What is the value of your solution? (is there a problem?)

Posted on September 5, 2007 
Filed Under Sales and Marketing

In my last post I promised to blog something on “What is the value of your solution? (is there a problem?).” I think everyone in sales will at some point in their career have become frustrated with customers or prospects that jump straight to the question, “How much?” after you’ve given your presentation on all the features and benefits your solution has to offer. Naming a figure (say $10,000) will immediately put you and your prospect in a premature discussion about price. And you know for sure what your prospect’s reaction will be. “Oh, that is too expensive!” “Expensive?” you think, “Don’t they understand the value of my solution?” 

So, what is the value of your solution? A solution has no inherent value, really. Your solution derives its value from the problem it solves. If there is no problem you can’t fix it. So, is there a problem that your solution is tackling? Does your solution fill a need or help to achieve a goal? That is the question we should ask ourselves in qualifying our prospect. Once we have qualified, we need to quantify it – in terms of money. How big is the problem we are seeking to address?

Let’s say, your annual sales revenue is $1,000,000 produced by 100 orders at an average of $10,000 per sale. The current cost of sales is 40% making it $4,000 per sale. And the length of your average sales cycle is 40 days bringing the calculated cost of outstanding sales to $100 per day. So each day an opportunity is not closing will cost your company $100 per potential sale. That is the problem! If your solution reduces the average sales cycle by 15% from 40 days to 34 days, you are saving the company $60,000 per year. That is the value of your solution.

 If we present our value proposition in this way, do you think the customer will have the same reaction when coming up with a figure, say $10,000 when asked “How much?” Is there a problem?

Comments

16 Responses to “What is the value of your solution? (is there a problem?)”

  1. Raghava on September 6th, 2007 5:07

    couldn’t agree more
    looking forward to more posts,
    rags

  2. Carli Peacock on September 6th, 2007 7:33

    Hi Rob,

    Love your work, some really good insight.

    Carli

  3. Hans on September 6th, 2007 8:16

    Sounds good but ….; what if the 15% can not be guaranteed ??

  4. Adam Cartledge on September 7th, 2007 3:15

    Rob,

    It’s interesting to discuss the ROI and value proposition of solutions associated with sales. I formerly worked for an organization whose solution was a parts-identification solution (www.infomill.com) designed to reduce overall spare parts wastage, promote more affective service engineer customer visits and reduce service and parts costs by 30%.

    Increased efficiency is a point that we come across in many of our organizational processes, whether that be from the sales, service, HRM, marketing and financial perspectives.

    I found your posting really interesting, and hope to read more!

    Thanks Adam.

  5. Karl Goldfield on February 16th, 2008 7:21

    Hans brings up a common question. The answer is to share the results of others you have worked with not guarantee results that are unknown. As Anthony Parinello likes to point out, you are building a partnership when selling. Your goal is to help someone with something. If you succeed, and go out of your way to ensure that success, you will continue to find opportunities.

    When presented with a challenge of value then cost, you should alweays begin with the need, the fit, and then focus on the solution.

    Karl Goldfield
    Coaching Sales Champions
    http://coachingsaleschampions.karlgoldfield.com

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