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Written by Steve Gielda, Principal – Ignite Selling
Quantifying value will never be for the feint of heart. It is not the first thing a rookie sales person learns. Understanding the industry, the products, and the customers are all vital and essential. But quantifying the value of what you are selling is also important for the complex sale.
Who
One of our clients is a global manufacturer of medical lasers. Their lasers are used for many different purposes, from blasting kidney stones, to corrective eye surgery, to laser hair removal. A couple of years ago, this company launched a new laser, specifically designed for hair removal. This new laser costs $90,000, compared to the previous model, which sold for $60,000. As you can imagine, selling this newer laser for a 50% premium in price was going to be no easy task, particularly when the target customer base was smaller, less cash-flush dermatology clinics.
Mike was a very successful sales rep for our client. He had been selling lasers to dermatologist and plastic surgeons for years. He had been specifically successful in selling his laser’s capability in hair removal. Neither of us has personally ever had this procedure performed, but from what we understand, it can be a fairly long and painful process. In fact, it’s not uncommon for men who have large target areas, such as the back, to come for their first treatment, and never return for their next four. Why? Because the procedure was too painful. We were told by one aesthetician that she has finally found a way to bring big burly hairy men to tears. We were not amused. Well, we were slightly amused, but only because we did not envision ourselves coming under her ministrations. As you can imagine, getting a patient to return for future treatments often takes a lot of skill on behalf of the dermatologists or the aesthetic staff.
Product Launch
The new laser launched by Mike’s company had some unique capabilities. First, the new laser provided a quicker procedure because it could cover a larger surface area in a shorter amount of time. Secondly, and the most important new feature, was that the new laser was practically painless. Mike was excited about both of these new capabilities. Even so, Mike worried that he would find it difficult to justify the price differential.
Within a month of the new product launch, Mike began working with Dr. Bennett. Bennett had a 6-year-old laser he had been using for hair removal. When Bennett purchased his existing laser, he had great hopes for the hair removal portion of his practice – and things had started out well. However, over the previous two years, the hair removal portion of his business became stagnant and Bennett started focusing his practice on alternative revenue streams. Mike thought Bennett might be an ideal prospect for this new laser and suspected it might help to rejuvenate his hair removal business.
In Mike’s initial investigation, Bennett told him that he owned his existing laser outright, and would only consider purchasing a new unit if he could sell his old laser to someone else. Mike overcame Bennett’s initial resistance by telling him that he could find a buyer for his existing laser, if he was willing to sell it for $40,000. Dr. Bennett thought about Mike’s offer, but said that he was still unsure.
“I don’t know Mike. I would still have to come up with an additional $50,000 to get the new laser, and I am not sure I could justify the additional expense. That is a lot of money for us to spend.”
To help Bennett quantify the value of the new laser, Mike went back to our formula, Value = Benefits – Costs. Mike first began by identifying the Concrete and Abstract Costs of purchasing a new laser.
While the price of the new laser was $90,000, Mike was confident he could sell Bennett’s old unit for $40,000. This made his Concrete Cost $50,000. Mike then turned his attention to potential Abstract Costs for Bennett.
Critical Elements
Mike identified three critical elements of Abstract Costs about which Dr. Bennett might be concerned. First was the risk of spending $50,000 and not receiving the anticipated financial return. Second was the hassle of re-training the staff on the new product. This was a real concern because Bennett’s aestheticians were used to the existing laser. Getting them to embrace a new tool might prove difficult. How might they react? What if they don’t like the new laser? And finally, there were the implications of allocating so much of his existing capital for this purchase. There were many competing priorities, and Bennett might see this as a sort of zero sum game. For example, the office administrator had been promised a lobby makeover, but with the purchase of a new laser, the makeover would have to wait. Mike knew he would have to test his ideas against what Dr. Bennett might really be thinking. But before he met with him, Mike knew that he had to be prepared to outweigh Bennett’s costs with Concrete and Abstract Benefits. So what were the Benefits of the new laser?
Mike had some background information that might be useful to share. Mike knew that Bennett’s office averaged 10 patients per month. Mike also knew that 50% of those patients coming in for laser hair removal would not return after the first visit because it was too painful. Bennett’s office had four Aestheticians who would spend approximately one hour working with a patient. Armed with this information, Mike knew that one of the Concrete Benefits from purchasing the new laser is that each Aesthetician would be able to see three times as many patients in that same hour because the new laser provided a quicker procedure. Taking an average laser hair removal cost of $200/per visit, and multiplying that time across the four Aestheticians and the increased number of patients, Bennett had an increased revenue potential of about $1,600 per day. Mike also estimated that Bennett could retain a certain percentage of patients who would normally not return because treatment was too painful. Mike figured the practice could reduce the attrition by 50%, though he suspected it might be much higher. That could potentially improve Bennett’s revenue by an additional $4,000 per month.
Mike was fairly confident that his Concrete Benefits alone might persuade Dr. Bennett to buy the new laser; however, to be certain, he carefully considered the Abstract Benefits of his solution. One of Mike’s Abstract Benefits was a happier Aesthetician staff. Most Aesthetician didn’t like the stress and anguish of doing an hour-long procedure that was painful for the patient. Building upon a happier Aesthetician, Mike thought they would be likelier to upsell other procedures. After all, if they were all quick and painless, it was an easier sell. He imagined they could promote hair removal during, say, a Botox procedure, even while the patient was in the chair.
Mike was now ready to meet with Dr. Bennett. He felt he would be able to successfully quantify the Value of purchasing the new laser. Opening the meeting, Dr. Bennett told Mike that he had discussed the new laser with his business partner, and they didn’t see how a $50,000 investment could be justified at this time. Fortunately, Mike had done his homework. He felt he could walk through a Value Equation conversation with Dr. Bennett and make a compelling case for change. He began by asking Dr. Bennett about the new laser’s costs. Dr. Bennett talked about the need to capture his return on investment within 24 months, he mentioned the hassle of training his four Aestheticians, and he worried about breaking his promise to his office manager regarding a lobby makeover. Essentially, he confirmed Mike’s own speculation about the Abstract Cost factors. Like any effective seller (or least ones we have trained), Mike asked questions and listened to Bennett’s answers. Then he asked follow-up questions and continued to listen. While he listened, he began to hear Dr. Bennett quantifying his own benefits. They talked about patient throughput and patient retention and up-selling potential.
By the end of the conversation, Dr. Bennett realized that without any new marketing, he could recover his investment of $50,000 within 16 months, substantially better than the 24-month ROI he said was an essential minimum. If Dr. Bennett put some additional time and effort into marketing his new quick and painless hair removal service, he might be able to reduce his ROI time down to 8 months!
Mike closed the deal with Dr. Bennett. He realized he never would have been able to get it done if he had not first carefully considered the Concrete and Abstract Costs and Benefits.
What’s the Lesson?
Our challenge as salespeople is to convince our customers that our products are worth buying. We not only have to show that the customer’s problem is worth solving, but that our solution, when compared to our competitors, is a better solution. Many of us are also not considered the “low-cost provider” in our markets, so naturally price is an objection frequently encountered. It’s not that our customers won’t buy a more expensive solution. It’s just that they want to make sure there is justification for any investment they may make. So Quantification of Value is critical. The Value Equation is our not-so-secret weapon in this effort. It helps us tell and sell our story to our customers.
In our laser hair removal case, we had a knowledgeable doctor, someone who knew the value of a new patient and the value of happier staff. However, not everyone you speak with is going to have the ability – or even perhaps the willingness – to quantify all of the Costs or Benefits associated with your solution, whether Abstract or Concrete. You will need to collect that information throughout the process, as you meet with key players in your prospect’s organization. The next time you hear that some capability of yours might save them time, ask them how much time. The next time a customer says, “My team is really going to be disappointed if we don’t do this,” ask, “How will you measure the impact of that?”
It’s about quantifying what you can – when you can. Next time a customer asks you, “Where did you come up with that number?” be sure to have an answer.