Michael Nick is Founder and President of ROI4Sales. The idea to start his company came serendipitously. Early in his sales career during a consulting project, Michael uncovered that his customer’s field engineers were placing orders for parts 14 to 15 times each day and that the supplier shipped 14 to 15 boxes each day. After the meeting he called the supplier to understand shipping costs for 15 deliveries compared to 1 delivery per day. He quantified the savings and brought the idea to place one consolidated 75 pound shipment per day vs. 15 separate orders to his customer. He recognized the broader application for this kind of economic impact analysis and 14 years ago he founded his firm. With today’s far more educated buyers, quantifying economic impact is more important than ever. In my conversation with Michael he shared how you can use economic impact analysis with your customers to accelerate closing by giving customers compelling reasons to buy.
The number one issue that Michael hears from salespeople, and one you undoubtedly can identify with, is “ We can’t get customers off the dime.” – How your customers buy has changed and many of the sales strategies you used in the past are not producing the results you want. The reasons customers are delaying decisions, as Michael sees it, is they don’t understand or agree with the value being offered. And although he is aware there are other motivators, most customers today are metrics-driven and even when other metrics are driving the decision Michael’s strategy is to translate needs into metrics that accelerate the buying process.
To help your customers take action, Michael recommends to first make sure your customers understand and agree with the issues they are facing — as Michael describes it “feel the pain”. I have always had an issue with the idea of making customers “feel pain” but the way Michael prescribes it, it makes the point without inflicting pain. While your customers no longer need you to educate them about your products, they do need you “to work with them to understand the intricacy of the issue they are facing and help them see the forest through the trees”.
As I spoke with Michael I envisioned an intersection he uses to monetize value for customers:
- First create a Value Inventory and from that a Value Proposition
- Next develop Questions That Drive to Your Value
- Finally Calculate Economic Impact.
The challenge is that most salespeople don’t really understand the value they bring to their customers. For salespeople whose organization does not provide value messaging, it is left to salespeople to figure it out on their own, an exercise more than worth the time.
Start by creating a Value Inventory by brainstorming with several of your colleagues from marketing , sales, and support, who talk to customers every day and who understand why your customers buy products from you. Plot out a value inventory matrix by answering a few essential questions:
- Why do customers buy our product (list the top ten reasons)?
- Who are the stakeholders?
- How are the stakeholders impacted by this purchase (who are likely to be positive/who will block the sale)?
- What pain do they feel?
- What is their desired outcome?
- What’s our solution?
Michael recommends 10 as the magic number and that list becomes the basis of your Value Proposition.
Next develop questions that drive to that value and help customers more clearly see the issues they face and gain their agreement that they have the issue. A key question captures the cost of the issue to your customer including the cost of delays. Extrapolate that cost over time to take in account rising costs. This conversation gets you and your customer on the same page and creates a base line for proving value and closing the sale.
For example, if your research or knowledge shows that discounting is an issue for the VP you’re targeting, probe his or her business challenges around discounting with questions such as, How much of an issue is discounting for you? What is your annual discount? What is the annual revenue? If you learn sales are $10 million a year and the discounting averages 20% a year, with some simple math it’s clear that without discounting sales would be $12 million and the VP would not be giving up $2 million dollars a year. Michael says it is important to go further than the annual cost by breaking it down to cost per day which gives the message even more impact. The reality is there will likely always be discounting but by implementing x solution to solve this business challenge, the customer could cut the discounting for example by 14%.
To help your customer understand the Economic Impact cover these base line points:
- Lay out the business issue.
- Define the current cost/status quo.
- Extrapolate costs over 3 to 5 years (this is the tipping point that gets your customer says to him or herself, “ Am I really losing that much money?”)
- Include Impact on C-Suite Metrics (This is optional – metrics such as ROI, profitability, revenue…). Show impact on cash flow, income statement or balance sheet or whatever is the priority for the customer
- Calculate the cost of decision delay ( current cost over 3 to 5 years broken down by 220 days).
Michael is sure that once you begin to think “financial impact” you will be amazed at what you come up with.
Michael’s advice: To achieve your goals understand that buyers have changed and will continue to change. Don’t bother to show up if you haven’t done your homework. Go beyond LinkedIn with tools such as SalesQuest which tracks Fortune 1000 and Global 5000 companies and CRUSH Reports and if your company doesn’t subscribe to paid services, find free tools such as CrushArmy.com to understand your customers’ businesses and future plans.. To close more sales, know your value, because value is all you have to sell.