Creating Value In Business

The notion of quantifying the costs for customers in order to illustrate how much money they are currently wasting or will be wasting if they do not do business with you is a key element in the process of getting a customer to buy from you. This sounds obvious but can be overlooked by many people attempting to trade with a customer.

This process allows someone not only to demonstrate how much money can be saved but also alleviates their concerns about spending money on one’s particular product or service.

Various areas may be addressed during this part of the process however it is not always easy to uncover where a customer’s money is being spent.

Getting customers to realise the value of one’s solution has to begin with asking the right questions; in order to do this one needs to identify the customer’s typical costs and then decide whether or not they could be reduced or eliminated through the use of one’s product or service.

A good example of this would be health care where outsourcing has become a hot topic, as well as with businesspeople and politicians.

There is a natural compulsion to use lower-wage workers abroad who have the same skills as those at home, although this brings with it the unexpected.

The pros of this are that savings will be made in direct costs and staff may be able to be eliminated from the payroll.

The cons are, depending on the industry, that the internet may go down, there will be a lack of rapport between the patient and doctor, there is a lack of accountability, and there would be no confidentiality.

Another good example of this is the construction industry.

Selling bricks is not all that exciting, but it is possible to quantify costs. For example, take someone who sells bricks to homeowners building new houses and construction companies creating new neighbourhoods.

It is very difficult to convince either of these parties to use bricks because they are more expensive than other building materials.

However, presenting the argument in a different way changes the picture:

Bricks hold heat better than other materials so in the long run costs will be saved on heating bills

As opposed to rendering, which needs to be replaced after years of wear and tear, bricks last a lifetime

Studies have shown that, everything being equal, a brick house will sell for fifteen per cent more than a house with rendering

For construction companies, bricks are easier to work with and easier to store than other materials.

In summary using this cost justification system, it is possible to translate the features of a product into considerable benefits and thus largely override the raw, up-front cost of the product; value can be imparted to a customer other than front line savings. However, it must be remembered that coming from the outside it is always easier to see and understand the concept and after all, it is their money that is being spent.