And How to Use Them

One things is for sure, if you can’t sell your product or service, you don’t have a business.  As the old saying goes “business is what, if you don’t have, you go out of!”   Michael Masterson said in 'Ready, Fire Aim’ your primary concern has to be making sales.  Even if you have a good product or service – one that is in demand – you can’t force people to buy from you.

Sales occur when you have a transaction.  Marketing is getting them to that point.

Michael Masterson ties marketing to cash flow, and hence your bank balance, very well.
“The other functions are important, but without marketing you will not have sales and without sales you will not have cash flow and without cash flow you will not be able to pay for all the other functions (except by going into debt, which is simply borrowing against the cash flow of the future).”

You must continuously offer them new and better products. You must always make the value proposition of your sales seem good to them.

Here are 5 Tactics to get into the minds of your customers!

Sell Time Savings Instead of Money Savings

Emphasise how valuable your product or service is in terms of time and not just money.

We all know price is important, and your prospect won’t buy if they don’t see value in what you are offering.  Lowering the price can change the prospects perception of your product; it becomes seen as a cheap, a commodity. 

Beware the dangers of discounting, about which I have often posted.

In many cases, what sells is time.  We all want more of it, to make the most of it, or to minimise wasting it.  When you market a product as an experience, or a better way of doing something, a customer will be far more likely to spend some extra cash.

Think of the benefit your product provides the customer:

  • What kind of experience, solution, or improvement are you offering?
  • What differentiates your experience, solution, or improvement from what your competitor is offering?

Make People feel they are Part of a Group

We all like to feel part of a group, people with similar attitudes, beliefs and actions.  Research suggests how we connect and relate to others and the world around us affects our buying decisions.

We act in accordance with the groups we commonly interact with like our family, friends, and business associates.  They can make us feel part, or not part, of something.  And to be part of that “something”, people buy accordingly.

You may recall how Apple pushed the concept of being “cool” to win over a younger market segment, and suggested IBM products old and stuffy. 

Think about how you can use this:

  • What reference group is your target customer a part of?  How do they dress, where do they shop, what do they buy, even how do they talk?
  • Is your product or service part of a comparative group – apple vs IBM?  If so, how do you make your customer feel better by being partof your ‘tribe and not your competitor’s?

Utilise the “Foot in the Door” Technique

You may have noticed a lot of offers like this, but not necessarily understood why the tactic being used works.

Studies have found that people are much more likely to buy again once they’ve first made a small purchase.  Once you have got a small “Yes” from the customer you are more likely to get a larger “Yes” the next time.  That’s why you see the “Follow-Up” offers.

It is also why it makes sense to look after your customers, provide great service, and keep them, rather than continually churning through customers, looking for the next customer at the expense of the current customer.

See How to Increase Sales from Existing Customers.

Offer something small that your customer will find valuable, such as a free (or inexpensive) ebook, guide, free samples, or a trial membership.  The customer will feel like you’ve already given them something of value, so they’re more likely to reciprocate in the future with larger requests.

I have read that you have to be careful not to offer the second, larger request too soon, though, as the second offer can backfire if made without delay.  Having said that, I do note many offer an upgrade before you leave.

Master the Decoy Technique

Decoy marketing is when you highlight the offer you’d like the customer to purchase by offering other options look inferior in comparison.

The decoy technique works because consumer decisions are swayed by compromise on the options available. Consumers feel they’re getting the best deal when they have to rationalise against comparable options. This technique is employed almost everywhere you look, from food to electronics.

Here is the concept:

There are two wines for sale at dinner: $12 a bottle or $18 a bottle.

Which one do you order?

Now, imagine that there are three, and the third is $44.

Are you more likely to buy the $18 bottle now?  Most people are.

The third bottle will undoubtedly be a better wine than Bottle1 or 2.  However, unless someone is looking to really impress they’ll feel the Bottle 3 is excessive and will go for Bottle 2. If only the cheapest and most expensive options are presented, most consumers will choose the cheapest.

If someone does go for the most expensive decoy option, think of how you will provide added value to justify their decision.

Competition is almost always a good thing, and marketers can create it... or highlight it.  To persuade people, change their frame of mind by giving them a different anchor point. And they’ll decide in your favour.

Emphasise the product or service option you would like customers to purchase by offering similar but less desirable options next to it.

Generate Positive Emotions Intentionally

Offering the same product or service in a positive light is a powerful tool. Studies have found that you are more confident in your buying decisions if you don’t perceive any drawbacks.

Likewise, if you have to think too hard about how something could benefit you, there’s much more cognitive dissonance when making a decision to buy or not.  Essentially, the path of least resistance makes us happy.

A basic example would be giving two people $50.  Participant 1 gets $20, but you give them an extra $30 for a total of $50. Participant 2 starts with $70 but you take $20 away.

Guess which participant would be happier?

When there is certainty that we have something to gain, the decision is made for us.  We won’t gamble with the outcome.  We see this tactic employed everywhere from the “buy 1, get 1 free” promos in supermarkets or 50%-off sales in clothing stores.

Similarly, if a proposition is framed in a negative light, we will risk certainty to gamble and hope for better odds.  An example you may have seen is when an insurance company tries to get you to switch to their plan by framing it as wasting dollars with the other company.

Present your offer as a no-brainer option that will positively influence your customer.

Where are YOU?

Which of these tips will work best with your product or service?  Are you consciously using such tactics in your marketing strategy?   Let me know.
(Note:  I have drawn in part on a blog at https://mirasee.com/blog for these concepts.)

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients, or the sales they need at the margins they need.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners use the right tactics to plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here. 

 

© Copyright 2018 Adam Gordon, The Profits Leak Detective  Except for those bits by Mirasee.

Four 'Must Haves' to Succeed

I’ve been looking at the key attributes of a profitable, growing and sustainable business following a challenge from a tradie who had bought a business and suddenly found himself a Managing Director.  He was overwhelmed, and not sure where to start. 
What advice could I give him?

I took the view that he needed to understand the key attributes of a good business as a whole, rather than just have important individual skills.  The latter will help you run a “self-employment” company, but not necessarily build a business.

The first two key “must have” attributes I looked at in my previous post.  They are:

•    A Sound Base – direction and capitalization, and
•    Customer Acquisition

Now to discuss the final two “Must Haves”.

3. Making Sound Decisions

“The road to success is paved by good information.” You will make better decisions if you are informed on a regular basis by the facts regarding your business finances and a few other key indicators that measure the health of your business.

All the good businesses I have seen over a lifetime have a good (i.e. accessible and accurate) Management Information System that gives them the information they need to make sound decisions.

These Management Information Systems report on a regular basis. Their owners have identified a limited number of Key Performance Indicators (KPIs) that are critical to their business.  Information is provided in an easy to understand basis; often graphical because many people interpret information visually.

Such businesses take one further step, one that is easy to bypass, but that makes all the difference to turning data into information on which to make decisions.

They ask “Why is it so?” and report on it.  A typical couple of KPIs for trade-based businesses may be the number of quotes submitted and their Success Rate. They are important lead indicators of future cash flow. If there are changes in either it is important to know “why” in order to make the right decisions.

An attribute of a good business is that it makes good decisions.  It does so because it has ready and regular access to the right KPIs.

4. Continuous Improvement

Good businesses keep getting better.  They do so because they are continually looking to benchmark themselves against other businesses, not only in their industry but also against those who perform well in other industries.

Guided, if not goaded by what they find, they work on all their key processes, only one or two at a time if necessary, to ensure they can deliver faster, cheaper, easier to their customers.  Improvement is a constant series of small steps that compound over the year to make a real difference to their operations.

Continuous improvement is practised, by definition, continuously. It’s a good discipline, but sometimes it isn’t enough. When might you need something different, what Alastair Drysdale (www.akenhurst.com) calls a discontinuous improvement?

Discontinuous improvement can be dramatic, but it can be safer than continuous. In times of rapid change, continuously improving something which the market no longer values may be the worst possible thing to do.  It doesn’t have to involve a leap in the dark, and like continuous improvement need not be expensive to undertake.

It is almost certain there is already a profit leak in your business if you find an opportunity for a discontinuous improvement.

If my tradie works on developing the attributes of a sound base (direction and capitalisation), prioritises acquiring customers, sets up and uses a good Management Information System to make sound decisions and practises continuous improvement he will not be overwhelmed by his new business. He will build a good business.

What about you?

How do your “Must Haves” Rate?

There’s nothing like an outside view.  So often we are too close to what we have written to properly assess our response.  The outside view sees what we don't see.

If you would like to discuss just where you are, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Four 'Must Haves' to Succeed

     He had a glum look on his face. We had just finished a workshop on marketing
and tendering to Defence and this small business participant was struggling. “It’s a lot to take in” he said. “I’m just a tradie, now I’ve bought out this business and I’m a Managing Director. It’s all a bit overwhelming. Where do I start?”

A good question indeed and it lead me to try and think through what are the key attributes of a profitable, growing and sustainable business?

People who start businesses without understanding how businesses work end up creating employment for themselves and a few others, and not a business that can create real wealth. They have been called self-employment companies. A self-employment-company is one in which the success of the business depends on how long and hard you work.

I'm not so concerned here about individual skills like leadership, the ability to delegate, accountability, the ability to develop a harmonious culture. There is no denying that these are important, but it is not the individual skill I am concerned about.

Rather it is attributes of the business as a whole.

Here are my thoughts. They are of course open to challenge and I would be interested in your comments or suggestions.

1. A Sound Base

There are two components of this; direction and capitalisation.

Direction - A good business has a clearly defined strategic direction, an overall vision goal, what they want out of the business and where they want to take it. So many small businesses drift aimlessly, caught up in the day-to-day currents of doing, but going nowhere.

A sure sign a company is not doing as well as it could is when the owner’s focus is 100% on short term goals, on what he is going to do today, and not where he is taking the business. Direction is critical but if owners and managers ignore that and focus on getting the sales in now, prioritising immediate sales over everything else, including customer service and satisfaction, then it doesn’t matter which way they go, they’re steering for no particular port.

A recent planning session with a client emphasised just how important it is to determine direction with clarity. The business has four major product groups, one of which has grown to represent about 70% of sales, a dangerous dependence.

We were examining future options for the business to reduce this danger when it became apparent that there was major constraint on the options that had not been voiced. That unvoiced constraint meant that most of the options being canvassed would not have been realised had they been pursued.

They just weren’t where the owner wanted to take the business and would have been resisted, probably unconsciously. Once that constraint had been put on the table the future direction was very clear, and greater clarity given to the options being discussed.

Good businesses have a clear business focus on what business they are in and on their target market.

Capitalisation - Undercapitalisation is a major cause of business failure. Capital is required for two types of assets; fixed assets and working capital.

Capital is required for two things:

Fixed assets – you need an office or a workshop from which to run your business. It may even be a home office, in which case it requires little capital. Depending on your business you may need equipment, at least a vehicle and office equipment, and maybe much more in operational equipment.

Working capital – to work your business, that is fund your day-to-day, week-to-week and month-to-month activities. That may have to cover wages, stock, debtors and pay creditors. Much will depend on the cycle time of your business, whether you provide credit and the terms of that provided to you.

Well capitalised businesses have the right premises, facilities and equipment to deliver sufficient value to the customers, and because they are able to deliver value they have a good customer base and good margins.

2. Customer Acquisition

Most small businesses, because they are founded on the technical skills of their owners, focus on the operational aspects of their business, doing the work.

They fail to recognise the primacy of selling; that unless you know how to win sales for your business and keep on producing sales your business will not be sustainable.

Unless you are willing to market your product, you won't succeed. Business is selling, acquiring and keeping customers.
“Of the major functions of business – product development, customer service, accounting, operations, and marketing – the one that always should be given top priority in an entrepreneurial venture is marketing.

The other functions are important, but without marketing you will not have sales and without sales you will not have cash flow and without cash flow you will not be able to pay for all the other functions (except by going into debt, which is simply borrowing against the cash flow of the future).” (Michael Masterson)

There is one other aspect of acquiring customers to think about. For all the importance of the lifetime vale of a customer, nothing lasts forever. Look at your customer list from even two years ago. What proportion are still there today?

Let me ask you three questions:
•    How many sources of new clients do you have?
•    Do a large percentage of your clients and income come from one source?
•    Have you ever implemented a strategy that got you clients at break even or better and then stopped doing it?

Good businesses have learnt the lesson – they have clear strategies to keep acquiring new customers even while looking after and treasuring their existing customers. Keep exploring new ways of acquiring customers.

My next post will look at the remaining two “Must Haves”.

How do your "Must Haves" Rate?

There’s nothing like an outside view.  So often we are too close to what we have written to properly assess our response.  The outside view sees what we don't see.

If you would like to discuss just where you are, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

And How to Improve It

We’ve been looking at the importance of presentation to your tender, quotation or proposal and what you need to master to turn it into something almost irresistible.

In Part 1 I looked at “why” presentation is so important and how it reduces risk in the Assessors’ minds, makes you look professional, and reduces the emphasis on price.

We covered the first of four aspects of a good presentation - Clear Writing.  Let’s move on to the other three; formatting, writing style, and the use of photos, charts and diagrams.

2. Formatting - Make it easier to read

Good formatting in your response can have a significant impact on your assessment score.  Formatting affects how easy a document is to read.  If it is hard to read, the mental reaction is negative, and this can affect your score.  If it is easy to read, then your communication will communicate.  Formatting is important. 

Formatting means using:

•    Sub headings to guide the scanning eye
•    Short sentences to keep the mind engaged
•    Short paragraphs to avoid impenetrable “grey walls of type”
•    Bullet points making it easier to scan – but don’t be cryptic
•    Graphics to show, not tell
•    Examples – to demonstrate or explain

If you would like to read more on this go to “How Well do you Present your Case”.

3.  Writing Style - be Persuasive

Begin each section with the relevant aspects of your value proposition for the subject and the benefits you will bring the customer.

Begin sentences with benefits (when possible):

Instead of...Moving your money now will help you avoid major losses.

Try...You can avoid major losses IF you move your money now!

Put benefits in the sub-heads so the reader will read on.

Fewer words – don’t use two words where one will do.  Most of us use too many words.  Part of that is a function of time.  Editing for brevity takes time, but brevity makes reading easier.  A few, yet perfect words.  That's what powerful writing is about.  Just the right words.  No more than necessary … but always enough to persuade.

Details and specifics, not generalities, are the foundation for credibility.  That doesn't mean overburdening the reader with so many details that his attention starts to drift.  Or that he puts down your submission and decides to read it later.  Or worse, gives up on it entirely.  It means understanding how much is really necessary … and how much is too much. 

Avoid long-winded expressions, for example, ‘due to the fact that...’ or ‘for the reason that...’ Instead, be short and sweet by using phrases such as ‘due to’, or words such as ‘ because’ or ‘since’.

Avoid vague references, for example, ‘the project is intended to...’ or ‘it seems that...’ Be definite, for example, ‘the project will’ or ‘it is’.

Linking facts with WIIFM - what’s in it for me   

  • It is not enough to just make a statement or fact about your company
  • Explain why that will benefit the client
  • Safety Engineering has offices located in all states in Australia.        So What?
  • ADD – that are located within 30 minutes from your offices which will result in reducing unproductive travel time between offices.

Avoid motherhood statements

  • The broad sweeping statement that makes you feel good!   Motherhood statements are broad generalisations that provide a high-level description of a particular situation without saying anything specific.
  • Statements which are too general, too broad or too bland to have any meaning
  • Specifics again – what evidence does such a statement provide which would justify a high score?   Assessors want to see evidence, not just fine words.

And then there is jargon!  First, we need to establish what ‘jargon’ is.

Jargon is the ‘in’ language of a profession. It is all those words used by people in a particular industry that the rest of us don’t understand.  It is a legitimate language used within a profession or industry to convey meaning to that profession or industry.

Jargon has its place – in specialised fields it is meaningful.  In less specialised fields it smacks of self-importance, and loses people who don’t understand.  It becomes gobbledygook.

4.  Photos, Charts and Diagrams

Graphics are not there to be pretty.  Show, don’t tell - Graphics can do a lot of the grunt work in getting your message across.

The point of the graphic is to enhance the text. If the graphic takes over, that's fine, but it's overdoing the required job.

Graphics are there to do some hard work!

  • Tell a story
  • Provide proof
  • Create drama

Graphics Reduce Risk – a diagram or photograph of what you are delivering will help clarify other questions the Assessors might have, help reduce the risk and increase the like factor.  “Before and after” photographs emphasise the benefits you are delivering.

Don’t forget the Captions – tell them what the graphic is.  More risk reduction.

Pictures draw attention to your story and help convey your message.

Judicious use of graphics is a sure-fire way to grab your reader’s attention. And by judicious use, I mean good quality, carefully chosen graphics with clear, explanatory captions; not a bunch of stock photos that you paste in to fill up a page.

There's one place in particular that I like to use a picture, and that’s on the front cover!  Use a picture of specific relevance to your proposal.  It tells the Assessors before they’ve read a word that you are in this game, that you have experience, and can do the job.  It puts that first tick into their mind, and they haven’t yet read a word!

Some examples include:

  • An Army tank in my client’s Paint Shed for a tender to paint new Army tanks
  • My client’s graders working a road for a road maintenance contract
  • The client's delivery van dockside for a courier tender

The perceived value that you are offering your prospective customer will ultimately determine whether your proposal is successful or not.  But compelling graphics are the hook that will grab your reader’s attention, enticing them to read the helpful caption or, even better, the entire surrounding paragraph or page.

That is exactly the reaction you want from the person evaluating your proposal.  Remember that same person may have to read many, many other proposals as well as yours, so you need to use every weapon in your arsenal to draw their attention to you, and only you.

But don’t overdo the graphics.  While judicious use of relevant graphics can add enormously to the impact of your proposal documents; don’t get carried away.  If a graphic helps to illustrate a point, show off your equipment or demonstrate a technique etc., then use it. If not, leave it out.  Simple.

In Summary

Support your expertise with a well-presented and well-written submission.  Put ticks in the Assessors mind from the cover of your response, and on through your submission.

Could your Tender Presentation Responses be Improved?

There’s nothing like an outside view.  So often we are too close to what we have written to properly assess our response.  The outside view sees what we don't see.

I have an upcoming online course, TenderWins, a 4-week intensive course designed to help you win more tenders, without the stress and time issues that currently hold you back!  Presentation is a key element of the course.

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it.  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

And How to Improve It

You know your reaction when you get a badly written document – your thoughts are negative from the start.

Think really hard about this one.  Show through the presentation of your tender or quotation that you are ahead of the pack.  And your words, fonts, headers and images are confident, show leadership, and inspire confidence.  Leave people feeling inspired.

Your presentation has a role to play.  It is important.  What will your proposal look like, visually that is?  And how will it read.  Does it get your message across?   Does your presentation make it easier to read?  If it is easier to read, then your communication will communicate. 

This is not about a big glossy document.  It is about the ease with which the Assessors can read your response.  If it is difficult for the Assessors to read, they are going to have an increasingly negative mind-set as they review your response.  Put yourself in the Assessor’s shoes.  Make it easy for them.

There is a further factor. Poorly presented tender responses and bids suggest you lack professionalism, raising doubts in the assessor’s minds.  A good presentation will make you look so much more professional

Good presentations reduce the risk in the Assessors mind.  It makes them more comfortable with the response and the ability of the company.

The right information, presented properly:

  • Removes doubts
  • Removes risks
  • Downgrades pricing

Are there other things you might need to do, other than wining and dining the prospect?   Can you make it easier for them to assess what you have presented?

Now there’s a clue – What are you presenting?

Content & presentation belong together

  • Content: obviously very important – your content tells them what they need to know about what makes you the only logical choice
  • Presentation: changes emphasis, determines what is read & when, highlights key messages
  • Balance: content and presentation of key messages and technical detail must be considered together

How content is presented can influence key take-away messages

  • Grab their Attention!.  Your proposal needs to capture the prospect's attention
  • Visual presentation is important, as is how will it read.

If the way your industry does things is a simple “price, quality, delivery” quotation here is your chance to make yourself different, and stand out. 

Four Aspects of a Good Presentation

1.    Clear writing
2.    Formatting
3.    Writing style
4.    Photos, charts and diagrams

1.    Clear writing

The quality of writing makes a difference. Poor writing may mean that you don’t get your key messages across.

Not everyone can write well.  That is nothing to be ashamed of; we all have different skills.  Don’t be afraid to bring in a good writer if that will make a difference.  I’ve seen in large organisations people whose sole job was to write bids and proposals.  In fact, that ended up as my responsibility in my aerospace industry days, along with the responsibility to negotiate the contracts.

You may know what your mean, but does the reader?  Being able to express yourself clearly and concisely on paper is important.  Writing well is the skill of expressing worthy ideas concisely and clearly on paper

Good writing skills make a real difference.  Tenders should be written in a way that is straight forward, professional and positive.   Present your case in an engaging and compelling way.  And write with the Assessors in mind.

Writing skills are critical in tender writing; contracts are often lost on the basis of poor writing that is unclear, illogical and fails to get across the key messages of the offer being made. 

Keep your writing — not your ideas — simple.  You're often trying to get across complex ideas to your reader.  Don't make his life more difficult by using complex language.

I’ve been involved the judging of our regional business excellence awards and have been struck, yet again, by the way poor skills in writing and presenting their case considerably reduce business’s chances of winning.  Some wonderful businesses have entered with a good story to tell.  But they don’t tell it well.  And they make reading their entries difficult for the judges. 

You might say, “we aren’t entering awards so this is of little interest to me.”  But it should be.

Why, because the same skills needed to write a winning entry are those you need to write winning sales letters, quotations, proposals and tenders.  They are the same skills you need to write content for your website, for your advertisements, for….

More than ever, today small business owners have to write.  And the words you use, and the way you use them, can either attract or repel customers or, for that matter, get your staff offside. 

I’m not concerned about writing grammatically correct sentences, although that does help.  What I am concerned about is writing in a way that communicates, that has an impact, that makes your business stand out, that builds relationships with your customers and your staff.  You need to write in a way that is engaging if you want people to read it.

If they don’t read your advertisement, or your webpage, or your proposal doesn’t capture their attention, customers will be going to your competitor, not you.

Tight copy uses the least number of words to get your idea across. It’s easy to understand.  It’s conversational and natural sounding.  And, it doesn’t contain glitches that make your reader stop, scratch his head, and wonder what you meant.

In short, tight copy is readable.  Readability isn’t the only quality of tight writing, but it’s one of the most crucial.  If your writing isn’t easy to read, it gets tossed. Sorry!

Next week I’ll go onto explore the next three aspects of a Good Presentation

•    Formatting
•    Writing style
•    Photos, charts and diagrams

And how, together, they help turn your tender, quotation or proposal into something almost irresistible.

Could your Tender Presentation Responses be Improved?

There’s nothing like an outside view.  So often we are too close to what we have written to properly assess our response.  The outside view sees what we don't see.

I have an upcoming online course you can do at your own pace - TenderWins, a 4-week intensive course designed to help you win more tenders, without the stress and time issues that currently hold you back!  Presentation is a key element of the course.

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

How do you provide “Value for Money”?

One of the worst mistakes you can make is to assume that everybody makes buying decisions based solely on price.  That’s a quotation from Dan Kennedy a contribution from whom I posted recently.

Here’s another quote, suggesting this mistake has been around for quite some time, "There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man's lawful prey." (John Ruskin -1863)

If there was one thing that really annoyed me in all my years consulting it was winning a job, whether it was a straight client quotation, or a government tender, because I had the lowest price, as if price was the main differentiator that set me apart from my competitors.

Do you have a clear idea about what makes up your customer’s value equation?  Value is rarely only price, it is about what your product/service will do for them (the benefits); their value equation where Value = Benefits - Price. 

I discussed the Value Equation recently in Is “Perceived Value” in the Value Equation Changing?  That discussion focused on the buying public.  In this post I’ll look at more formal quotations, and in particular tendering to governments, where everything is much more ridgid, and the need for transparency imperative.

If you are bidding on a Government tender, the ‘benefits’ of the Value Equation are different - other factors come into play.

“One of the most common misconceptions among service firms is that the best way to beat the competition is to lower your price, so that you are the low bidder.  That may work in consumer retailing, where every store is selling the same items.  But for professional services, being the low-priced provider is a bad move.  Many prospects do not buy on price ... and in fact, if your price is low, their perception is that you must not be very good at what you do.”  (Bob Bly)

When quoting or tendering, whether you are successful comes down to the “Evaluation Process”, which in Australia seeks to determine the best “Value for Money” (VFM). 

The purpose of an evaluation process in sourcing is to identify which bid offers the best value for money i.e. the most economically advantageous tender or proposal.  The criteria that are specified in the invitation to tender document are the basis for the buying decision.

These will vary from jurisdiction to jurisdiction.  They all look different and criteria differs depending on each customer’s needs. The scoring can range from simple percentage splits to complex weighting systems. But the basic principles of tender evaluation criteria remain the same.

Most jurisdictions will have some form of Procurement Principles which must be met in calling the tender, and the assessment of the responses.  These will typically cover such issues as:

•    Value for Money - not just price although price has become more important.  It is a weighting of all the Assessment Criteria, including price.
•    Open & Effective Competition – designed to get the best value for the Government.
•    Enhancing local business – can be regarded as a key Assessment Criteria
•    Environmental protection – speaks for itself
•    Ethical behaviour and fair dealing – the awarding of contracts should be done by due process

How is Value for Money Determined?

You will understand that before your response is assessed you must pass the first checkpoint – Compliance!  Do you comply with the tender compliance requirements?

I’m sure you understand why is this the first checkpoint.  If you were busy, and everyone is busy, even public servants, and had a pile of 15 tenders in front of you, each 100 plus pages, you would want to cull those that don’t meet the requirements.

At this stage there is likely to be only one person on compliance gate.  Not compliant with the Conditions of Tender – reject; not compliant with the Scope of Work/Technical Requirements – out; not compliant with the Assessment Criteria – sorry.

More on this in another post.

Step Two – separate out the pricing.  Now I know price can be the dominant factor at times, but most of the time it is but one factor.  In fact, depending on the nature of the requirement and risk involved, the weighting placed on price will vary.  Price is usually a criterion, not the criteria.

It’s no surprise that the second step of many evaluations involves the removal of pricing from the tender document.  Typically, it is provided to a separate team or pricing analyst, whose feedback is given outside of the primary assessment (step three). Often the primary assessors never see it.

Now this will vary between jurisdictions, but many operate on the basis they do not want impressions of the price offered to colour the assessment of experience, approach, capacity and capability.  The pricing section will be pulled from the tender to be analysed separately and balanced with the evaluation of the Assessment team.

Note that there are a number of ways Price can be scored:

•    One formula for assessing the values derived is Price Score = Lowest Tender Price X 100/Tender Price
•    Another uses the Average tender Price instead of the Lowest Price

Price will have a weighting in the overall Assessment.

Now the Assessment Panel can get down to business.

This is your opportunity to convince the Assessors that your proposal is the only logical choice, that you are uniquely placed to help the agency meet its objectives. 

The Assessors review the responses to the various criteria that have been set down and score them.  That may be a numerical score. Each section may also be weighted.  It takes time.

It is also the area where so many businesses fall down.  They fall down because of an almost unconscious reaction to the requirements of that gate through which they have been drafted – compliance.

Perhaps you should ask yourself why they are asking these questions.  Could it be because they have doubts about your ability to deliver the outcome they are seeking, and of the various other tenderers?  Doubts mean risk.  Could it be because they, the Assessment team, don’t want to end up with egg on their face because they made a poor decision?  It certainly has happened more than once. 

To be successful in winning government business you must deliver the best value for money (VFM) solution.  A VFM solution does not simply mean the lowest price. A VFM solution will balance the non-financial score against the cost, where the non-financial score refers to the score received against the evaluation criteria.

The VFM index is calculated by dividing the non-financial score by the cost. The higher the VFM index the more VFM is being offered to government.  The greater your non-financial score the greater scope there is for a higher priced bid to be considered as VFM.

Of course, you must be in the “price range”.

Let’s look at two examples of Evaluation Criteria:

Victorian Government

Evaluation criteria commonly used to score Victorian Government quotes and tenders fall under four categories as listed below:

  • professional competence: your compliance with specifications, capability, past performance and current work, quality systems, customer service and innovation
  • commercial capability: your financial viability, risk assessment, insurance, compliance with the proposed contract and conflict of interest
  • environmental commitments: your environmental approach, policy and management systems
  • financial competence: your costings, does it all add up?

Evaluation scoring - Evaluation scoring is usually measured on a scale of 0 to 10 as follows:

0       Not acceptable, has not met any reasonable criteria
1-4    Has only met some minimum requirements and may not be acceptable
1       Acceptable
6-9    Acceptable, has met all requirements and exceeded some
10     Acceptable, has well exceeded all requirements

You can read more about it here.

http://www.business.vic.gov.au/operating-a-business/developing-your-business/government-tenders/evaluation-process

Now for the Northern Territory criteria:

•    Past Performance
•    Local Development and Value adding (Now minimum 30% weighting)
•    Timeliness
•    Capacity
•    Price (mandated)

Individual Agencies have the ability to define their requirements against these criteria.

Other jurisdictions will have similar criteria they use to determine “Value for Money”. 

Weighting

This is the other factor you have to think about.  Not surprisingly the weighting given to each of these criteria, from whatever the jurisdiction, can vary. 

In generating the final non-financial score, the raw score given out of 10 is multiplied by the weighting to give a final score against evaluation criteria. All scores are added to give the final non-financial score.

The Victorian evaluation criteria are generally given weightings between 1 (lowest) and 5 (highest). Highest weightings are generally given to 'compliance with specifications', 'capability' and 'past performance and current work'.

Compliance criteria do not generally attract evaluation weightings. They are evaluated against a ‘yes or no’ scale, with an accompanying risk statement e.g. 'company is financially viable with a moderate risk'.

Let’s look at another example – this is a real one which I worked:

    Assessment Criteria                         Weighting %
Past Performance                                    20%
Local Development & Value Adding           30%
Capacity                                                15%
Innovation                                               10%
Scope Specific Criteria                            15%
Price                                                     10%

Each tender assessment criterion may include sub-criteria; however percentage weightings are only published as a cumulative percentage against the tender assessment criterion.  The Agency reserves the right to apply percentage weightings to each criterion at its total discretion, having regard to requirements contained within the Minister’s Procurement Directions.

In this example, ”timeliness” has not been used.  Price is rather low.  I have seen it up to 50%.

One of the clues Weightings give is where you should apply your best effort.  In the above example, price is of little importance, but Local Development and Past Experience are 50% of the weighting.  Where would you be putting your emphasis?

What is this all about?

Remember the Value Equation; Value = Benefits – Price!  As you can see, the benefits in a government tender are rather different than those in the commercial arena, as I discussed in  Is“Perceived Value” in the Value Equation Changing? .  It is not just identifying which bid offers the best Value For Money i.e. the most economically advantageous tender or proposal, but one which offers the least risk for those returns.

Remove the risk - If you were pitching for a sale, I’m sure you would make every effort to present a solid case that removes all doubts the buyer may have, eliminates the risk in their minds, leaves the prospect with one clear choice…. you! 

The Agency is looking for the most economically advantageous tender or proposal, and one which does not come with a significant risk.

That is the benefit that provides Value for Money.

Could your Tender Responses be Improved?

There’s nothing like an outside view, a second opinion of your response to a Request for Quotation or Request for Tender.  Have you identified their Value Equation, and responded to it effectively?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

I have an upcoming online course, TenderWins, a 4-week intensive course designed to help you win more tenders, without the stress and time issues that currently hold you back!

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

 

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Now that’s a Headline that got my Attention

Dan has found something that never ceases to amaze him – leaking profits.  And I’m similarly amazed at how many ways businesses can find to leak profits.

The Dan in this case is Dan Kennedy, who has been a marketing legend for many years.  He has been publishing marketing newsletters, hosting conferences, bootcamps, intensives, and mastermind/coaching groups on a variety of marketing and business growth topics, plus developing a wide range of marketing products.  I have a number of his books.

So an article Dan wrote  identifying six holes in business’s marketing buckets which leak profits that I came across recently grabbed my attention.  I couldn’t have put it better myself (lol).  Take it away Dan.

In my 40+ years in this business I’ve found something that never ceases to amaze me.

People are more than willing to throw lots of money at new, unproven tactics when instead they would be better served spending the relatively small amount of time it’d take to fix the holes in their process that are leaking profits.

Usually directly into their competitors’ wallets.

Below I’m going to reveal the six areas I’ve found where you can quickly seal the holes in the bucket – and often double or triple your profits.

Profit Maximizer #1: Lead Generation

Most people give little to no thought about an actual lead generation strategy. They may spend, at times a lot, on advertising, but that does not equate to a lead generation strategy.

To have an actual strategy you need three things…first, a clear idea of EXACTLY who you’re trying to attract. Second, a lead magnet that instantly attracts your ideal prospect. Third, a way to measure the effectiveness of any media that you’re using.

Simply getting clear on these three things will save you thousands of dollars while putting more of the right prospects in front of you.

Profit Maximizer #2: Lead Capture

I recently went to a new restaurant outside Cleveland. I heard about it from a friend and I enjoyed it quite a bit. My waitress actually asked if we’d been there before and, when I said “no,” went on to tell us about the restaurant in a well scripted presentation.

But at no time during my visit did they even attempt to capture my information so that they could continue to communicate with me and provide me with a reason to return.

They, like many businesses are operating on a strategy of “hope”, and that’s a BAD strategy. They HOPE that I liked it enough that I’ll return. Thing is, I did. But I like a lot of restaurants, and the chance of me returning to their restaurant next time I’m going out diminishes each and every day that I don’t have contact with them. And they have no way to contact me specifically because they didn’t even attempt to get my information.

Capturing people’s information is a MUST. You can do this online, in-person, or by phone. It’s easier than ever, yet most make NO attempt and it’s costing them tens or even hundreds of thousands.

Profit Maximizer #3: Non-Buyer Follow-Up

This is the BIGGEST area of opportunity for 99% of people I work with. They don’t have a systematized, automated strategy to follow up with prospects to turn them into customers, clients or patients.

Once you’ve captured their information, you now have the ability to put a campaign together that consistently moves people who don’t immediately purchase towards the sale. This is more important the higher the cost of your product or service.

You need to put a well thought out, online AND OFFLINE follow-up campaign into place for those who are initially interested but not yet ready to say “yes.” This could include: emails, texts, phone calls, postcards, newsletters and should probably include all of these items. If you don’t have this you’re most likely letting 30%-70% of your potential customers, clients and patients buy from your competitors.

Profit Maximizer #4: Conversion in Customers, Clients or Patients 

This is an area where you can add to your bottom line without adding a single dollar of expense to your business! Imagine each day you currently have 100 people coming to your website, contacting your office, coming into your store or however people reach out to you. Can you tell me out of those 100 people what percent will do business with you? If not, you should figure that out fast.

Then you need to put in strategies to increase that number. Many times it’s as simple as putting simple processes into place to help that person buy from you, or buy MORE from you. Imagine you’re a dentist and someone comes in for teeth cleaning. Do you have scripts in place to sell them other products or services? If not, you just let them dictate their dental care. Do you assume they have the best toothbrush, the best toothpaste? That they don’t need fluoride or want whitening? How much is it costing you in lost profits to make those assumptions? 

Profit Maximizer #5: Repeat Business

I read that Domino’s Pizza has an app that customers can use to order pizza online, but it also sends notifications to those subscribed, with special offers. This allows them to turn slow nights for their stores into busy nights.

EVERY business should have in place a campaign to consistently keep in touch with their past customers, clients and patients. This is another demonstration of how most businesses run on “hope.” They hope you’ll remember them when you need another widget and not have been attracted to a competitor in the meantime.

This too should be a multi-media campaign using online and offline pieces to consistently provide value and give them a reason to return.   

Profit Maximizer #6: Referrals 

Almost no business does this well. While many stumble across ‘referrals by chance,’ almost none generate a steady stream of ‘referrals by design.’ Yet if I asked most business owners who their best leads are they will almost inevitably say it’s those that were referred to them by a past customer, client or patient. 

What if you weekly, monthly or even just quarterly provided your past customers with the tools they needed to actually become an “unpaid sales army” with useful reports, emails or gifts AND specific instructions on exactly how to introduce others to your business? It’s such an easy strategy, but virtually no one gives this the smallest iota of thought or effort.

Plugging these six holes in a leaky profit bucket will much of the time provide all the growth a company can handle and many times MORE than they’re looking for. Be warned, this is not SIMPLE, but it’s not hard. It just takes committed time and effort on your part to layer in each of these six strategies.

Thanks Dan.

You will find the full range of Dan’s offerings at https://nobsinnercircle.com/

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here

 

© Copyright 2018 Adam Gordon, The Profits Leak Detective - Except for those bits by Dan Kennedy.

Understand Why Governments Buy….And How to Take advantage of That!

If you have attended one of my “Tendering Essentials” workshops, a Tendering Webinar I’ve given, or one of my TenderWins online courses, you will know that I seek to get you to take a different view of tenders.

There’s a good reason for that.   Many find completing government tenders a bureaucratic burden.  I’ve heard all the complaints over the years:
    It’s too complex,
•    It’s too bureaucratic,
•    Everything takes too long,
•    It’s biased,
•    Tender forms are repetitive,
•    Small businesses can’t win, big business has an unfair advantage,
•    The requirements aren’t always clear, it’s confusing
•    It’s too demanding, it’s too costly

On and on and on.

So what is the Underlying Problem?

The underlying problem is usually the requirement for COMPLIANCE.  That is where the complexity, detail and time comes in.  Compliance with the Request for Tender (RFT) specifications, compliance with the Conditions of Tender, compliance with the Conditions of Contract

Governments can be rigorous in requiring compliance with their (ever increasing) policies with which you must comply – a definite pain in the posterior.

There seems to be an almost instinctive, sub-conscious reaction to this drudgery – how to avoid it? People tend to hurry through their Response with as little thought as possible.   They seek to MINIMISE the time, content and effort required.   Just get it done and out of the road, so you can get on with doing what you do!

The result is a boring document almost indistinguishable from the competition.  Another match in a matchbox.

The Assessors are scarcely likely to sit up and take notice of a response that is the antithesis of “engaging and compelling”.

And that is why I teach that in responding, you need to take an alternative view.  Think of the Assessors & all those submissions in front of them – all boring!  Your challenge is to capture their attention, hold it, & then convince them that your offering is the only logical choice.

Compliance merely gets you through the starting gate.  To win the job you have to be the best on the day.  The challenge is to draft a persuasive tender or proposal, not just a compliant one.

Is there an Alternative Way of Looking at This?

But what if you looked at that tender response in another way, not as a bureaucratic compliance burden, but a Sales Tool to be used for your advantage?  If you were making a sales pitch to a prospective customer, you would be going all out, with all the evidence, demonstrated capability and capacity, and proof you could do the job, that you were the only logical choice.

If you were pitching for a sale, I’m sure you would make every effort to present a solid case that removes all doubts the buyer may have, eliminates the risk in their minds, leaves the prospect with one clear choice…. you!

I have found, dealing with countless clients over the years, that changing the viewpoint of the tenderer completely changes the way they approach. their response

But there is an additional twist to this approach, one that will further change the way you view your approach to drafting a persuasive and compelling response.

To do that, you first need to understand why governments call tenders in the first place.  Of course, it is not just governments; businesses of all sizes request proposals or quotations, but I’ll refer to government throughout this posting, because they are the most ridged and complex for reasons I’ll address shortly.

But the principles apply to Requests for Proposals (RFP) and requests for Quotation (RFQ) from a broad range of potential customers, and what you learn can be profitably applied to these.

An RFT is usually an open invitation for suppliers to respond to a defined need as opposed to a request being sent to selected potential suppliers.  An RFP, which, since public money is not involved, typically has a less rigid structure. 

Governments and other potential clients call for tenders or quotations to meet a need, to solve a problem.  The need or problem may be:
•    Immediate – an unexpected event, often a tragedy or weather event
•    long term – such as infrastructure
•    precautionary - the result of a Gap Analysis – future obligations vs current capability

“No business buys a solution for a problem they don’t have.”  Seth Godin

The procurement process may be required and determined in detail by law to ensure that competition for the use of public funds is open, fair and free, i.e. impartial.

Just to avoid rejection in the first cut, a tender must be compliant and answer every single requirement.  To go on to win, it must also be competitive and persuasive

It must show, clearly and persuasively, your difference, why you rather than the competition should get the contract.  To win, you must submit a tender which is the best on the day.

You will have an advantage if you address their problem right up front, rather than talk about how good you are, which so many people do.  Assessors always feel more comfortable with respondents who recognize the buyer’s problem and what they are seeking to achieve.

You will score lots of points by showing you understand their objectives, and demonstrate your experience in handling projects of a similar scope, value and size.

And this is where that additional twist comes in

You’re solving, no selling.  Be much more explicit in your response, and show just HOW you will solve their problem, and back that up with Proof that you will – testimonials that support your solution.

Craft a Value Proposition that clearly describes how you can solve the client’s problem in the most competitive and efficient way.

The most compelling value propositions are those that address the high-priority concerns of the agency, and solve htheir problem.

Clear & concise, promise quantifiable outcomes – i.e. they solve the problem - clearly distinguish the value of your product or service, and provide a reason or incentive for acting right away.

Develop a well-rounded process to enable you submit compelling, persuasive tenders that demonstrate you will solve their problem.  You will win more tenders, and to do so without the time pressures you currently are subject to, and remove the stress from submitting fully compliant tenders on time.

Does your Value Proposition Solve the Problem?

There’s nothing like an outside view of your Value Proposition?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  
If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.


© Copyright 2018 Adam Gordon, The Profits Leak Detective 

Is Your Offer Compelling?

As the old saying goesbusiness is what, if you don’t have, you go out of!”  As Michael Masterson said in “Ready, Fire, Aim”, your primary concern has to be making sales.

Without sales, you don’t have a business.  But it starts with your offer which in turn leads to a sale. 

An Offer is a way of communicating the value of your product or service to a potential customer.  A good offer is one that focuses on what people want, and NOT on what people need.  If you wish to create a good sign-up offer, produce something people desire.  To make a profit, you must satisfy your customers. 

There are two related issues here:

•    Understanding what drives their desire

•    The outcome – the results the customer will gain if they accept your offer.

Driving the Desire

Their desire is driven by more than just features and benefits.  Sure, the benefits are what the features will do for the customer, but you must dig deeper. 

But there is more to benefits than straight forward ‘cause’ and ‘effect’.  Robert Imbriale (Motivational Marketing) suggests that there are in fact at least two levels of benefits.  Direct benefits are what people usually talk about.  You go on a diet, and if you maintain some discipline, you lose weight.  Cause and effect.

Let’s take this a step further.  You need to drill down to the key desire that will have the greatest emotional impact on the buyer - the indirect benefits.  It comes down to emotional factors, how they will feel having used your product or service.

Losing weight is the direct benefit, but what is the subsequent effect of having done so?  Now that is where things get interesting, because the ‘indirect benefits’ can take a number of different paths.  You may:

•    just feel good about yourself again, and that’s not a bad situation to be in;

•    have more energy, more get up and go;

•    take up a recreation again;

•    get work done more promptly and as a result, be able to spend more time with your family;

•    be more attractive to your partner;

and so on. 

Did you notice that all these indirect benefits are about how you feel, rather than something strictly measurable like the weight you have lost?  Because they are about how you feel, you tend to judge them in emotional terms. 

So many advertisements today endeavour to tap our emotions.  They ask us to put ourselves in the situation being promoted.  And they often show us with pictures – ‘before’ and ‘after’ = the transformation.  Very clever, because most people make decisions for emotional reasons, although they justify them in more logical terms (I’ve lost 5 kilos!).

You might set a target of losing 5 kilos, but underneath that there are “feelings” such as those above.  It will be those feelings (emotions) that are most likely to lead your prospect to take up your offer.

The benefit part of the value equation is not simple, but you need to understand it to ‘balance the equation’ when making an offer to your prospective customers.

So we come to the Transformation - the Outcome

For most people, the top reason that someone will chose to buy a product or service is that it will do what they want it to do.

It’s the Transformation - the before and after evolution that your customer will go through after using your product or service.

Every offer boils down to a transformation. Regardless of what you’re selling, it starts with a before picture, which is less than ideal in some way.  Then your offer intervenes, and that takes people to the after picture…

The transformation is the core of your Offer.  Your prospect probably won’t tell you why they want to lose 5 kilos.  That is why you have to dig down.

Stop selling your product and start selling your outcome.  It’s not earth shattering, but it is easy to forget. We get so wrapped up in the great stuff we have to offer, we forget it’s really all about the prospect and what they want. 

So be very clear about the outcome you’re trying to create for your prospect.   Try rewording your offering in outcome terms, not product or service terms.  Make it compelling.

You need to get inside the mind of your prospect, and understand their discontent, and to be able to show you understand it.

Now obviously, you can’t do this for each individual out there.  That is why market segments are important; niches with similar problems and desires to change.  And the niche has to be big enough for you to prosper – see my blog post “Does your marketing tail stretch to the sea?

Let’s now look at Value

Value arises because the direct and indirect benefits your product offers solves a problem for your customer for a price they are willing to pay to gain those benefits.

Too high a price, then the benefits will not be seen to offer value, and the customer won’t buy, or at least, they won’t buy from you.  Instead they may well go to a competitor who offers a superior value as perceived by the customer.

The greater the benefits in terms of the problem they solve for the customer, the more the customer will be willing to pay to obtain those benefits.

Too low a price will offer increased value to the customer, but at the expense of your profits.

The difficulty in getting the balance right is that very often the assessment the customer makes is likely to be carried out in their mind – at the emotional level.  It is a perceived value, and each customer will form their own perceptions, but to be compelling you must reach down to that emotional driver.

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here. 

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

The Dangers of Building Value on Price alone

You will know people buy based on perceived value.  It’s all part of the Value Equation:  Value = Benefits – Cost.  Whether it’s done formally, or more likely as an informal, subconscious mental decision.  When someone is making a purchase decision, they make a value decision.  It doesn’t matter whether the “buy” under consideration is a consumer purchase, or a business purchase, the ValueEquation will come into play – “will I get value for the money I spend?”.

It’s about the “Transformation” -  the before and after evolution that your customer will go through after using your product or service.  This is the core of your offer, the change it will make for them.  At its core, every offer boils down to a transformation. That’s where the real value lies.

If there was one thing that really annoyed me in all my years consulting it was winning a job, whether it was a straight client quotation, or a government tender, it was winning the job because I had the lowest price, as if price was the main differentiator that set me apart from my competitors.

Do you understand what constitutes “value” in each of your market segments?

Do you have a clear idea about what makes up your customer’s value equations?  Value is rarely only price, it is about what your product/service will do for them (the benefits); their value equation. 

Do you have a value proposition for each of your key market segments – a compelling statement that clearly identifies why customers should ONLY buy from you, and not your competitors; a clear statement of the tangible results a customer gets from using your products or services?  If you can’t clearly communicate this, of course you will struggle.

Some years ago I blogged on “What is happening with your customers?”  Here are some points:

“Whether it is three years of depressed economic activity kicked off by the Global Financial Crisis (GFC), the on-going uncertainty about Europe’s ability to pull itself out of their quagmire, or doubts about the US economy reviving, people seem uncertain about the future.

A recent newspaper report suggested that Australian retailers have been forced to extend their summer clearance sales, as shoppers have left them with piles of unsold stock.

And people are responding to uncertainty with thrift, both on a personal and a business level. Australia's savings rate is at a two-decade high, due to consumers remaining fearful over the future of the global economy.”

Price became key driver in the Value Equation with fear and thrift driving people’s decisions.  Retailers responded accordingly, both in Australia, and overseas.  Neither businesses nor consumers could afford to be indulgent. 

A number of reports suggested customer behaviour was changing, and that this was not a temporary change, but more likely a permanent change.  

To maintain healthy sales, businesses adopted price-driven marketing strategies. 

So in Australia we had what were dubbed the “Supermarket Wars”, with staples like milk and bread reduced to ridiculously low levels, led by Coles.  Woolworths retaliated.  The slogans were “Down, Down!” and “Cheap, Cheap”.  The Supermarket Wars lasted seven years.

The Penalty - retailers suffered losses in terms of margins, consumer loyalty and an inability to pull out of the downward cycle. Research shows that if price becomes the main selling point, customer loyalty decreases.  Operational costs don’t go down, so if prices keep coming down, businesses run out of margin.  Price conscious consumers and thin grocery margins are a problem.

But there has been a change!  It was intriguing to read recently that the two major retailers in Australia were moving away from price as their main differentiator.  And just as intriguing to read the reasoning was based on similar experience elsewhere.  The ultimate cost of price wars on retailers is currently being played out in the UK, a retail market which shares many commonalities with Australia’s.

A Dutch study examined the market impact when the leading Dutch grocery chain Albert Heijn slashed its prices in response to Aldi and Lidl, finding that there was an 8.2% reduction in food prices. This cost Dutch supermarkets €900 million in one year alone and more than 30,000 employees lost their jobs.

As a result of the losses, Woolworths pulled out of the “War” two years ago, and has reaped a good increase in earnings from their supermarket business.   Coles has now blinked as well, having seen a continuing drop in earnings. 

They are changing the Value Equation

If Price can’t be used to create value, then the benefits have to be upped.

Coles and Woollies have shifted their focus to service quality, social programs and connecting with the community.

By moving away from price and focusing on a story telling strategy, both supermarkets can engage consumers with a process called “internalisation”. This is where people accept the endorser’s position on an issue as their own.

While food prices won’t necessarily go up any time soon, consumers shouldn’t expect to see any further significant price drops. Instead, Coles and Woolworths will draw attention to other important attributes.  They will build on the benefits.

Let’s talk about You!

Building value on price alone is, to me, nothing but a profit leak.  Once you start focusing on Price as your discriminator to build value, the only way is down - at the expense of your margins.

As Rashid Kotwal said, “many businesses operate on two assumptions that are often never tested and end up costing them dearly.

The first is assuming their clients know and fully understand the value they get for their money. The second is assuming what they themselves believe is valuable to their clients is actually the case.”

What you think you're doing for your clients and what they truly value can be poles apart.  And if that's the case you spend more and more effort and money promoting aspects which don't advance sales, rather than spending your effort in areas which will.

The only way to differentiate yourself is to explain the value you provide.  Explain in great detail how you get your results and what they mean in real terms for your clients.

Don't assume your customers know all this.  They don't.  What's obvious to you because you do it day in and day out is not obvious to them.  And yes, it is about blowing your own trumpet.

You want to make more sales so that your business can grow and stay sustainable...
...but you also know that you don’t want to resort to cheap attention-seeking or sleazy sales tactics with low margins to get you there.

The value has to be in your Offer.  The Benefits the Offer extols must be more than superficial benefits; they must be deeper than that, benefits that meet an emotional need for the buyer.  How it will transform them.

Can you add additional benefits? More clearly state the existing benefits? Create more value for the prospect?  When you make your offer irresistible, the sales will follow.

Simply having a great product with awesome features and desirable benefits isn’t enough. You need a great offer - one that walks your customer through the logical *and* psychological journey from "I don't really think I need this" to "This is exactly what I need! Can I buy it from you right NOW?"

What are the additional factors what will allow you to charge a price commensurate with that Value Equation?

When you have the right offer, that builds Perceived Value based on the real benefits you offer, here's what happens:

  • People are excited to talk to you about it
  • You don't need to lean on persuasion and pressure tactics
  • You raise your sales conversion rate (which means more revenue, even with a small audience)
  • Sales get much easier to make, and your customers are happier than ever!

All because you crafted the right value offer, one that speaks directly to your market without sounding fake, pushy, or salesy.

If you struggle to communicate the value of what you offer, it's often because you haven't identified the key transformation your target market is seeking.

Could your Value Equation be Improved?

There’s nothing like an outside view of your Value Equation?

Very often when we read something we’ve written, we read what we expect to see.  And miss the mistakes, or lack of logic, or lack of persuasiveness.  

If you would like to discuss how this might help you, This email address is being protected from spambots. You need JavaScript enabled to view it..  There’s no cost for a consultation.  It is my gift to you.

Or buy "Small Change, Big Result", my manual on how to increase your success rate with proposals and quotations; make a few small changes, and reap the rewards.

© Copyright 2018 Adam Gordon, The Profits Leak Detective 

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