Executing Value-Added Service Strategy Tactic: Quantify Values

Remember: all benefits are claims. As a result, benefits are intangible and sometimes difficult to grasp. When selling products or services, you use the features as a springboard in translating the benefits, and then back them up with proof, data, and sales aids. In presenting value-added benefits the benefit is even more intangible. It's 100 percent conceptual! The customer is usually not seeking it, or paying for it, and may not even comprehend it. In fact, there are usually a number of resources (services) that produce the value-added benefit. Because of this, it's essential to make the value-added benefit as concrete and tangible as possible, so you can present it effectively and the decision maker can both understand and appreciate it.

In quantifying value-added benefits, there are a few simple guidelines to remember:
Not every value-added benefit can be quantified. Many value-added benefits, such as relationship, trust, "making someone look good," cannot be measured. However, keep in mind that most value-added benefits can be quantified with creativity and number crunching. Also, while all value-added benefits should be presented and reinforced, it's important to recognize that the ones that are quantified will be more visible and remembered longer. As a result, you will generate long-term sales and enhance relationships.

When quantifying the value, start with the value of the benefit, and if you cannot measure it in specific terms, try to compute the cost of the service that provides the value-added benefit. For example, your company provides its customers with a safety training program (value-added service) and, while 200 of the account's plant personnel have completed the course, there's no way of measuring how much this has contributed to safety or a lower accident rate. However, with research, you can determine that a course like this would cost $500 if the account purchased it and can therefore value the benefit at $10,000 ($500 x 200 courses). When quantifying, try to measure in bottom-line dollars: profit increases, reduced overhead, increased productivity, and so on. While other measures such as percentages, numbers, days, tons, feet, are specific and measurable, dollars are more impressive, dramatic, and memorable. For example, it's more effective to say, "If you follow my inventory suggestion, you'll be able to generate a $20,000 annual return on the space saved," as compared to the less-effective statement, "You'll be able to find a more productive use for the 3,000 square feet saved by the inventory reduction."

Often a number of value-added services or benefits can be linked to make a more sizable benefit. This is desirable to keep in mind when quantifying the total value-added contribution. Measures values piecemeal, but link them to increase the total amount of the benefits accruing to the customer.

Finally, it's important to project the values over a longer period. Obviously, if a value-added benefit has a life cycle of six months or is a one-time enhancement, you are limited. However, if you provide an ongoing benefit to the customer, you have earned the right to value it over a longer period of time. Many salespeople use one to three years as a projection, but in the final analysis the projection must be (1) dictated by common sense, and (2) explained to the customer when you show him your projections. For example, it's more effective to say, "We estimated that our just-in-time delivery will save you $11,000 a year," rather than to say, -will save you $300 each delivery."

In summary, follow the steps below to quantify value-added benefits:
1. Recognize that all value-added benefits provide value to the customer, and that most values can be quantified.
2. When quantifying the value, the ideal method is to measure the benefit; but if this cannot be done, a fallback method is to quantify the cost of providing the service (what it costs your company to provide this benefit).
3. To quantify, use IMPACT to identify the interacting resources and then quantify the individual elements.
4. If more than one value-added benefit, service, or resource is involved, link them by adding or multiplying, as needed.
5. To maximize the value, project the benefits over the long term.

To capitalize on these value-added services, the values themselves need to be very visible to the customer. "Visible" is not a strong enough word, perhaps, since many customers are smart enough to recognize the benefits on occasion. While being visible is part of the scheme, the benefits need to be memorable, dramatic, concrete, specific, and validated. After all, when translating value-added services into benefits, you are selling a concept. Concept-selling demands powerful benefits presented in a different way that position you ahead of, and apart from, competitive companies. That's what differentiation is all about.

Source: Rethinking the Sales Force by Neil Rackham