In the past, I have written about complexity and all the damage it does. I still believe everything I wrote but I now know there are some times when complexity is an ally. Before I explain my new thinking, let’s define complexity. According to Wikipedia,
“Complexity is generally used to characterize something with many parts where those parts interact with each other in multiple ways, culminating in a higher order of emergence greater than the sum of its parts. Just like there is no absolute definition of “intelligence,” there is no absolute definition of complexity.”
What all this means is that complexity exists in the mind of the person thinking about it. This is just like customer value and customer experience. And just like those two ideas, complexity depends on the context. Here is an example of what I mean by context:
When is a complex situation good for you?
There are two examples that come to mind:
- You are selling something that is perceived by buyers as being a commodity.
- Your prospect is happy with their status quo but you think you can add much more value because of your situation.
Both examples are very similar because the prospect does not want to buy from you or anyone else. They are happy to continue doing what they always did. If you think this is unusual, you are greatly mistaken. In 2015, according to SBI, 58% of a typical B2B sales pipeline ended in “no decision.”
The results of a recent survey conducted by Blumberg Advisory Group and Giuntini and Company indicate that only 30% of companies have achieved service contract attachment rates of 50% or more. And 16.7% have achieved attachment rates of 70% or better. I know that mission critical equipment in high-risk businesses have a high probably of achieving greater that a 60% contract capture rate. Examples are medical imaging systems and networks handling high volume retail or financial transactions. So, in most cases where a customer does not buy your contract offering, the customer is content to call you for help and pay on a time and material basis. This is when complexity can become your friend.
If we assume that most business buyers are rational, then the reason they do not buy from you or someone else is that no one offered a good enough value proposition. That means that the benefits received do not exceed all the costs involved in the purchase in a way to make the purchase worthwhile. I believe it is also safe to assume that all businesses have a degree of complexity that gets tougher to deal with every year, Work forces change, regulations change, employee skills change, and interests change. Therefore, you should take the opportunity to spend time with your customer and not only observe how your product is used but what is impacted if it fails or is out of service for an extended time.
Some customers have multiple pieces of equipment that can do the same job but they must first document the fact that the alternate equipment will produce the same results as the original one. In some manufacturing plants, they maintain a large amount of work-in-process inventory to cover equipment failures or material problems. Once they stock is consumed, they may have to shut down their production line and in that case, it is your job to find out how much the inventory costs and how much it costs in both lost production and stress for your customer. (As you know, pressure flows down hill.)
If you or a team spend the necessary time with your customers, you are likely to uncover opportunities to make a complex situation simpler or less expensive. This means you will be creating customer value at a relative low cost because the service contract is much less expensive than the equipment cost. Your customer wins because she gets better support and can reduce current in-house costs and your company wins because you sell another contract, improve another relationship, and create a happier customer.