Download Sant presentation 022014

February Meeting: Adding Value to Our Value Propositions
The APMP California chapter’s first meeting of 2014 featured a presentation by Dr. Tom Sant,
F.APMP, on effectively communicating value in proposals.
Proposers tend to regard value as a cure-all that relieves pressure on price, competition, and slow
sales cycles. That is, we believe that if we can convince the customer that our solution is the best
choice, we might have to worry less about losing to the lowest bidder.
A value proposition, Dr. Sant said, is a promise to deliver specific results that the client desires,
backed up by evidence that we can keep our promise. “If we do that, we’ve got a really good
chance of winning,” he said. “But unfortunately sometimes that doesn’t work. Sometimes our
value propositions don’t have any value.”
A good value proposition must overcome four obstacles:
1. Cognitive bias. People are predisposed to give more importance to potential losses than to
potential gains. What we pay is seen as a loss, so the gain must be significantly greater than that
loss. “The biggest fear that they [our customers] have is that they are going to spend more than
they should, which will dramatically diminish the return on investment.” A corollary of this is
that people are likely to over-weight what they already have versus what you have to offer.
“People simply won’t change. They won’t change even when the cost of doing nothing is more
than the cost of taking action.” And this means that being the incumbent has a huge value.
Changing processes and changing control structures for your customer also raise flags – this is
the kind of change that they naturally will want to resist. To overcome this resistance, then, the
proposal must make clear how the investment in change will pay off.
2. Buyer behavior. Purchasing managers try to get the value out of the equation and reduce
every procurement to a question of price.. There are four basic types of buyers: the price buyer,
the value buyer (who needs a quality proposal to support his or her buying recommendation), the
relationship buyer (who wants you to be an extended part of the team), and the poker player
(who will pretend to be a price buyer even when actually looking for value or relationship).
“Although roughly 30% of all buyers are price buyers, only 21% of large-scale enterprise deals
went to the vendor with the lowest price,” Dr. Sant said. “So somebody is overruling the price
buyer from time to time.” This means that a compelling case for value can indeed result in a win.
3. The reality of sales commissions, which creates suspicion in the customer’s mind.
Whenever there are sales commissions, there is likely to be skepticism about our sincerity in
offering superior value. A common mistake is to try to up-sell to the customer in the proposal.
Gold-plating is not adding value if it isn’t something the customer wants. Don’t throw in things
that they aren’t asking for – they don’t need to know you offer it. Sometimes the proposal team
must be the gatekeeper, rejecting content that shows what the company has to offer at the
expense of a coherent message about what the customer is looking to buy.
4. Weak value propositions. Tarzan screaming is not a value proposition. “Generic claims of
superiority do not work.”
So what do we do to make a compelling value statement? Dr. Sant says it involves five
components.
The basic value proposition is that the value of our solution is greater than the value of the nextbest alternative minus the cost of that alternative. “If we can convince the customer that that’s
true, we almost certainly are going to win,” Dr. Sant said.
First, we must identify the customer-desired outcome. Customers are looking for different
kinds of value. Strategic value shows up on the profit/loss statement, or mission fulfillment, or
impact on share price. Tactical value is manifested through improvements in operational
efficiency – maybe introducing better practices or reducing errors. There’s some overlap
between the two. Tactical value appeals to the user. This may be what drives the deal. Third is
social and political value. This can be external (increase customer loyalty, community
acceptance, reduce carbon footprint) or internal (morale, turnover). In Europe, this is often the
top driver, sometimes more important than financial gain.
Ask the customer how they will measure success. Do they have any specific key performance
indicators? How will you communicate your success to your peers? The answers to those
questions should help you identify the outcomes that the customer really wants.
2. Quantify how big the value is that we are going to deliver. To do this, we need three bits of
information: the baseline, the probable gain, and the value of the gap. Dr. Sant recommends the
Douglas Hubbard book How to Measure Anything. Figure out case studies and find ways to
frame the benefit in a way that is compelling to the customer.
3. Show it graphically. There are two reasons to do this. First, it focuses the reader’s attention.
Readers skim, and pictures stop the skimming. It focuses the reader’s attention and increases the
persuasiveness by 47%, according to the University of Minnesota. Your graphic makes it easy
for the customer to visualize the benefits of your solution.
If your own corporate culture or lack of knowledge about the customer’s situation make
quantification difficult, use a case study from a previous project.
4. Link your value proposition to your differentiators. What differentiators are relevant to the
need and to the value you are adding? The best differentiators are the things that only you can
claim, but there aren’t a lot of those. Nevertheless, you can highlight the things that you do
differently. You want the customer to recognize things that are important.
One potential differentiator is how you will manage the work. And a good one is the people you
are putting on the project. Equipment, tools, facilities, software, and other resources might be
unique.
How to do this? List your differentiators. Then align them with the values your customer seeks.
Then weight them.
5. Prove it. There are three kinds of evidence. Things you say about yourself, things your
customers say about you, and things that third-party experts say. You can’t use marketing fluff.
Use references, testimonials, case studies, awards, personnel certifications. What your customers
say is the strongest of them.