Is the focus from your customers mainly on price? Have you recently lost a major account?
If so, that may be a strong indication that your customers may not see the value you add.
Perhaps one of the most critical challenges confronting distributors and suppliers alike is the ability to show, in dollars, the value they add to their customers. True value is what you do that allows your customer to be more profitable, period. Since most customers don't know how to quantify the value you add in this business, you must do it for them.
Showing the value you add
Why must the value be shown in dollars? If you can't do this, how will your customers know the worth of what you provide or be able to differentiate between you and another vendor offering a different value-added package?
When customers can't see the difference, they buy on price. Typically, we fall back on the age-old answer that what we offer our clients is service. Hogwash! Everyone will tell you they offer the best service. So how do we quantify it?
Companies that can show the value they add in real dollars achieve a significant competitive advantage because customers always are looking for ways to improve their profits. The more value you bring, whether it's in an incentive program or an embroidered cap order, the more profitable it should become for your customer.
The nice part about added value is that customers often are willing pay a premium for it.
Measuring the value you add
Consider three steps in measuring the value you add: Identify the value you have provided or can provide to a specific customer; determine how these opportunities will make an impact on your customer; and measure the impact.
Developing a profit improvement proposal
To get customers to see and buy on the value you add, you must develop a unique selling proposition. This should be based on your ability to improve your customers' bottom lines and is the difference between selling them products and selling a program.
To take this one step further, make them a profit improvement proposal. Wouldn't that be appealing to you if you were the prospect?
While everyone else is selling products, you are selling profitability. How many distributors actually show their clients how to make money?
Consider these areas in making a profit improvement proposal: Price, added value, performance and compatibility to their needs. The first three can be measured in dollars and therefore can be related directly to profit improvement opportunities. This is what many key accounts are looking for, which can provide you with a competitive advantage if you can show them the impact.
One distributor I know once built a modular presentation around 32 added-value solutions that his company could potentially provide for its customers. Each solution was related to a specific need with which the company could help its customers, given any challenge. The solution always outlined the potential dollar impact expected for a customer, as well as the resources available from the distribution company to achieve the objective.
The distributor then chose which solutions to include in the proposal and filled out a short worksheet on each. The result: a customized profit improvement proposal with minimal effort.
To create a profit improvement proposal, you must be able to measure the total cost impact you have -- or expect to have -- on your customers. Today, this ability will prove a competitive advantage. But tomorrow, it may become a requirement for survival in this crazy business climate.
In ending, I would like to try something different. It's my turn to ask you for something. Would you take a few minutes to jot down the answers to the three questions below? Then fax them to me at (412) 373-8773. I will compile the results and report back in a future column.
1. How do you define added value in your industry/profession?
2. What kinds of value-added services provide -- or could provide -- additional revenue/margins?
3. What additional value-added services will you be providing in three to five years?
Because of such a diverse readership, this may be difficult to compute, but perhaps we will see some trends in the Pittsburgh market. Jeff Tobe, primary colorer at Monroeville-based Coloring Outside the Lines, teaches diverse businesses how to be creative in their sales and marketing strategies. Subscribe to his free creativity newsletter by visiting www.jefftobe.com or contact him at (412) 376-6592.