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Six cost factors to consider when pursuing a new business client

April 5, 2017

Price isn’t the only criterion customers use to evaluate the cost of doing business with you. Does your value equal or exceed that cost?

Bart Shachnow

Sales Performance Director

As Sales Performance Director, Bart, with the help of his team, develops and delivers a broad range... About this expert

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Everyone’s talking about “value propositions” these days, and there are a multitude of definitions as to what the term means. (In subsequent tips, we’ll go into more detail.) For now, suffice it to say that a value proposition essentially states how you can address the needs of a prospect or customer better than anyone else.

How a value proposition is formulated and communicated is critical to success, yet the most fundamental element is often overlooked: You must consider the relationship between the value you are bringing to the table and the cost you are asking the prospective buyer to pay, all the while remembering that “cost” is not limited to price alone. This cost can be felt in many ways, including but not necessarily limited to:

  • Uncertainty: “Will it really be better elsewhere?” How can a customer be sure that moving to another provider will translate into better results, better service, better overall outcomes? All of this is uncharted territory and people generally feel uncomfortable with the unknown.
  • Aggravation (aka, the “hassle factor”): A customer may believe it is simply too much of a hassle to change providers, even if the proposed provider “seems” better on paper.
  • Upsetting the status quo: Many people find comfort in the status quo and have an “if it isn’t broken, don’t fix it” attitude. Even if they realize things could be better, will the benefit outweigh the perceived aggravation?
  • Dislodging a long-term relationship with an incumbent provider: An incumbent almost always has the advantage (and usually the “last look”). While incumbents can often get complacent about a relationship, they are also often quick to make amends if their shortcomings are pointed out after a competitive bidding process. Once the changes are made (even if forced by the competition), the incumbent can settle back into nurturing the inherent comfort level associated with an established relationship.
  • Developing new relationships: Leaving an incumbent, established relationship also entails potential risks and effort. Don’t underestimate the learning curve associated with establishing new relationships with a multitude of personalities and departments at a new provider.
  • Price issues: Yes, price is always an issue. But don’t think you’re a lock to win an account because you came in at the lowest price. Other issues will certainly be considered (see above). And a customer may believe that a lower price is being offered just to win the relationship, with the intent being to raise prices at the earliest next opportunity.

So, in formulating your value proposition, you should evaluate the relationship between the value you believe you bring to the table, and the cost – in all its manifestations – you’re asking the other party to pay. Here are the two scenarios you face:

If value equals or exceeds cost, you have a chance to win. Make sure you have identified and can clearly articulate why and how your value exceeds these aforementioned costs when you make your presentation to the prospect or customer.

If value is less than cost, you have virtually no chance and should consider deploying your resources elsewhere. This is often difficult to accept, because most salespeople are eternally optimistic. Be realistic. Time is one of your most important assets. Use it wisely by diligently pursuing those accounts where you can make a compelling argument why the value/cost equation is in your favor.