In this story: Monetizing solutions and ideas to meet the five basic objectives of every customer.
Written by Maria Edelson, Founder & CEO of Edelson
This story is about monetizing value, a.k.a. showing your customers the money. Monetizing value means making it obvious to your customer that they will make (or keep) more money because of your idea or solution.
Customers have five objectives in business. If you can clearly explain why doing business with you helps accomplish one of these five, then you’re headed in the right direction:
- Increase Revenue
- Increase Profit
- Reduce Cost
- Mitigate Risk
- Maximize Cash Flow
Here’s an example related to #3: Reducing Cost:
A protective coating company (let’s call them PCC) created a type of paint that you can use on ships. This paint is special because it makes the ships glide through the water and use less fuel. Compared to other paint, there’s less friction against the water. PCC measured how much fuel it saves vs. the typical (cheaper) paint used on most ships. They estimated it saved about 6 to 7% of total fuel costs. On a 4,000-mile journey, that really adds up! So PCC is able to say something like this to their customers: “Our paint costs $5,000 more per ship. But after 1 year with our paint, you could save $1,000,000 in fuel costs due to less friction while sailing.”
Now, paying $5,000 looks like a no-brainer, right? In fact, the customer probably wants to repaint the whole fleet! The value of the paint has been monetized so crisply — so the sale comes down to very simple math.
We teach people how to monetize value. This is so important because:
We start with the idea of a value element, which is a capability or asset that can help a customer address a problem, need, issue, or concern. Here are some general examples of value elements that any company may have — these are assets and capabilities you have that can deliver value:
- A differentiated product
- Data availability
- On-time delivery
- Access to markets
- Safety and compliance
- Storage options
- Co2 reduction
- Automated scheduling & tracking systems
- Credit terms
- Store labor and support
A value element can help sell your product. But the value element alone — say “reliability”, “on-time delivery” or “automated logistics” — isn’t enough. A value element becomes powerful when you monetize what it’s worth to the customer. How does it help the customer achieve their goals?
You need to map your product or service to their problem, need, concern, or issue. And then you need to connect that directly to one of those five objectives (revenue, profit, cost, risk, or cash flow).
Think back to the paint anecdote above. The value element was a beautifully differentiated product. But even though the product is differentiated, it doesn’t automatically translate into revenue, profit, cost, risk, or cash flow in the customer’s brain. The customer doesn’t automatically connect “the ship will move faster” with $1,00,000 in fuel cost savings. Salespeople need to connect those dots for their customers. That’s what we mean by “monetizing value.”
Is all value created equal?
The most meaningful value element a company has is what we call a differentiated value element. This is something your company has that a competitor doesn’t!
Remember when Apple first introduced the iPhone? It was unique. It had features and benefits that offered customers something → things they needed and wanted that no other phones offered at the time. And they had a beautiful design.
And remember people were lined up outside the Apple Store to buy them? When the customer got to the counter, no one asked, “Is there a discount?” In fact, no one even asked, “What is the price?” They just handed over their credit card.
However… most companies don’t have a unique differentiator.
The next-best thing is a value element that’s better than the competition.
For example: imagine your on-time delivery is 98% and your competitor is currently at 72%. Then, you have a 26-point advantage. You can monetize what that’s worth to your customer like this: “How much money do you lose for each day that your product is out of stock (not on the shelf and not available for sale)?”
If the competitor is currently unable to meet demand (due to any number of manufacturing or production problems), they’re creating Out of Stocks at store level. If the stores are averaging an in-stock level of 72% with your competitor and your company is able to ensure delivery and stores are experiencing a 98% in-stock level, is this valuable? YES.
But how valuable? You need to “show them the money!”
Well, if the competitor’s past history shows they could move 10 units per week at $8.99, now the retailer could potentially LOSE:
- 28% of 10 units a week (2.8 units) = $25/week/store
- Across their chain of 220 stores = $5,537/week
- Across their 8 items = $44,300/week
- If this goes on for 1 Quarter = $576,000
- At 30% profit = $172,800
At 98% in-stock, you’re virtually never out of stock. Therefore, your recommendation of revising the shelf plan-o-gram to expand the space of four items and add four new items could result in the customer NOT losing $576,000 in sales and $172,800 in profit. Thank you!
So, there are three questions here because value is so important:
- First, can everyone in your sales organization identify and recognize your company’s value elements?
- Second, do your sales teams solve customer problems by building solutions using your value (rather than just selling price and discounts)?
- Finally, can they monetize what your value is worth so they can show every customer “the money”?
Feedback is a gift. Let us know what you think about this story in the comments below.
This is part 4 of Sales Bites, a 12-part series of stories from 35 years of sales experience with P&G and from training 13,000 sales executives globally. Follow or Subscribe below so you don’t miss the next story.
Up Next: Death by 1,000 Knife Cuts