To quantify benefits, customers must perceive value. It goes without saying that sellers are a critical part of that process. Whether it’s the product sales people who are responsible for selling services, or a dedicated services sales team, the services portion of the solution must be positioned early enough in the customer’s buying process to be considered an important component of addressing the business problem they’re trying to solve.
Product sales people are often criticized for introducing services late in the sales process. There are many reasons for this, not the least of which may be a lack of understanding or confidence in positioning the value that services can provide. Often they believe that adding services somehow diminishes the value of the products they are selling, while adding unnecessary cost to the transaction. Of course nothing could be further from the actual truth.
The later services are positioned in the sales process, the more difficult it is to tie them to business improvement. And therefore customer value. At this point services are perceived as added cost, and any value positioning comes across as reactive, perhaps even insincere.
Assuming all elements of the solution have been positioned correctly and a degree of trust has been established between the buyers and sellers, quantifying the benefits and articulating the value is still a significant step in selling any solution (services or product + services).
Benefits quantification is a collaborative effort between seller and buyer, and there must be agreement on a number of factors to get to an actual number or value. The good news is that the basic process is pretty simple, and while there are certainly nuances, it goes like this:
- Gain customer agreement that that your solution creates a specific benefit(s).
- Ask the customer how they would go about quantifying it.
- If they don’t think the benefit is quantifiable, and you have previously quantified the same benefit with another customer, share how you did that – it might just change their mind.
- If they agree that the benefit is quantifiable, work together on the assumptions required for quantification. This gives them ownership. Since this is the most important part of the process, some important considerations are described below.
- Presuming assumptions can be agreed to, you can now quantify the benefit.
- For cash flow purposes, cost reductions are handled differently than revenue improvements. Cost reduction flows directly to the bottom line, and revenue benefits will likely be measured against a cost of revenue (confirm with the customer whether they would use gross profit, net income, or another measurement).
Benefits quantification and the assumptions that go into it must be based on sound logic. Creating credible assumptions is the most critical piece of the benefits quantification puzzle, so here are a few important considerations:
- Accuracy is not nearly as important as being logical and reasonable, so don’t over engineer the process. You are predicting the future, so you will never be exactly right, and efforts to get there will take longer, frustrate the customer and perhaps be less accurate. Educated estimates are more than acceptable; they’re essential.
- Collaboration with the customer at the right levels is essential. If the people you are working with don’t know the numbers or don’t have access to them, chances are you are talking with the wrong people.
- Make sure the assumptions pass the test of reasonableness: objectively consider alternative values (higher, lower, or another metric altogether) and consider the implication. This helps identify the most reasonable approach.
- Do whatever you can to establish credibility: compare the assumption to the same metric in similar companies, independent research or past work in the same company.
- Numbers alone are misleading. Provide all necessary context to validate the assumption.
- Assumptions change with the passage of time, so document the assumption, the source and the date.
During the process you will likely realize that some benefits just can’t be quantified, and that can happen for number of reasons. But don’t let that keep you from at least trying to put some monetary boundaries around them. In most cases it’s reasonable to say something like, “Mr. Customer, I know you believed that this would probably increase market share, but you couldn’t put a finger on how much. We agreed it would likely be at least 0.1% and possibly higher. So in effect, even though we didn’t quantify this, it may be worth $100K or more in gross profit.”
While the thought of quantifying benefits might be daunting at first, with practice it will become part of your everyday selling style. Even more importantly, the consultative nature of the dialogue and assistance in quantification will be valued by your customers and differentiate you from most of your competitors.