By Stefania Aulicino
Mark grew up in the import/export industry in India. He was hired by a US firm, moved to the States. Mark started his own company a decade ago to streamline challenges he understood uniquely about operating effectively between these the 2 distinct cultures. As a 10 year old freight and international logistics company, Mark offered great a solution (including products and services), but at 6% profit he was earning below the 9% industry average.
Most would quickly assume this is a marketing/sales issue. Actually it’s a valuation challenge.
Like a lot of entrepreneurs, Mark was taking for granted what he does best.
No one can buy your distinctive value until you recognize that distinctive value for yourself.
Value is what we allow ourselves to be paid for in our business model.
There are 3 elements of value which drive premium profits:
- Analysis
- Execution
- Terms
Each element not only is incremental money to you, but each is a stepping stone for your customer’s buying decision.
Are you driving profit with all 3 value elements?
Analysis
In today’s information overload world there are plenty of solutions, but which one is right for the customer’s specific situation. Analysis is the biggest differentiator in today’s world for the successful companies.
Mark apologetically went through a check list to determine the right solution to offer a new prospect. He did not perceive this as a value-creation process and the prospect experienced it as frustrating. Mark significantly underestimated the value of helping prospects analyze their problem.
When he ascribed value to his analysis, Mark experimented by charging. To his surprise, conversations with new prospects yielded access to a higher decision-maker. Analysis empowered Mark to offer higher perceived value.
Prospects were better positioned to consider their options and actively participate in trade-off of features of importance to address their pain. Several prospects paid for a greater in-depth analysis before making even bigger final buying decisions which allowed them to comparison shop, all the while building a trusted relationship with Mark. Analysis empowers buyers to feel confident they are making the right decision.
Mark’s own mind shift had a dramatic effect on the prospects in just days! Mark’s value in the eye of the beholder was escalating and prospects were happy to pay for it.
People hate to be sold, but they love to buy solutions!
Analysis drove fast decision-making with prospects clear about the cost of NOT taking action now.
Execution
Prospects are not interested in mechanics; they want to eliminate their pain.
Mark had been proud of the step-by-step detail of the execution plan he used to offer. But prospects were not buying until Mark changed the “how to” of his process to RESULTS.
For one of his customers Mark offered 4 staged outcomes:
Step 1 Use consensus with the customer’s team to prioritize the top pains to be addressed
Step 2 Beta test the solution the worst pain
Step 3 Complete the rollout by first fiscal quarter in time to be documented in Board report with an ROI
Step 4 Monthly optimization for a 12 month period to increase the ROI
Mark turned a “transaction”, into a “relationship” during the execution phase by teaming up with his customer’s team.
Staged pain elimination makes you the customer’s best friend.
Terms
Customers will buy larger solutions when payment terms fit their cash flow.
Mark initially was selling a standard solution, payment with contract, but he was meeting with resistance resulting in a low average sale of $1,500. When Mark added Terms to the Analysis and Execution discussion, one customer quickly signed on for a $12,000 project: $1,000 monthly payments.
Value need not always be reflected in terms that delay cash. Another of Mark’s customers paid $10,000 up front for a customized feature they were clear they wanted. Mark gave another customer a choice of emergency support: priority 1 hour response at 5 times the price of his normal response time support.
Terms let customers trade value for time, just as we all do at the post office: 42cents first class mail vs $18.00 guaranteed overnight.
Mark’s profit margins escalated with each new customer. Today, at 12% pretax profit, he exceeds the industry average. Mark’s own mental shift is making a difference in his entire operation.
If your solutions are not generating premium profits in today’s market place, check to see how much of your distinctive value you are taking for granted.
Value is what we allow ourselves to be paid for in our business model.
It’s your job to help prospects see value so they can pay for it.
Use all 3 elements of value: Analysis, Execution, Terms.
Customers in pain really do want the valuable solution you have to offer.
Stefania Aulicino, president of CapitalLinkUSA ensures business owns get cash to keep control of a bigger, more profitable company, faster, safer than they ever thought possible- in any economy. Let us help you become a magnet for non equity and equity sources to fuel your growth. Please explore our tools, solutions and consulting options tailored for different growth stages and different budgets: www.CashAndControl.com