Value Engineering

Increasing Sales Effectiveness in the high-value, high-touch sell.

 

Ian H Smith

2024 will be a very challenging year for knowledge-intensive tech and services firms. Even non-profits will find fundraising more difficult, as both business and consumers have less discretionary spendfing power this year. But this is not a doom-and-gloom post: it's rooted in optimism!

At Being Guided we are offering a free 30-minute Discovery Workshop to CEOs and sales leaders (business, consumer or non-profit) and who want to measurably increase sales effectiveness. This is an introduction to our interpretation of Value Engineering and how it can make a real difference to you, if you are engaging in a high-value, high-touch sell.

At Being Guided, we define Value Engineering as a combination of a method and set of interactive tools embedded in Salesforce - all designed to help knowledge-intensive tech and services firms or non-profit organisations to better defend value over price and increase sales effectiveness.

In this blog post I talk about four key elements of Value Engineering that applies to the high-value, high-touch sell - and how this can measurably work for you:

  1. Be Proactive Not Reactive.
  2. Let Buyers Validate Forecasts.
  3. Engage in Mutual Value Discovery.
  4. Apply ROI Modelling.

 

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1. Be Proactive, Not Reactive

If you are selling an innovative product or service (or raising funds for a good cause) that buyers cannot easily define in a formal procument process, you need to engage in Demand Creation Selling. This is the opposite of Demand Fulfilment Selling.

In Demand Fulfilment Selling, it is the buyer who initiates the process - typically in the form of issuing a Request For Proposal (RFP), inviting sellers to respond at arm's length with writtent Proposals. This is wholly inadequate for the innovative product or services firm, where the buyer does not know all and cannot adequately specify the problem and solution in a RFP document.

As a sales method, Demand Creation Selling is based on the idea of a proactive engagement between buyer and seller - initiated by the latter. However, making an approach to empowered buyers from a cold start is increasingly challenging. Whether it starts with an email or a LinkedIn Inmail invitation, it has to be compelling to attract a positive response from the target buyer.

In particular, this relates to the challenge where a product or service is not instinctively understood by buyers from afar and where 'buyer intent' data is therefore, extremely hard to detect digitally. Added to this is the problem of buyers being seemingly impossible to communicate with from a cold start. This is where you could say that the buyer is surrounded by a 'Hermetic Seal'.

The best way to overcome this resistance and break the Hermetic Seal surrounding the buyer is to offer an initial free Discovery Workshop that provides real value in it's own right. This becomes the first step on a journey of Mutual Value Discovery expanded upon in section 3. below.

From a skills and culture perspective, being proactive from a cold start with the buyer, requires the seller to have what I would define as the 'DNA' of a sales professional: the inherent characteristics that can be coached, but are inherently strong in that person. This is the natural ability to generate receptivity and rapport with the buyer (or, in complex scenarios, groups of buyers and influencers).

The ability to generate receptivity leads to rapport. In turn, this leads to trust and, ultimately, truth in conversations between buyer and seller. In a high-value, high-touch sell, this is human: no amount of AI-based Prompt Engineering or Bot Automation will compensate for this.

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2. Let Buyers Validate Forecasts

For the innovative product or service supplier, since the buyer cannot know enough from afar, they must be willing to be open-minded to what we call a Mutual Value Discovery engagement - not a RFP-based procurement. Equally, the seller must offer something compelling to 'break the Hermetic Seal' surrounding the buyer.

So, the offer of Mutual Value Discovery must offer even the most conservative buyers a meaningful incentive to engage in the process, where openness (versus arm's length procument) leads to a more transparent, more accountable outcome in the buying and selling process, not less. Again, this can start with a free Discovery Workshop, as described in section 1. above.

In reality, to attract the prospective buyer, the seller must offer something of immediate and compelling value in this first, free-of-charge step in a Mutual Value Discovery process. This could be introduction to the product or service in terms of the cost of NOT buying it, using a ROI Model (see section 4.) - built on input metrics that the prospective buyer provides.

This can translate into customised, forms-based ROI Calculators integrated with a CRM system, such as Salesforce Sales Cloud. The transformation here is to bring the buyside into determining the true value of the sellside offering. It effectively means enabling buyers to tell sellers the optimum price and timing of a purchase. This is Value Engineering applied to Demand Creation Selling.

As illustrated below, this results in a Salesforce CRM system offering two forecasts: one from the Sellside, as usual - but now, one from the Buyside - based on ROI Modelling determining Sellside Amount and Close Date. This is a transformation of salesforcasting - from seller to buyer.

The data for the Buyside Amount and Close Date comes from a simple Web Form, where the seller provides a Unique ID Code to enter into the Form, to update ('upsert') the right Opportunity Record in the buyer's instance of Salesforce Sales Cloud. This counters the inherent bias of the seller in telling management what they want to hear.

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3. Engage in Mutual Value Discovery

Value Engineering, in the context of helping buyers justify the purchase of a complex product or service they may not fully understand, is a systematic analysis and structured approach aimed at increasing the value of the product or service. This includes the cost of not buying (or a delay in buying) the product or service in question.

In a Mutual Value Discovery process there are a few things that matter:

Clarify the Solution Purpose
Understanding and clearly defining what the product or service is meant to achieve. This includes identifying key functionalities and the problems it solves - quantified as a Return on Investment (ROI) Model.

Identify and Analyse Customer Needs 
Engaging with potential buyers to understand their specific needs, challenges, and what value means to them in the context of the product or service. This must compare Current State (without investment the product or service) and Future State (with investment in the product or service).

Evaluate Function versus Cost
Analysing how each function of the product or service contributes to its overall cost and the perceived value to the buyer. The goal is to optimise this balance and maximise value, underpinned by measurable value outcomes from a ROI Model.

Simplify and Optimise
Looking for opportunities to simplify complex features or processes without compromising essential functionalities, thereby making the product or service more accessible and understandable to the buyer. This is one of our Design Principles: Fierce Reduction.

Communicate Value Effectively
Articulating the benefits and value of the product or service in a way that resonates with the buyer's specific context and needs. This often involves translating technical features into tangible benefits. This should recognise that this is combination of both an objective 'Economic Basis of Decision' and a more subjective 'Emotional Basis of Decision'.

Through Value Engineering, the intrinsic worth of a complex product or service is not only enhanced but is also communicated more effectively to the buyer, helping them understand and justify the investment by clearly seeing how it meets their needs and provides tangible benefits.

For the conservative buyer (e.g. central or local government) this should increase the transparency of the buying and selling process - as as counter to introducing the barriers of an arm's length procurement - which does not work well for innovative products or services, because the buyer does not know enough to specify requirements in a Request For Proposal (RFP).

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4. Apply ROI Modelling

ROI Calculators are interactive tools that allow prospective buyers to input data and receive a calculation of the Return On Investment (ROI) they can expect from your product or service. By customising these calculators and integrating them into your CRM system, we create a compelling interactive experience for your prospects, building engagement and trust.

Here's are the advantages:

Enhance Prospect Engagement

Custom ROI Calculators provide a hands-on experience for your prospects. They can play around with different scenarios and instantly see how your offerings can impact their bottom line. This interactive process not only keeps them engaged but also educates them about the value of your products or services.

Achieve Data-Driven Insights

When prospects use your ROI Calculators, they input data that is crucial for understanding their needs and pain points. This data, when upserted into a CRM system, gives your sales team a clear picture of the prospect's expectations and how they perceive the value of your offerings.

Align Buyside and Sellside Perspectives

One of the most significant advantages of integrating ROI Calculators into a CRM system is the ability to compare the Buyside view (prospect’s input) with the Sellside view (your sales team’s estimations). This comparison can be incredibly insightful. For instance, if there's a significant discrepancy between the Opportunity Amount and Close Date as perceived by the prospect versus your sales team, it could signal a need for better communication or re-evaluation of the offering.

Streamline the Sales Process

By automating the process of capturing and upserting prospect data into Salesforce, you reduce manual entry errors and save time. This efficiency not only speeds up the sales cycle but also ensures that your sales team has access to accurate, up-to-date information.

Customise for Specific Needs

Every tech firm is unique, and so are its customers. Customising your ROI Calculators to reflect specific use cases, industry standards, and unique value propositions ensures that the tool is relevant and effective for your target audience.

Build Trust through Transparency

Providing prospects with a tool to calculate ROI themselves enhances transparency. It shows that you're confident in the value of your offerings and are willing to let the numbers speak for themselves.

Identify Key Metrics
Determine the key metrics that matter most to your prospects and are relevant to your offerings.

Customise the ROI Calculator
Tailor the calculator to reflect your unique value propositions and ensure it aligns with your brand.

Integrate Seamlessly
Ensure the ROI Calculator integrates smoothly with a CRM system such as Salesforce, allowing for automatic data capture and 'Upsertion'.

Ensure a User-Friendly Design
Make sure the ROI Calculator is easy to use and understand, even for non-technical users.

Train and Support
Provide your sales team with the necessary training and support to leverage this new tool effectively.

Return on Investment (ROI) is a metric used to evaluate the profitability of an investment relative to its cost. When comparing a Current State (As-Is) to a Future State (To-Be), the formula can be adapted to represent the net benefit gained from purchasing a product or service relative to the cost of making the purchase.

The Buyside Amount is generated by a ROI Model; not a price list, nor an unchallenged copy of the Sellside Amount. As illustrated in the examples below, ChatGPT 4 is a powerful Co-pilot in applying Prompt Engineering to create appropriate ROI Models that makes sense to both buyer and seller.

Here are some examples of ROI Modelling created with ChatGPT 4 Prompts.

Firstly, the general ROI formula:

ROI = (Cost of Investment / Net Profit​)×100%

To adapt this formula for an As-Is vs. To-Be comparison, consider:

  1. Net Profit: This will be the difference in profits between the Future State (To-Be) and the Current State (As-Is).
  2. Cost of Investment: This is the cost incurred to move from the Current State (As-Is) to the Future State (To-Be).

Given the above considerations, the formula becomes:

ROI = (ProfitToBe​ − ProfitAsIs​​ / Cost of Transition) × 100%

Where:

ProfitTo-Be = Profit or (benefit) in Future State
ProfitAs-Is = Profit (or benefit) in Current State
Cost of Transition = Cost to move from As-Is to To-Be

Note: If you're measuring benefits other than strict monetary profits, such as time saved or other intangible benefits, ensure you can convert these benefits into a monetary value for this calculation to be valid.

To calculate the Return On Investment (ROI) from Digital Innovation with the specified inputs, we can formulate several equations. Let's define the variables first:

BVAs-Is = Current State (As-Is) Business Value generated per annum without Digital Innovation.
BVTo-Be = Future State (To-Be) Business Value generated per annum after investing in Digital Innovation.
CDI = Cost of Digital Innovation as a Recurring Annual Subscription.
ROI = Return on Investment as a ratio relative to the Cost of Digital Innovation.
CoD = Cost of Delay per day when not investing in Digital Innovation.
CoDN = Cost of Doing Nothing per day when not investing in Digital Innovation.
CoDday = Cost of Delay per day when not investing in Digital Innovation.
CoDNday = Cost of Doing Nothing per day when not investing in Digital Innovation.

Calculating ROI from Digital Innovation:
Net_Gain - BVTo-Be - BVAs-Is

Calculating ROI:
ROI - Net_Gain - CDI / CDI
The ROI is expressed as a ratio. Multiply by 100 to get a percentage.

Cost of Delay (CoD):
This represents the loss per day by delaying the digital innovation. Assume the delay starts from the beginning of the year and goes on for d days:
CoD = BVTo-Be - BV As-Is (d x CoDday) - CDI / CDI

Cost of Doing Nothing (CoDN):
This is the loss per day for not implementing the innovation. Similarly, for d days:
CoDN = BVAs-Is - (d x CoDNday) - CDI / CDI

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Summary

When considering a high-value product or service and assessing its Return on Investment (ROI), a buyer should inquire about several key metrics to make an informed decision. This is Value Engineering, applied.

Remember, there are four key elements to Value Engineering applied to the high-value, high-touch sell:

  1. Be Proactive Not Reactive.
  2. Let Buyers Validate Forecasts.
  3. Engage in Mutual Value Discovery.
  4. Apply ROI Modelling.