The Four Domains of Value

Transcription

1 The Four Domains of Value Dr. Tom Sant

2 Your Presenter: Dr. Tom Sant Author of Persuasive Business Proposals, the world s # 1 best-selling book on proposal writing One of the 10 most important business books of all time. Geoffrey James, Inc. Magazine America s foremost expert on proposal writing. (American Management Association) One of world s top ten sales trainers. (Selling Power Magazine) Over 30 years experience with Fortune 500 companies Over $30 billion in winning proposals

3 The magic word in selling today is Value.

4 Value is supposed to cure all problems. Price pressure Intense competition Slow sales cycles Shrinking margins

5 And when does value matter the most? Your client must believe your value is superior when: 1. You are trying to displace an accepted vendor. 2. You are changing a process. 3. You are relocating control of something valuable. 4. Doing nothing is a viable alternative.

6 But What do we mean by Value?

7 Two uses of the phrase value proposition Marketing The firm s offer to its market Tends to be focused inward A general statement that applies to every customer or client Examples: Service with a human touch Bending the cost and time curve in drug development. No hardware. No software. No boundaries. Sales The firm s offer to a specific client Needs to be focused outward A precise statement that applies only to the recipient of our proposal Examples: By consolidating your cleaning and catering contracts with us, you can save over $1 million a year. With our automation system, you will reduce call handling time by an average of 95 seconds per call.

8 For sales proposals A value proposition is a promise to deliver specific, measurable results that the client desires, backed up by evidence that we can keep our promise.

9 What about a win theme? Is that the same thing as a value proposition? No.

10 Typical definition of a proposal win theme: a central idea (feature and benefit) that is supported or proved.

11 Unfortunately they usually don t work. Value expressed as a win theme usually has no real value.

12 For example: How effective is this? We offer a full range of enterprise-strength, integrated technology solutions.

13 Does this make you want to say YES? We are a true one-stop shop for all your facility management needs.

14 How do you like me now? We enable the people-ready business with leading edge solutions and world-class service.

15 Pretty exciting, huh? We are committed to the success of the enterprise.

16 Why don t win themes work? 1. They sound generic 2. They re self-centered 3. They don t address real outcomes 4. They re not quantified

17 We need a true value proposition because of two cognitive biases: 1. The loss aversion principle 2. The status quo bias

18 Cognitive bias # 1: The principle of loss aversion People are predisposed to overweight potential losses vs. potential gain.

19 Daniel Kahneman 2002 Nobel Prize in Economics for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty."

20 Loss Aversion People are more motivated to avoid a loss than they are to acquire a similar gain.

21 In a business setting The risk people fear most is overspending. Wasting time, resources and opportunities are bad, but not as bad as wasting money.

22 Cognitive bias # 2: The Status Quo Bias Another cognitive bias against value: People won t change even when the cost of doing nothing is higher than the cost of changing.

23 Related to the Endowment Effect

24 Consequences People overweight loss vs. gain. People overweight what they already have vs. what you have to offer. People prefer the status quo to the risk of change.

25 Generally, people look for a return that is 200% to 300% their outlay before they feel good about spending.

26 As a result, there is no value in vagueness Significant savings Substantial growth Improved performance Reduced operating expense Increased revenue Lower risk

27 Building a Better Value Proposition by focusing on the four domains of value Show me the money!

28 FACT: Without value, winning is just luck. You must establish superior value based on technical, contractual, managerial, quality, or service differentiators, or the customer will choose based on price or may choose to do nothing.

29 Smart buyers look for positive impact Improved financial performance Operational efficiency Reliability of mission-critical operations Reduced errors and rework Increased worker productivity Customer satisfaction Regulatory compliance And other key performance indicators

30 The promise inherent in our value proposition: You will get more of the outcomes that you want the most if you choose us.

31 The Basic Value Proposition (Value s - Cost s ) > (Value a - Cost a ) Return on Investment where: Value s = the value of your solution Cost s = the cost of your solution Value a = the value of the next best alternative Cost a = the cost of the next best alternative

32 Six Easy Steps to Compelling Value

33 Step 1: Define the customer problem we are solving Productivity issues Coordinating a geographically distributed work group Reducing number of FTEs needed to handle the work Dealing with union issues Financial issues Increasing revenue Increasing profitability Cutting operating costs Expanding market share Reducing labor costs Meeting profit expectations from shareholders and owners Increase return on capital Value arises from a change of status, moving from an unacceptable condition to a desirable one. Risk minimization issues Mitigating facility obsolescence Mitigating skills obsolescence Maximizing tool availability Avoiding unplanned disruptions Minimizing liability and time lost to accidents Schedule issues Handle increased seasonal volume of work, calls Beating a competitor to market Completing required studies faster Reducing set-up time Providing service at more convenient times Quality issues Attracting and keeping good employees Reducing attrition among managers Reducing downtime Reducing errors Making the workplace a competitive advantage Achieving regulatory compliance

34 Value is the measurable difference based on our 1. Fixing a system, process or tool that s broken. 2. Implementing a capability they don t have. 3. Improving the way they are doing something today.

35 Step 2: Identify the kind of value the customer seeks Value will appear in one or more of discrete but overlapping domains of performance.

36 Domain 1: Strategic Value STRATEGIC Business / Financial Increased profitability Increased market share Mission fulfillment Mergers / acquisitions Maximize return on capital Increase share price

37 What are some examples of strategic value* your customers seek? Which decision makers are most likely to seek it? *Strategic value has a positive impact on the core measures of business performance.

38 Domain 2: Tactical Value STRATEGIC Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Increased market TACTICAL share Reduced risk Operational Efficiency Faster product launch Automating a manual process Introducing best practices Adding flexibility Improving QC Achieving compliance with regulatory standards

39 What are some examples of tactical value* your customers seek? Which decision makers are most likely to seek it? *Tactical value has a positive impact on operational efficiency, improves the infrastructure, or introduces labor-saving processes or tools.

40 Domain 3: Social/Political Value STRATEGIC Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Increased market TACTICAL SOCIAL / POLITICAL share Internal Reduced risk Operational Efficiency -Improve employee Faster product launch Automating a manual process Introducing best practices Adding flexibility Improving QC Achieving compliance with regulatory standards morale -Reduce absenteeism -Decrease turnover External -Increase customer loyalty -Reduce carbon footprint -Generate good will

41 What are some examples of social or political value* your customers seek? What kinds of decision makers are most likely to seek it? *Social/political value has an impact internally on employees and/or externally on suppliers, customers, and/or communities.

42 Domain 4: Personal Value STRATEGIC Business / Financial Budgetary compliance Profit improvement Downsizing Mergers / acquisitions Increased market TACTICAL SOCIAL / POLITICAL share Internal Reduced risk Operational Efficiency -Improve employee Faster product launch Automating a manual process Introducing best practices Adding flexibility Improving QC Achieving compliance with regulatory standards morale -Reduce absenteeism -Decrease turnover External -Increase customer loyalty -Reduce carbon footprint -Generate good will Personal

43 What are some examples of personal value* your customers seek? *Personal value has an impact on a given decision maker s career, reputation, or income.

44 To uncover the right value, ask the right questions: 1. How will you [the customer] measure success for this project? 2. How have you measured success for similar projects before? 3. Do you have any specific KPIs (key performance indicators) for this project? 4. How did you measure results in previous projects of this type? Do you plan to use those measures again? 5. How will you communicate so other managers in the organization know that this project was worthwhile? 6. Do you have benchmark data of current performance? 7. Are you looking for a specific ROI? If so, what is your baseline data against which you will measure? 8. Are you seeking regulatory compliance? Why does it matter?

45 Step 3: Quantify the value 1. The starting point: Baseline data from the client Research data on the client Research data from the industry 2. The probable gain: Probable results after implementation of your solution Quantified improvement 3. The value of the gap

46 Example: Monetizing the impact 1. Baseline data regarding the area of performance. Example: Currently, at XYZ Company you waste approximates 7% of raw materials run through your process. 2. An agreed upon estimation of probable gain, based on data from other clients. Example: Wasted raw materials = 7% of a total $30 MM annual spend. 3. Articulation of the value of the gap between current performance and potential performance. Example: Eliminating waste means a potential impact of $2,100,000 in savings.

47 Step 4: Present the value graphically 1. Focuses the reader s attention stops the skimming. 2. Increases the persuasiveness by 47%. Total savings for year one on reduced waste is calculated to exceed $4.5 million. Savings for years two through five will average $7 million a year.

48 Which is more compelling? By implementing our software system, ABC Company can reduce call handling time from 30 seconds to 90 seconds per call. This will deliver significant savings. The Impact of Reducing Average Call Handling Time:

49 Step 5: Link value to relevant differentiators Product/service features Corporate capabilities Methodology Management practices Personnel Facilities Size Experience Recognition, awards

50 Differentiators that matter in services In differentiating a service, emphasize: 1. How you will do the work. 2. How you will manage the work. 3. The people you will provide. 4. Special equipment, facilities or tools you have.

51 Create a selection matrix 1. List all of your differentiators By competitor By processes By corporate capabilities 2. Align your differentiators with common value positions 3. Weight the differentiators

52 Align differentiators with value positions Differentiator/ Uniqueness factor Cost reduction Increased profits Technology transformation System integration Minimize risk Lower carbon footprint Flexibility, scalability Single point of contact Highest level of selfperform in industry Career path Global presence, global capacity Financial stability, resources Center of Excellence Speed of delivery and set up Documented processes, workplans

53 Weight the degree of fit Differentiator/ Uniqueness factor Flexibility, scalability Single point of contact Cost reduction Increased profits Technology transformation System integration Minimize risk Lower carbon footprint Highest level of selfperform in industry Career path Global presence, global capacity Financial stability, resources Center of Excellence Speed of delivery and set up Documented processes, workplans

54 Select differentiator based on value Differentiator/ Uniqueness factor Flexibility, scalability Single point of contact Cost reduction Increased profits Technology transformation System integration Minimize risk Lower carbon footprint Highest level of selfperform in industry Career path Global presence, global capacity Financial stability, resources Center of Excellence Speed of delivery and set up Documented processes, workplans

55 Different strokes for different folks Differentiator /Uniqueness factor Flexibility, scalability Single point of contact Cost reduction Increased profits Technology transformation System integration Minimize risk Lower carbon footprint Highest level of selfperform in industry Career path Global presence, global capacity Open architecture Cisco Solution Partner First to market Team functionality

56 Step 6: Prove Your Claim Differentiators Proof What you do that no one else does. What you do differently from everyone else. Value Proposition Value That Has Value. Verifiable claims you make about yourself. Claims your clients make about you. Third-party evidence.

57 Real proof, not fluff Here are a few examples of marketing fluff. Anything look familiar? Best of breed World class Leading edge State of the art Quality focused Uniquely qualified Innovative Fully leveraged High performance Synergy User friendly Integrated Partnership Seamless Robust Highly available Vague generalities. Undefined or unsubstantiated claims. Grandiose promises without substantiation.

58 And here are some more Vague claims of superiority One-stop shop Industry leader Breakthrough Next generation Disruptive Flexible Impressive Powerful Cost-effective Technical Claptrap Value-added Mission critical Turnkey Bizblab Seasoned Premier Acclaimed Enterprise-class Scalable Cutting edge Outside the box Dramatic Passionate Strategic Game changer Committed Next level Impactful Singularly focused

59 Three kinds of proof Things you say about yourself. Things third-party experts say about you. Things your clients say about you.

60 Things you say about yourself Resumes or CVs Company history Corporate capabilities Coverage maps Process diagrams

61 Things the experts say about you Awards Rankings Recognition Certifications

62 Things your clients say about you References Testimonials Case studies

63 Putting It All Together

64 Writing effective value propositions 1. State the outcome the client seeks (preferably in quantifiable terms) 2. State the differentiator that enables you to offer more of that outcome than your competitors 3. Prove it

65 Step 1: State the outcome they seek State the value the customer will receive (the outcome), preferably in quantifiable terms Example: One important benefit of accepting this proposal is that Acme Ltd will achieve a major gain toward your goal of a more sustainable enterprise. Specifically, your energy consumption will decrease by 15 to 18%.

66 Do NOT lead with your feature or differentiator! Our best-in-class approach employs sophisticated predictive analytics to refine the site selection process to identify high-quality sites with proven track records for meeting enrollment goals. You will meet your enrollment goals because we will employ a unique system based on predictive analytics to determine the best sites for your study. As a result, your study will start and finish 15% sooner on average.

67 Step 2: Link the value to your differentiator(s) Link the value proposition with your differentiator in a cause/effect sentence Example: That decrease in energy consumption will come as a direct result of implementing our energy rationalization software. This software automatically manages your energy costs to assure that you pay the lowest possible price 24 hours a day. The only system of its kind, the software has been proven in controlled studies to reduce energy bills.

68 Step 3: Prove it! Provide a proof statement Case study Reference or testimonial Third-party validation (industry expert, analyst, etc.) Verifiable statistics Guarantees or service-level commitments Example: For example, when SAS implemented the software, they saw an immediate reduction in energy costs of more than 20%. Similarly, Dell reduced energy costs by 17% during the first year of using our services.

69 Average Phase 3 Asthma Length (months) An Example of a Strong Value Proposition Although some research organizations quote implausible project completion rates, here are the facts: The industry average length for phase 3 asthma trials is 19 months The average length for Abecedarian Research is 12 months seven months faster As a result, Abecedarian Research increases your projects net present value by over $100 million on average over other CROs. Abecedarian Research s Faster Asthma Trials Increase NPV by Over $100 Million on Average month average delay 0 PPD Abecedarian Industry 2016 Tom Sant. All rights reserved.

70 Another Example of Effective Value ArgentOil will see US$11 million in capital expense savings. Decreased capital expenses: ArgentOil will benefit from our implementation of the newest commercially-proven adsorbent, BTE-47, and catalyst, I-500. These products available exclusively from Americhem will generate more than US$11 million in capital expense savings annually. Those savings will come from the fact that loading is faster, requiring less downtime, and catalyst life is longer. In controlled studies, the combination of BTE-47 and I-500 loaded in half the time and lasted a full six months longer than alternatives Tom Sant. All rights reserved.

71 In summary Start with the problem: value arises from meeting needs Focus on outcomes: what the customer wants Quantify the gain: numbers are stronger than words Show me the money: the power of the graphic Make it bulletproof: link it to your differentiators Prove it: provide evidence to substantiate the claim

72 Dr. Tom s Tips Are you getting Dr. Tom s Tips? Are your competitors? Get the latest research, insights and practical pointers to increase your win rate. tsant@hydeparkpartnerscal.com

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