Each Workshop we conducted and Value Matrix we created enabled us to collect data from our baseline group that could be analyzed for similarities, consistencies, and potential trends. We collected 3,127 Why Buy statements or lines in all of the Value Matrix created. We categorized the participant's solutions into the following:
Of the 3,127 line items, 67.3% of the lines were cost reductions, 19.7% were revenue increases and the 13% remaining were cost avoidances.
The "Reduce a Cost" category consisted of collecting solution based information that helped companies lower their cost in the following categories:
ROI4Sales did not create the categories as part of the exercise. In each of the workshops, the categories were created by the participants. There were 2104 cost reduction lines and all but 9.4% fell into one of the above categories. The human capital sub-category led with 67.5%. What this means is that of the over 2100 lines of cost reductions in the Value Matrix, over 58% are labor cost issues and consequently resolutions offered by our participants. Lower operating cost made up 9.9% followed by IT infrastructure at 8.3% of the cost reductions. Inventory control and training together made up 4.6% of the total.
The "Avoid a Cost" category consisted of collecting solution based information that helped companies avoid costs in seven primary categories:
There were 406 cost avoidance line items in the Value Matrix. Twenty-two and one- half percent (22.5%) were focused on avoiding fines and penalties from government regulatory agencies dealing with compliance. Although this seems like a high percentage of the total, when we interviewed our participant's customers, fines and penalties ranked very low in the overall scheme of things. Avoiding the need to hire additional personnel came in at 20.7% and avoiding the cost to replace lost customers came in at 13.5%.
Doing more with the current staff seemed to be a recurring theme in our workshops and interviews. This is more obvious when looking at such high numbers on reducing human capital costs. If you add up the avoid hiring numbers with the human capital cost reductions, and the cost avoided to replace a lost customer, combined they make up 56.7% of all the line items that dealt with cost avoidance.
The final category, Revenue Increases garnered 2104 line items in three primary sub-categories:
Additional sales included not only selling more of your existing products to your current customer base in your existing market, but also increasing your market share beyond your current situation. Increasing market share included introducing new products to the market, marketing your existing products better, and being able to up-sell and cross-sell more products per customer (increase products sold per customer). Recapturing lost revenue dealt primarily with reducing customer attrition. If a company loses a dozen high value customers a year there is a noticeable and measurable loss in revenue. By reducing the attrition rate, a portion of that revenue is returned to the organization. Most of our participants felt this was an important factor companies are facing.
However, additional sales made up 79.1% of the total revenue increase category and recapturing lost revenue only 11.2%. The majority of the remaining was made up in the ability to value justify your products and sell them for more.
To be successful selling using value you must understand the need to present a credible and compelling Business Case Analysis. This analysis must include at the very least these seven components:
Above is an example of the minimum amount of information required to assess the value you are capable of delivering. The top portion displays investment and impact information along with metrics for ROI, NPV, IRR and Payback Period. The bottom portion categorizes the cost and revenue impacts over a three year period by current and on-going cost vs. estimated value delivered. It is important to be able to show your prospect the cost and impact over an extended period of time.
This next section of your Business Case Analysis is used to help your prospect realize there is a cost to status quo and decision delay. Notice we include not only the three-year cost but break it down to a daily cost. We also include the investment per day to simply ask this question: "Would you spend $12,626 per day to get $19,506 in return?" The difference between these two figures is the cost per day of status quo. If you multiply that daily cost of status quo by the number of days a decision is going to take, (14 in this case) then you now have the cost of delay. Your Business Case Analysis should include these figures to help reduce the number of no decisions by your financial services prospect.
Cash Flow Analysis is a critical part of your success. This table and chart can be used to discuss the investment impact over a three-year period. I believe it is important to show cumulative return on the graph so your prospect can see the impact year by year and the expected return as it occurs. The yellow line is the most accurate depiction of their breakeven point.
In each of our Business Case Analyses we include a graphical breakdown by category. The seven categories defined on the first page are now shown graphically in three-year charts. Each chart displays a line for status quo over a three-year period, and the estimated value your products and services can deliver over the same period. The final chart captures consolidated costs and compares them over a three-year period too.
This Decision Impact document is a piece of the Business Case Analysis we often see missing. We include a copy of the Stakeholder Analysis for each executive, group, and influencer in a sale. Financial services companies make decisions like most major corporations…by committee. It is crucial to your success that you are able to identify individuals and groups, their issues, pains and goals, and create a textual response to how you are going to deliver value. The Decision Impact document will help you create the necessary output to include in your Business Case Analysis.
The final piece of your Business Case Analysis should include a Total Cost of Ownership (TCO) model like the one above. We break the TCO into three primary areas: Acquisition Cost, Deployment Cost, and Lifecycle Management. Each category includes customized detail lines that can capture and assess the on-going, three-year cost of status quo or even versus a competitor. TCO will enhance your value as a vendor, and give your proposals credibility where other vendors will have difficulty.
Among all of the business software applications necessary for business operations, ERP is undoubtedly one of the most important. Making the wrong selection can have a disastrous impact on your accounting, manufacturing, and supply chain. With so much at stake, it is crucial to make a well-informed decision. more
Did you know that, according to Forbes, 86 percent of customers will pay more for a better customer experience? Customer satisfaction is always a worthy business pursuit, but to identify customer preferences and exceed expectations, you must keep pace with innovations in the technology your customers are using. more
Deciding which phone system is right for your business can be difficult. With our VoIP technology blueprint, discover the top 15 questions you should ask VoIP vendors before you make a buying decision. more