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Show me the money! - Measure your value, or someone else will

Guest post by: Paul O'Dea

Article Overview: Can you answer and back up the question “How much do you make or save me?” If not, you are not measuring or proving your value. Buyers have no time for unsubstantiated declarations of value. Understanding how to create, deliver and prove value can turn small companies into large ones and large ones into giants.

Show me the money! - Measure your value, or someone else will

When Rod Tidwell told Jerry Maguire [Tom Cruise] to ‘show me the money’, he coined a mantra for today’s buyers. You may have a brilliant product but if you can’t ‘show the money’, buyers are not interested. Showing the money means you measure in quantifiable terms how much you make or save your customers.

Can you answer and back up the question “How much do you make or save me?” If not, you are not measuring or proving your value. Buyers have no time for unsubstantiated declarations of value. Understanding how to create, deliver and prove value can turn small companies into large ones and large ones into giants.

You may ask - why measure value when your customers are satisfied? You provide them with good service. They like your products, which you continually invest in. You have a good relationship with them. You even carry out regular customer satisfaction studies. So why bother measuring and proving value?

Think about the message that unquantified benefits sends to customers. In effect, you are saying “We don’t care enough about you to measure how much we can impact your business’’.

Do customers rate your value as highly as you do? How do they rate your value relative to your competitors’? When we interview customers of our client companies, there’s almost always a significant difference between what our clients think their value is and what customers do. It amounts to a value gap.

When asked to explain the value they provide, too many vendors sound like copywriters under duress. As one senior executive put it to us:

“Why do so many vendors lie? They tell us they are the fastest and most comprehensive and all that jargon. We know it is not true. We spend thousands of dollars with analysts to keep us up to speed. With all this gobbledygook, vendors break their promises, before we even start to engage. Give me a vendor any day that talks in my language, can help me fix my problems and keeps their promises.”

Describing products in vague terms that are not measurable is depressingly prevalent – and always unhelpful. Airily telling buyers that your solution will reduce costs, without actually measuring those costs, looks half-hearted, lazy and opportunistic. Do the work and run the numbers to turn a perceived vague value into a real measurable one.

When customers think about measuring value, they are weighing up questions like:

· How much will I save or make by adopting this solution?

· How long will it be before I will see a return?

· What are the risks (to me personally in terms of career and to my company) that this project will fail and I will not see any return?

· What resources will I have to invest in this project to make it happen?

· What is this going to cost me?

· How important is this project relative to the other pressing projects that I am considering?

No longer is it good enough to trot off a set of generic answers to these questions. Buyers have had enough of vague promises. They want to know exactly how much you will save them, what concrete risks are involved, and how you plan to address those risks.

Analysts IDC carried out research that shows that an investment of $1m typically has a decision cycle of 18 months. However, once a customer can measure the impact, 65% of purchases occur in six months or less. Being able to prove to customers the amount, and the timeframe in which you can reduce their key costs, increase revenue growth or achieve market share objectives will set you apart from the competition.

If you don’t know the measurable value you create, then how do you know how much to charge? Are you charging too much? Too little? In our experience growing companies often undercharge because they’re desperate for business and don’t understand the true value they’re providing. Before they know it they’re in a downward spiral.

Substantiate your claims by showing that you have the people, processes, tools and experience necessary to deliver the value that you’ve promised. Get input from existing customers to underpin your business case. If you want to grow your business, build a repeatable process for measuring the value you create.

For every dollar spent, there must be more than a dollar returned. That return must be measured, in tangible benefits such as reduced cost of production, increased sales, reduced operating costs etc. ‘Show them the money’ and customers will want to blow your trumpet. ‘Gold customers’ give you an edge over the competition and grow your business.

INSIGHT IN ACTION

• Bring together a small team from sales, finance and product management to start building a model that measures the value you provide. Keep the project simple. Aim to build a spreadsheet tool that average sales folks can use with customers.

• Document the areas where your solution makes savings or increases sales (e.g. reduces time, increases productivity). Break the areas down in detail. Build this list with a friendly customer.

• Make the model flexible and document realistic assumptions which can be used for different types of customers. Test the model in your next customer project. Document the results and start to build a stronger model and a library of generic results that you can use with future prospects to prove your value and grow your business.

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Article Tags: increase sales, make savings, measurable value, ROI, value buyers, value gap, value proposition, vendors



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