and I’m making an investment decision.  I have three options.  One option from Vendor A and two options from Vendor B.

  • Vendor A’s proposal says that its Solution X will generate a daily savings of $1,000.
  • Vendor B’s proposal says that its:
    • Solution Y has an 80% chance of generating a daily savings of $1,000 and,
    • Solution Z has a 99% chance of generating a daily savings of $808

All three options have the same cost.  Solution Y from Vendor B is virtually identical to Solution X from Vendor A.  You know like and trust the sales reps from both competitors equally.  What do you do?

You eliminate Vendor A and noodle on which of Vendor B’s options is better.  That’s what you do!

And here’s why you do that.  In a perfect world, Solutions X & Y both yield the 1,000 bucks.  BUT, as Vendor B points out, I should really only count on saving $800 due to the risk involved.  Solution Z, however, is lower risk.  It’s max up-side is only $808, but it’s pretty much a lock I’ll get that.  So bottom line, X most likely gives me $800, Y most likely gives me $800 and Z most likely gives me $800.  That SOB from Vendor A, though, never even pointed out the risk of failure.  I think I’ll buy lunch for the rep from Vendor B, ask her what she’d decide and seek out her advice more often.

The sales rep who considers risk not only wins the current deal, but also builds long-term loyalty.

So Barry, I’m in violent agreement with you!  …almost.  You’re right, but it’s not “Only two. Dos. Deux.”  It’s “Only three. Tres. Troi.”

You’re wrong again, my friend

As my friend and business associate knows, the snarky title of this post is said with a smile…  He IS, however, a little off on his reasoning in a recent post of his own.  He begins by saying,

“Engaged in friendly, spirited banter with a business associate the other day. We had just returned from a trade show radio gig, and had 50 radio interviews with CEOs to edit. Naturally, we split the batch in half.

And naturally, we each named and organized our respective batch of files differently.

My associate? Named the files according to the company name. Me? I did it based on the name of the person interviewed.”

He goes on to make a case for keeping a laser-beam focus on the individual person you’re selling to vs. that person’s employer.  Yes, I agree that establishing and nurturing one-to-one relationships is vital.  Focusing only on the individual, though, is a recipe for repetitious disaster. The whole notion of “decision-maker” is pretty much dead.  The days of clearly drawn corporate silos and individual fiefdoms are over. 

As sales professionals, we must sell to the “decision network,” the whole company.

For example, assume you’re selling widget washers.  You go to Norman, the VP of Maintenance at [COMPANY], and demonstrate how with your washers, the job gets done in half the time.  Knocks $1,000 a month off maintenance expenses, has a payback period of 6 months and an ROI of 112%.  Done deal!  Congratulations!  Your widget washers are installed and you and Norman enjoy a few adult beverages to celebrate.  Ain’t it great to make your customer look good?

Two months later Harvey, the VP Manufacturing at [COMPANY], notes that widget production is off by almost 8%.  Widget demand – as always – is high.  If Allison, the VP of Sales at [COMPANY], had that 8% more widgets to sell, she could deliver an additional $10,000 per month in profit.

Jill, the CEO of [COMPANY] finds out and goes ballistic.  Who’s the moron who changed the widget washing equipment?  Didn’t that knucklehead realize that shutting down the production line to wait for the washer fluid to evaporate would drastically reduce output?  “You mean he actually changed the widget washers (that I personally designed ten years ago) to shave a few measly bucks off the maintenance budget?” she roars.

As you help Norman update his resume, you might want to consider how vital it is to relentlessly maintain a holistic view of your customer’s entire company.  An individual perspective simply doesn’t cut the mustard.

You Are Too Narrow-Minded (…yes, YOU!!!)

Know your customer!  Great advice.  It’s essential for success.  But…  Even though it’s necessary, it’s no longer sufficient.

Let’s say the arrow to the left represents all of your customer’s people, processes and resources.  “Stuff” goes in the left side of the arrow, gets processed and then products and/or services come out the right.  (See Michael Porter’s classic Competitive Advantage for a detailed discussion of the Value Chain.)

Your job (as a journeyman sales rep) is to understand how the stuff in your own company’s value chain can integrate and collaborate with the stuff in the customer’s value chain to generate more productivity, performance and profit for the cusotmer.  (Note:  Only two connections between you and the customer are shown here.  Obviously, there will typically be more.  In fact, the more connections, the more compelling your value proposition.)

Let’s take it a step further.  Is it conceivable you could provide something (or somethings) to your customer that would provide value to your customer’s customer?  It’s no great mental leap to make that next set of connections.  To reinforce the obvious point, helping your customer help your customer’s customer makes you that much more valuable; makes your value proposition that much more compelling.

This next extension of the thought process requires no significant mental stress either.  Why would you not have conversations with customer executives about innovations – that you will help implement – that will have a positive impact on many of the customer’s customers.  (Of course, you realize only five customer’s customers are shown for the sake of saving space.)

Beware!  It’s oh so easy to understand why it’s smart to be able to articulate the value of your stuff to your customer’s customers.  It ain’t so easy to actually do it.  Remember all that research you did to grasp the nuances of your customer’s business?  Well now you need to repeat that process for CC1, CC2, etc.  Makes sense to start with learning about the primary industry that buys your customers’ stuff.

The effort pays off in spades, however.  Think about how cool it will be to have your customer coming to you for advice, counsel and assistance for serving their customers better.

One last addition to the diagram; and, sorry for the possible insult.  (The journeymen among you will object!)  Let’s also figure out how the customer can better integrate the products and services of other vendors with your products and services to better serve the customer’s customers.

Think what you will of Microsoft Windows, the sales strategy behind it is pure genius.  Microsoft is in the software business.  So what did and does Microsoft do?  They did and do everything they can think of to help software vendors (including competitors!!!) sell their stuff.  Thousands of garage-based programmers loved and love it.  Help from Goliath!  All they need to do is write code that runs on the Windows platform.  Got that?

The Windows sales rep has the help and assistance of virtually 100% of the software providers on the planet.

You owe it to yourself to think long and hard on this “serve your competitors” thing. It’s counter-intuitive.  It’s challenging.  It’ll hurt your brain.  But if/when you figure it out, you’ll have struck gold.

So are you too narrow minded?  I am.  I struggle daily trying to maintain my “ecosystem perspective.”  It’s the right perspective though.  It’s the path to sustainable competitive advantage.



The Stupendous Worth Of A Compelling Value Proposition

It’s an old habit.  When I read on airplanes and come across an intriguing passage or concept, I jot down notes on whatever scrap of paper I can find.  While cleaning out my briefcase last night, I came across these two gems.  (My apologies to the author – don’t recall the book or article these came from.)

  • “The Sunday New York Times contains more factual information in one edition than in all the written material available to a reader in the fifteenth century.”
  • “In 1900, a well educated person could still grasp the existing knowledge in almost every field of science and the arts (in fact, this was what a college education was supposed to provide).”

A Value Proposition cuts through!So what do those two factual tidbits tell you?

I can’t say I’ve ever read an entire edition of the New York Times, but I do read a lot more than that amount every month.  And as far as grasping all the existing knowledge in any single field – science, arts or otherwise – well… forget about it.  No living person can make that claim.

To me, those tidbits above reinforce the vital importance of a particular sales best practice:  Begin every conversation with a compelling value proposition.

Stupendous!  In the case of this blog post, I hope the word “stupendous” in the headline cuts through the flood of content coming at you today.  (Although it’s not a common term, everyone knows what it means, plus it’s fun to say!)

Generate an 8 to12% annual, incremental increase in effective sales capacity.  In the case of Sales Process Engineering, I hope the notion of methodical, relentless continuous improvement cuts through the flood of content.

It’s a kick-butt sales call every time.  In the case of a sales rep’s own business talk radio show, I hope the near-guarantee of call effectiveness cuts through the flood of content.

How am I doing on my value propositions?  How are you doing on yours?