May 052019
 

Many salespersons have heard the term ‘value proposition.’ What does it mean? Why don’t two people agree on the meaning and definition of the term? Is it because no one has bothered to define it? Is it because it means different things at different times? Is it that due to laziness everyone wants to think what they are doing in the name of ‘proposing value’ to customers is the way to do ‘value proposition’? Perhaps others believe it is all irrelevant.

In this instance and for the purpose of modern selling we are speaking about showing that the TCO (Total Cost Of Ownership) is less than the benefits gained. Let us think of TCO in terms of simple cost (the cost of the air conditioner, software, apparatus, whatever). As such, if we can prove to the customer that owning a solution saves them money (and maybe time and maybe number of errors and other factors) the salesperson has a decent shot at making the sale.

Photograph Credit: Lukas

For this to happen the salesperson must:

Have access to the customer and its processes and workflows. Incidentally, not being given access is a good indicator of where the sales process, and its likelihood of success, resides.
Be able to leverage this access to count, calculate and put a figure (value) against how things are happening now pre-automation, pre-efficiency gained, pre-effectiveness garnered. With me so far?
The mathematics begins now. The seller must quantify the existing workflow and contrast it with the (hopefully) lesser cost of the solution. In other words, if the solution costs $100,000 and the value gained is $200,000 then there is a net ROI of $100,000 or 100%.

Here is an example I shared elsewhere recently that I paste here to demonstrate the sample math:

 

  • Our software module costs $20,000. However, to take the minimum and smallest possible scenario, they have 1 person spending 2 hours/day doing something manually or inefficiently (say shuffling paper from the warehouse to the desk, reviewing it, approving it and then delivering it to their finance department…).
  • This person is paid $40/hour. That is $80/day, which is $1,760/month, which in turn is $21,120/year. So in one year they have broken even with our software (and we didn’t even place a value against the person doing other work once freed from this task or the elimination of potential human errors).
  • Over the 5 years they run this solution they could realize a 400% ROI!

 

This is but an example, but it should apply to any enterprise sale.
The above is important, but sellers need to remember that no matter what humans buy based on emotion and only justify against logic with either a formal process or against a set of data later.

 

*Things that need to go away: Thinking of selling as asking customers questions like ‘Is this a good time to move forward with project ABC’?

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