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Distributor Management

Why Measuring Value is Critical Today

This article is an excerpt from Frank Hurtte’s recent presentation to an international group of companies who provide technology solutions.

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Recessions have an impact on the way business is conducted. 

We can illustrate this by looking back at business trends that became “mainstream” practices following past recessions.

Think about Right-sizing – this bit of Americana started during the recession of 1983.  And according to a New York Times article, the nine years that followed resulted in large businesses downsizing over 43 Million North American jobs.  Right-sizing’s roots -planted firmly in the recession years – became standard practice.  The recession around 1991 saw Supply Contracts sweep through the distribution industry.  Remember back, most of us had never heard the term in 1991; by mid-decade these agreements are standard operating procedure.  The phenomenon didn’t stop there.  2001’s recession saw an acceleration of information driven management techniques and a race for off shore manufacturing facilities.

Is change bad?  None appear inherently evil, they probably would have occurred naturally even without the driving force of a recession.  What I am saying is that economic crisis accelerated their proliferation.

Ten, twenty or maybe even thirty years of selling can’t prepare you for these catastrophic changes.  No matter how well your old approach worked in the past, things are about to change.  Here’s why- our customer’s world is changing.  The tough times we face now are driving those changes forward at a breakneck pace.  Let’s take a look at a few of the changes we have in store.

The new competition for money…
A tough new competitor walks the streets of our town.  Whether you realize it or not, your products and solutions facing off with a brand new competitor!  I am not just talking about the folks down the street who are out there hawking their products and services.  It’s far more complicated than that.  Today, you are competing against other options for your customer’s limited supply of available funds.
 
Cash is in short supply.  Just like the kid clutching a dime and pacing the glass case of the candy store contemplating the best sweet nugget for his hard earned allowance.   Cash strapped company’s today look for their “sweetest” potential investment.  It’s a competition.  The project with the best payback, the least risk, the greatest promise for the future wins.  If you happen to be part of that project – sales dollars flow.

Gut instinct doesn’t get it.  Your expert customers might love you.  They might have graced you with lots of good business in the past – but that doesn’t count anymore.  Here’s why.  A few years ago an engineering magazine surveyed business leaders responsible for the purchases of technical products.  The chief complaint these business-types had of their technical staff was their inability to understand and document the financial success of projects and improvements. 

Simply stated, many of the customer contacts we “sell to” are not all that astute in capturing all of the financial benefits related to your solution.  Furthermore, even if they are very good at this function – they often lack the reputation and respect needed of their financial peers. 

In the past we counted on these “specialized experts” to convey not only the technical value of our work but also the economic impact.  We “sold them” based on solving a problem – assuming they would/could explain the forthcoming flow of new revenue dollars.  This was an oversight in our past and a gigantic error for the future.  Unknowingly, we delegated a critical function of our sales role to those who really aren’t that good at it.

More people are involved in the buying process….
One point many of you have noticed is; more people are becoming involved in the decision making process.  A Dow Jones study of organizational buying during the 2001 recession found recessionary times drive customers to committee-based decisions.  Whether to drive better decisions or break down silos within their organizations, our customers are putting purchasing techniques that involve groups of people in place.

The CFO joins the group…
The CFO is taking an important part in these committee decisions.  Chief Financial Officers and their surrogates are participating in purchasing policy.  Upper level contacts are being stripped of their discretionary buying power - whether they tell you about it or not.  A brand new Dow Jones study chronicled the tail of a Fortune 500-based Senior Vice President whose buying authority had been reduced from $2 million to $50 thousand.  Let me reiterate, this is a hard pill to swallow for some of our top contacts, don’t expect it to come up in casual conversation.

The point is the CFO’s are forcing some serious financial measures into the buying process. 

And this brings us to the point of value…
A few years ago “Value-Add” was in vogue for many selling organizations.  It has crept through the fabric of our culture.  Companies claim to add value – and to be absolutely honest most companies do add value in their environment.  The problem:  After customers hear and see a million value-add messages the polish starts to wear off.

To prove the point, just Google “Value add”.  Everybody adds value.  It’s hard to find anybody who doesn’t claim to add some value.  The carnival barker pitch from the makers of the latest household gadgets shouts, “And, now a new value-add feature yours for the asking.” 

Try to hang your hat on differentiators like these and your selling efforts suffer.  The real question isn’t does your product or service have value?  With these new plays it has to become: Exactly what is your value?  And, how can it be measured? 

Now don’t get me wrong - goodness, purity and mom’s apple pie have a value.  But in our post-recessionary business environment, we need a value we can stand behind.  Better still, a value that earns profits and betters our customer’s world. 

We need to be able to measure that value in a meaningful way…
Now – it just so happens – a certifiable measure of value exists.  It’s been around for 5,000 years and it’s called money.  This is a measure that means something to business leaders and it is a measure that you can use to differentiate yourself in the market space.

As a side note, this is also the measure that the CFO of these organizations can relate to.
As we compete for internal dollars (hopefully you believe you are), measure the value of our solutions – before, during and after their implementation, you stand to gain.  And, if you train business allies at customer accounts to measure value, they will stand out in their own company. 

Helping friends progress professionally is a time honored tool for growing your business relationships.  So, we stand to differentiate not only ourselves but our friends as well…

Walking and Talking Points….
A few points to think about as you move forward in the future:

  • Recessions accelerate change in business practices.
  • There is a new competition for cash within your customers.
  • More people are taking part in the buying process.
  • This might be the age of the CFO.
  • Our old friends can’t buy as much as they used to without justification.
  • Value-Add doesn’t count anymore.
  • There is a 5,000 year old measure of value – money.  
Distribution Management

If you would like to learn more specifics on using your value to drive sales in a post-recession world, give us a call or drop us an email.  We can help you get started.  And, we measure our value in DOLLARS!

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