There are at least eight major kinds of value that your customer may be interested in deriving from a relationship with you and your company. Now, there could actually be sixteen or twenty-seven, but there are at least eight. Some of them are tangible and measurable, and others exist only in your buyer’s mind. I refer to these as the Denominations of Value, and they represent the various outcomes or outputs that our customers might want to ‘get out’ of an investment in our product and services solutions. Economic Value or a financial return on investment is one of them. The others include Time Value, Quality Value, Guidance or Advice Value, Political or Image Value, Relational Value, Simplicity Value, and Emotional Value. We can see how these various denominations are interrelated, like the many facets of a cut and polished gemstone. This diagram is also meant to remind us that value can look very different based on who looks at it and the angle or position from which they look.
Our task is to understand what kind of value the individual or the group we are selling to is hoping, or expecting, to derive when they reach point ‘C,’ so that we can position our ‘B’ as the ideal solution to provide it. This involves questioning and understanding on a much deeper level than most would-be vendors and suppliers are accustomed to.
For each of the Denominations of Value, there is a corresponding denomination of risk. As we endeavor to better understand the way our customers see value, we should remember that . . .
Value and risk are two sides of the same coin.
Risk, as it will be used here, refers to the possible downside of leaving the status quo of point ‘A’ and venturing out in search of point ‘C.’ While a prospective customer may believe that they can save money, or derive Economic Value, by switching suppliers from you to your competitor, they will hopefully also understand that they may have to give up some Quality Value. They might choose to take the Quality Risk if the increase in Economic Value is great enough, but only to a point. They might be willing to accept a few more defects or mistakes, but not so many that it begins to impact their ability to serve their customers at a required minimum level. Likewise, your customer might be willing to wait a little longer, or incur some level of Time Risk, in exchange for the Quality Value of obtaining the best service available.
The exact mix of value and risk that any buyer may desire, or be willing to accept, can only be determined by the buyer themselves. One of the things that we can do to maximize the value of our offerings is to eliminate as much risk as possible from the equation. Simply put . . .
Any decrease in perceived risk is, in effect, an increase in perceived value.
So, as we look at the various kinds of value our customers may seek, we should look not only at how we can maximize the value we deliver to our customers, but how we can minimize risks as well. Now, let’s look at each of these eight in more detail.
1. Economic Value and Risk
It would be great if every customer considered only the economic outcomes and financial ramifications of their buying decisions. It’s the most easily measured and probably the most tangible denomination of value there is. Unfortunately, they don’t. Economic Value is usually only one of several aspects of value they consider. The question is, ‘How can we position what we sell to be perceived among the options as offering the greatest Economic Value or the lowest Economic Risk?’
We might use examples and metrics of how we’ve helped other clients to derive Economic Value by effectively earning more profit. Case studies of the payback and return that our current clients have experienced are extremely useful for this. Of course, we may also offer to assist them in producing a return-on-investment analysis, a cost justification, or a business case of their own to help validate the investment in our solutions.
We should be prepared to offer some kind of proof or evidence of the Economic Value we can deliver, because most customers will consider the economic impact of a purchase or investment. There are exceptions. Occasionally, a buyer decides to operate with a ‘money is no object’ mentality. But for the most part, business managers making complex business decisions make investments for the express purpose of increasing revenue (selling more), reducing costs (spending less), or better utilizing their assets (doing more with less). We will explore Economic Value in great detail.
2. Time Value and Risk
There seems to be a universally accepted premise that ‘time is money,’ but time is often far more valuable than money. If it weren’t, FedEx probably wouldn’t exist because it’s cheaper to send things parcel post. The value of time can be enormous, as is evidenced by how much consumers are willing to pay in interest charges to buy things on credit.
The question for us is, ‘How can we help our customers gain time?’ We should take a look at our customer’s specific situation, depending on their business model and the things that we sell, and ask questions like:
- Can our collaboration solutions help them share design ideas and information with subcontract manufacturers and effectively reduce time to market?
- Can the high quality of our products, or the availability of our service specialists, help them to maximize uptime and reduce downtime in their manufacturing plant?
- Can our business-process consulting or systems-design consulting help them to drive time out of their product-design cycles or to reduce payment-collection cycles?
- Can they hire us to help them implement our best-practice business processes and thereby free-up time to do other things?
Remember, most customers are cautious. It’s only natural to assume that if something is done faster, some other kind of value might have to be sacrificed. Make sure your buyer doesn’t inaccurately assume that faster means lower quality, less reliability, or the risk of higher costs in the future. Always position yourself considering both added value as well as reduced or ‘managed’ risk.
3. Quality Value and Risk
The business world seems to be on a ceaseless quest to improve the quality of everything they do. The widespread adoption of Six Sigma and other quality initiatives is evidence that quality is a top-of-mind issue for almost every company today. Here are four ways we might deliver Quality Value to our customers, depending, of course, on what you sell and who you sell to:
- Can our systems be used to reduce the number of defects or mistakes made in manufacturing?
- Can we implement a process that reduces the number of errors made in billing and collections?
- Can our state-of-the-art diagnostic equipment improve the quality of medical care and improve the quality of the patient experience?
- Can our customer use our components to make higher-quality machines that last longer and require less maintenance?
The area of quality is one of the first to be impacted when companies try to reduce costs. If you want to occupy the position of the ‘high quality’ solution, make sure to point out to your customer the Quality Risk they are likely to face if they choose to go with your ‘low cost’ competitor.
4. Guidance or Advice Value and Risk
Customers frequently look to vendors for advice on which solution would be best suited to solve their problems and to achieve their goals. To some buyers, this is the most important denomination of value there is. This is especially true for the buyer who doesn’t know what all the options are and doesn’t have time to learn. Many clients will gladly pay a premium price to the supplier who they feel ‘really understands’ what they need and takes the time to educate them on why they make the recommendation that they do.
In order to use this to our advantage, we-or somebody on our team-must possess the knowledge and experience needed to make the right recommendation. We demonstrate our expertise in part by using the diagnostic approach to selling and avoiding broadcasting as much as possible. This emphasizes our intention to fully understand the issue at hand before we make any kind of recommendation. This makes our customer more confident that when we do offer an opinion, it will be tailored to their specific situation and not just a general recommendation based only on our desire to sell something.
Once in a while, you’ll come across a customer who uses you for ideas to solve his problems but then-once he has the value of your expertise-buys from someone else who is a little cheaper. Don’t be shy about reminding him that ‘This might not be the last problem you ever have. So, the next time you need some help, please call me back, and I’ll help you again. Except next time, buy from me. Would that be fair?’ Always keep it positive. Never burn a bridge, but help your customer understand that guidance or advice can provide tremendous value, and it is part of the overall package you bring to market.
5. Political or Image Value and Risk
It has probably never happened where you work, but I did hear once about a customer who actually let his own political motives (i.e., desire to look good to his boss) influence whom he decided to buy from. Surely, that has never happened to you, has it? Unfortunately, it happens to all of us.
Some customers use a buying decision as a way of advancing their own agenda or acquiring more clout and political influence within their company. What we have to do is try to figure out how to use this to our advantage. We should try to determine how the buyer can ‘look good’ for deciding to buy from us instead of our competitor.
Always be on the lookout for situations that might pose a political threat to anyone in your customer’s organization involved in a buying decision. We should be very careful to never make one of our customers ‘look bad.’ If we can recognize a situation where one of the decision makers perceives some risk to her image or political standing, perhaps we can do something to try to alleviate that risk or at least bring her perception of it into perspective.
We should also recognize that the resolution of any buying decision that includes many different people reaching some form of agreement will always involve some degree of compromise and trade-off. Take care that some of your customer’s buying committee members don’t trade their vote of ‘YES’ on your project for something else they want more. You and I will never know all the back-channel communiqués that go on among and between decision makers and influencers, but let’s not be oblivious to how corporate politics can impact a deal in which we invest our precious time. Learn and understand the agenda and motives of as many of the different players as you possibly can.
6. Relational Value and Risk
Sometimes a customer decides not to buy from us in favor of their brother-in-law or someone they already have a relationship with or whom they have dealt with before. It is completely normal for a buyer to favor a vendor or supplier they know, like, and trust. Frankly, it should be expected. We, of course, want to develop a good working relationship with as many different people as possible within our client’s company. Relationships based on a consistent, pleasant customer experience make people feel safe about doing business with us.
We should also try, when possible, to get other people within our company involved with the personnel of our client’s company. The more relational ties we build with our customer, the tighter the bond between the two organizations becomes. This is especially important in the case of our best customers, with whom we really want to develop a partner- ship. We can’t afford to base everything on any one person on either side because if (or rather when) that person gets promoted, quits, retires, or gets fired, it can be very difficult to salvage the relationship between the two companies.
Customers value relationships with vendors and suppliers to varying degrees, but they also value their relationships with their coworkers. For this reason, the judgment of one decision maker or influencer can be swayed by someone else involved in the decision process. Your internal champion might back down or be persuaded by someone else who happens to be a champion for another supplier or vendor. Your guy could side with your competitor just to avoid the Relational Risk of an internal conflict. But this works both ways.
A purchasing agent may just love doing business with your competitor. But if you can meet and build a relationship with the director of manufacturing on whose behalf she is buying, she will then have to consider her relationship with the director as she makes her buying decision. Likewise, our great relationship with the vice president of advertising might lead us to believe we have that new ad campaign deal all sewn up. But we could be surprised to learn he ultimately decided to go with the other vendor to preserve his relationship with the marketing communications director, who simply did not like us for some undisclosed reason. When assessing how any particular player in a buying decision thinks, make sure to consider all the relationships within and even outside the company that they might take into consideration before making their decision.
7. Simplicity Value and Risk
Simplicity Value is the label I use to describe the value customers derive when a task is made easier, simpler, or is eliminated altogether. I don’t know how many millions of dollars in revenue I’ve booked by figuring out and selling creative ways to make my customer’s life easier, but it’s a lot! Simplicity Value can result in a savings of time, reduced chances of making mistakes, less hassle, less stress, or fewer headaches, either now or in the future.
Simplicity is one of the reasons it can be difficult to unseat an incumbent vendor. Sometimes it’s easier for your customer to just keep working with the same supplier they’ve always worked with. To displace an existing vendor, we have to overcome the inertia of the status quo by getting creative about the Economic, Time, Quality, or some other kind of Value we can deliver that their current supplier does not.
The flip side, Simplicity Risk, is surely one of the most common reasons that sales aren’t made. Nobody wants a hassle, and most buyers are glad to pay a little more to avoid one. Make sure your customers understand how simple and easy it is to work with you and your company. You might also need to carefully remind them of how painful life could be with a vendor who doesn’t offer all the convenient services that your company does.
8. Emotional Value and Risk
Most decision makers would probably never admit it, but Emotional Value and Emotional Risk play a major role in the way we all think and make decisions. It could easily be argued that our personal emotional needs drive our pursuit of, or desire for, each of the other forms of value, as well as our aversion to all forms of risk. Our emotional need for security and admiration drives our pursuit of Economic Value, as does our need to feel important and successful. Guidance or Advice Value serves our emotional need to feel safe and more likely to avoid the humiliation of failure. And our need to believe that we ‘did the right thing’ can cause us to overlook a potential gain in Economic Value or to incur the Relational Risk of disagreeing with, or voting against, someone whose goodwill we value highly.
I have found, however, that we can’t really openly talk about these things with prospective customers. I admit that I’ve never asked a CEO, ‘Can you share with me a little more about your emotional needs?’ but if I did, I doubt it would have gone over very well. Instead, we have to learn to listen for it within and between the things they say.
Many business executives who are considered great leaders and great decision makers rely heavily on their ‘gut,’ their ‘instinct,’ or how they feel about a tough decision they face. This is strong evidence that emotions do play a role in good decision making. People tend to make judgments and choices based on emotions and then justify those judgments with logical arguments.
Our job is to ask the right questions, and then listen closely enough to our customer that we begin to hear their perception of, and need for, Emotional Value, so that we can position ourselves as the ideal vendor or partner to deliver it. Throughout the balance of this chapter, I will explain exactly how this is done.
Breaking value and risk into these eight denominations helps us to think more carefully about what our customers think about, what they really want, and what value they hope to derive from their relationship with us as a vendor or a partner. Now let’s turn our attention to what we bring to the relationship that will deliver the value our customers seek.