If this section is beginning to sound repetitive, that is good. The repetition of the phrase will help you to commit it to memory. By now, you are probably saying to yourself, “If companies have these organizational characteristics, then they have these goals. If those goals match up to my unique strengths, then I want to contact them. When I mention their goals, they should show interest.” You have got it.
Note Your list of market segments and organizational characteristics can vary and might be quite long, depending on your industry. Again, use your unique strengths and strongest features to determine the characteristics of the market segments that produce the customers’ goals that you should focus in on.
How Your Contact’s Position Affects His or Her Goals
The position of the person who is your contact at a company further narrows the goals he or she wants to achieve. The roles and responsibilities of a position determine individual goals. The director of purchasing has different goals (and sometimes conflicting ones) from those of the vice president of operations or the engineering manager. The head of finance has different goals from those of the director of maintenance or human resources or vice president of sales.
In addition, your contacts’ positions also determine how their performance is measured (which helps determines their goals). For example, if a vice president of operations receives his performance review (or bonus) based on reducing downtime by 10 percent, that will be his goal.
Note If you can’t through questioning uncover the customer’s goals or the person isn’t sure what you mean, ask how his or her performance is measured.
The following examples demonstrate how people’s positions, combined with the characteristics of their organizations, further predict their goals:
Is a vice president of a national sales force interested in sharing customer purchasing information better?
Is the vice president of finance for a credit card company interested in improving cash flow?
Is the director of manufacturing interested in improving on-time deliveries?
You bet they are! Your sales go up as your ability to understand customers’ goals improves. Discussions about goals provide a great starting place for your sales calls. Customers appreciate that you are focusing on their destinations (goals), not yours (products).
Note In sales situations involving more than one decision maker in various positions, divide your written proposal into areas of interest sections for quick referencing. These sections reflect their different areas of expertise and their separate goals. You might need to make different types of presentations within the same organization depending on the positions of those in your audiences.
How Customers Assign Value to Their Goals
You help customers to figure out their goals. Next, you want to help customers calculate the dollar value they receive from achieving these goals. The computing tools you use in this endeavor are Systems of Evaluation (SOEs). You find out their numerical details in MP 2: Measure Potential. As you will see, more sales are won or lost at the SOE level than at the product level.
Note SOEs or often referred to as key performance indicators (KPIs). However, SOEs focus more on calculating measurable value than do KPIs, henceforth their difference.
Example
A customer wants to purchase a new piece of manufacturing equipment to improve reliability (goal). If the salesperson of the product with the best-documented performance persuades the customer to use the SOE of mean time between failures to calculate reliability, he will win the sale.
Yet, if the salesperson of the product with the best predictive diagnostics convinces the customer to use the SOE of warning time before failures occur to calculate reliability, she will win the sale. The key lies in which SOE produces the most measurable value in dollars.
The number one requirement of SOEs is that they must accurately reflect the attainment of customers’ goals. For examples, see Exhibit 3-2.
Customers’ Goals
Systems of Evaluation to Assign Value
Numerical Details Examined in MP 2: Measure Potential
Minimize initial cash outlay
Initial purchase prices
Dollar differences between competitors’ sell prices
Reduce life-cycle costs
Total cost of ownership
Dollar amounts of operating, maintenance, and repair costs
Increase reliability
Number of hours lost to downtime
Number of annual downtime hours and the cost per hour
Exhibit 3-2: SOEs must reflect the attainment of customers’ goals.
Note Besides knowing their goals, you can often determine which SOEs customers use to calculate value by reviewing their Web sites or sales literature. The SOEs they use to sell value to their customers are the same ones they will use to measure value. For example, a computer manufacturer stresses reliability and an SOE such as “lowest defect rate per million parts” to their customers. If you show how your products improve reliability via the same SOE that the company uses, it will respond positively. Your sales approach becomes a unique strength when you help customers to identify valid SOEs that competitors have no experience with.
Systems of evaluations have two tremendous benefits that you use to outvalue the competition and earn compensation for doing so. First, they provide customers with the means to convert perceived value into measurable value. Each SOE adds a measurable benefit row and dollar amount in Column 2. If you have four SOEs, you have four rows of dollar amounts that add to your total measurable benefits. Each additional SOE helps to offset the actual and perceived dollar value of the four Column 1 items.
Second, you use SOEs that favor your unique strengths to dominate a marketplace. While either benefit is acceptable, having both is overpowering as illustrated by the following real-life example.
Example
Ray Kroc and McDonald’s made billions selling what many considered to be the ultimate commodity, hamburgers. Kroc used SOEs to make the perceived value of customers’ goals such as good taste, consistency, high food quality, and cleanliness of facilities all measurable. Case in point: McDonald’s measured taste and consistency by using identical ingredients, weights, standardized cooking methods, and uniform packaging. You knew McDonald’s made its hamburgers measurably more consistent than did mom-and-pop burger joints. No surprises as to what a hamburger looked and tasted like at McDonald’s.
Kroc used these SOEs to turn a so-called commodity into a product with unique strengths. He dominated the marketplace by establishing SOEs that favored McDonald’s unique strengths. He highlighted the unique point-by-point checklists McDonald’s used to ensure cleanliness as a unique strength of the company’s.
He forced other burger joints and fast-food restaurants to compete on terms that matched up to his unique strengths. No surprise who won. The competition’s only immediate defense was lowering its prices. This tactic probably explains why most independent hamburger joints went out of business. You cannot continue to use lower prices as a marketing tool without eventually losing money and diminishing quality.
Yet, systems of evaluation vary sharply in how customers calculate value. They include methods stressing lowest prices to ones emphasizing highest returns on investments. Exhibit 3-3 shows the different systems of evaluation customers use to calculate the value of diamonds.
Exhibit 3-3: SOEs calculate value differently.
As the McDonald’s example demonstrates, SOEs put either you or competitors at advantages or disadvantages depending on whose unique strengths best match up to them. When customers use SOEs that bind their goals to your unique strengths, you outvalue competitors to win sales. You dominate the marketplace. The opposite is also true, which again reinforces the need for you to know which SOEs favor whose unique strengths.
How to Calculate the Value of SOEs
To know the customers’ SOEs is one thing, to calculate their value in dollars is another. Your goal is to provide the formulas to use for the calculations and let customers plug in their numbers. If they don’t know these plug-in numbers find out who does, or as an industry expert, use industry averages (if acceptable to the customer). Exhibit 3-4 illustrates this concept.
Systems of Evaluation
Typical Customer Calculations and Formulas Used to Measure Value (in Dollar Ramifications)
Typical Unique Strengths They Favor
Return on investment (ROI)
Net profit divided by invested capital
Highest performance track record
Payback
Total savings divided by total investment
Quickest recoup of initial investment
Initial costs
Total purchase price
Lowest prices
Life-cycle costs (costs of ownership)
Total purchase price plus add in all lifetime operating costs (operating, training, parts, maintenance, repairs, utility, upgrading, etc.)
Lowest product-life operating costs
On-time delivery percentage
The percent of missed deliveries multiplied by the cost for a missed delivery (return costs, lost or delayed revenues, penalty costs for missed deadlines, etc.)
Computerized scheduling
Number of distribution centers
The percent of missed deliveries multiplied by the cost for a missed delivery (return costs, lost revenues, penalty costs for missed deadlines, interrupted production costs, etc.)
Worldwide parts depots
Percent of in-stock merchandise
The percent of unfulfilled orders multiplied by the cost for a lost order (average order size, lost revenue, interest charges, costs of inventory, etc.)
Highest order fulfillment rate
Costs of changes (switching out suppliers or products)
Total costs in new training, parts inventory, equipment, etc.