The reason people make purchasing decisions is not because they want the products or services but because they need the value derived from using them. Remember the famous Theodore Levitt quote from the 1970’s – “people don’t want a quarter-inch drill, they want a quarter-inch hole.” The hole being the value derived from using the drill.
With the exception of a few very rich sole proprietorships or really poorly run companies, there is an insignificant chance of selling a product just because of its award wining design or because someone likes a service provider. Today, purchase decisions are made based on the value the buyer will get from the purchase in exchange for the payment made.
Hospitals purchase new capital equipment because it will “improve patient outcomes” (help get them well faster or reduce their stay in the hospital), or because reimbursement schedules are based on the efficiencies gained from new techniques. Industrial laboratories buy instruments because they need the data from the instrument. Factories buy new trucks only after exploring leasing and outsourcing options. Railroads buy new locomotives when they need additional capacity or when the older models are maintenance hogs. And businesses buy support contracts for a number of reasons:
- Uptime is critical and they need a fast response
- The plan includes a discount on consumables (which are generally low cost, high usage disposable items)
- The combination of plan and equipment allows the service provider to include tasks usually performed by the business’ employees at a higher incremental cost.
How do we create customer value?
Sounds like a very simple question but the answer is complex because it depends on the individual customer and her business situation. For example, in a manufacturing operation, reducing required floor space is usually a good thing except that many plants have excess capacity because of offshoring, reduced demand, or building ownership in a depressed area. The best approach is to create a list of all the value adds that your business can offer and then talk with each prospect to gain a detailed understanding of their needs and wants. Also, learn how they assign a monetized value for the “intangible” benefits you can provide like helping the prospects customers grow. Then go back to your computer and craft a proposal that quantifies the value you can deliver and that are on the customer’s needs and wants list. This approach requires a genuine relationship with the “champion” so you can obtain useful insights. And you will only get these insights if they really trust you.
Sometimes the sales person has this relationship and sometimes it is a service person. Don’t let false pride or a bad compensation plan stand in the way of making the information gathering process a team effort. If no one in your company has a good relationship with a key person in the buying chain, you had better get started because without insight and information, your chances of success are like less than hitting the lottery for a big payoff.
Sources of value
This is a partial list of the kinds of attributes you can add to your products or service that will add value for your customer:
There are many ways to create business value and everyone in the business has to be working together to identify and commercialize them before your competition does. There is no better time to begin than today!