Investing in solutions during the digital era is not easy for buyers. Whether it is the challenge of understanding new technologies, or time constraints, or too many people in the decision process, there are a multitude of excuses to resist the initiative for change, resulting in keeping the status quo. The good news is that this temptation can be significantly mitigated by accentuating the solution’s potential impact of solving the business problem. Maintaining the status quo has a cost that you can highlight.
There is considerable motivation to proceed with a proposed solution. The competition keeps moving forward as they react to the dynamics of the economy, technology, geo-political, environmental, etc. So, let us start with a premise that your customers want to be competitive and satisfy their stakeholders, whether for-profit pursuits of growth, profitability, innovation…, or non-profit seeking desirable outcomes. Can they continue to succeed IF they don’t continuously improve towards their company goals? The reality is that staying stationary is detrimental due to risk of losing ground to competition and/or erosion of costs and assets – which potentially is much greater than the investment savings.
Computing the cost of delay
Every day, week, month of inaction is a loss. Why? The improvements of the proposed solution will hit the bottom line in various ways, that is lost if the proposed solution is not implemented. For example:
- Improved competitiveness may capture new business, new market share, or higher prices, which result in increased gross margin and/or net operating profit. For example, an increase of $1 million per year revenue due to volume could add $250,000 Gross Margin, or over $20,000 per month. Therefore, the $20,000+ is the cost of delaying the decision each month.
- Similarly, if the suggested improvements help to improve inventory effectiveness, and reduce the inventory level by $400,000, you also reduce your inventory carrying costs (typically 30%+ times average inventory balance per year), which is $120,000+ carrying costs per year or $10,000+ per month. Every month of delay costs $10,000+, plus the capital costs on the inventory.
- And, another example is the delay of improving maintenance on your plant equipment. The cost of delay could result from continued downtime and lost production, additional reactive maintenance costs, wasted materials and labor, and more.
Beyond the financial impact, there is potential risk of not meeting standards, compliance, or other criteria that is mandated by the stakeholders, government, etc.
Bottom line – Status Quo means loss of competitiveness, and hits the bottom line
Why the delay?
So, why doesn’t your customer make the decision – and get going? Excuses may include budget confusion, time constraints, lack of priority, or intimidation from the technological innovations and disruption. Also, on average, complex solutions in the digital age require 6 or more people in the decision process, and 1 in 5 of those people will change their role during any 6-month sales cycle!
Another aspect that may cause delay are the non-traditional approaches of a growing segment of the workforce – the Millennials. They use peer review, social media, consensus, and self-education to develop their expectations on how to engage in decision making. And, there is conflicting data on their brand loyalty1,2. This group is increasingly influential and has high expectations for achieving results. So, how do you navigate the changing decision process and motivate action?
Establish the value of change early in the conversation
Your customers do not really have Status Quo as a viable alternative – although they can delay indefinitely. But the delay will be costly and likely lead to erosion of their metrics, or even failure. There would seem to be an opportunity to encourage change – and to establish your solutions’ value. This includes educating the customer on “a better way” by focusing on their business challenges, and aligning best practices that meet the various stakeholders’ motives. It is not about the features and functions – it’s about positioning them for success, on their terms. Don’t lead with solutions, but establish the value of change early in the conversation.
If you really believe that your solution is providing value to the customer, then it is imperative that value is the focus. The late Harvard Business School professor Theodore Levitt pointed out that “customers often do not want the product itself, but rather the effect that the product produces”. In his famous example, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!”.3 So, talk about how great the hole will be – not about the slick trigger on the drill! You are solving their problems, or helping them reach their goals. Thus, establish the value early in the sales cycle, and reinforce throughout, thereby:
- Elevating the conversations to the decision makers – in their language
- Diverting the conversations from bits and bytes, features- functions and pricing
- Personalizing the improvement (how it affects me), but can also help align their changes with the overall company goals
- Distinguishing your solution from the others
- Emphasizing its importance as the customer builds the business case for making change
So, how do you lead with value? Do your homework when approaching a prospect or existing customer. Understand their industry and best practices, and capture their current challenges and objectives. It is imperative that you align your solutions to the interests and definition of value of all decision makers. A Materials Manager may be seeking to reduce spend or improve inventory turns, whereas the CFO may be measured on Return on Net Assets or EBITDA. A Sales Manager may be compensated on revenue growth and sales efficiency, and a branch manager may be focused on profitability. You’ll want to steer the conversations towards solving their problems and differentiating your solutions such that you are the only answer.
When you focus on value, it is not a matter of responding to a requirements document, nor engaging in a demonstration of offerings. It is about encouraging your customers to embrace change at a time that it is sorely needed. You are selling the sense of urgency!
Do you concur? Comment below or email me at eric.frantz@VSRCouncil.org.
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ABOUT THE AUTHOR: Eric Frantz’s passion is aligning customers’ investments, and the stakeholder’s personal and business measures, with an understanding that value is personal. “Value is from the customer’s perspective, and may include financial impact, risk, governance, safety, or other situational factors”. Eric works with global customers to capture value from their investments in technology, process change, and organization realignment. His 25+ years’ experience includes value-focused management and consultant roles in manufacturing, supply chain, sales automation, reverse logistics, inventory and production planning, ERP, business intelligence, performance management, and operational strategy. Eric utilizes a unique combination of analytical and communication skills to facilitate value selling and value realization with all levels of an organization, from individual contributors to senior executives. You can contact him through: firstname.lastname@example.org || https://www.linkedin.com/in/eric-frantz-0071969/