Capturing Value in Nontraditional Ways

When I grew up in Massachusetts, I remember reading a story about Joe Kennedy. He would go up to owners of older drafty apartments in downtown Boston and make them a unique proposition. Many of the units were poorly insulated and cost a small fortune to heat in the winter. Joe would agree to insulate the building at no cost to the owner if the owner agreed to simply pay Joe the historical heating bill for a contracted period of time. Then at the expiration of the contract, the owner would begin to pay the actual heating bills from that point forward and owe Joe nothing for his investment in insulation.

Joe captured his value in the margin between the lower heating costs he had to pay while the owner continued to pay Joe the much higher historical based cost. Joe capture additional value in the form of tax credits.

Since I live in Colorado where it is sunny for over 300 days per year, last year I contemplated buying a solar panel to supplement my electricity. After doing an ROI analysis, I determined that based on the large upfront cost it would take more than six or seven years to see any kind of savings from the purchase. I recently read an article by clean energy entrepreneur Jigar Shah that got me thinking. There is an opportunity for a solar panel company to look at the Joe Kennedy model and just give away the solar panel in exchange for capturing the margin between the market cost of purchasing electricity from the utility company and the actual cost paid by the consumer with the panels supplementing their electrical need. The solar company could devise a economic model based on a contract period where the margin would provide an ongoing annualized revenue stream for a given number of years that would not only cover its cost, but provide a hefty profit. Rather than carry all the costs, the solar company could unitize the cost of the panels plus their installation and offer the deal to investors who could also capture the subsidies. Have you ever considered giving away your product in exchange for capturing revenue in other ways?

Reposted by permission. View Steve’s original post here. Follow Steve on Twitter @SteveImke

Marketing and Sales Alignment

Factors In Choosing Your Sales and Marketing Model

It bears repeating that despite all the possible permutations of how you can get there, there are only three ways to grow your business:

  1. Increase the number of customers
  2. Increase the average transaction size
  3. Increase the frequency of purchase

In order to be successful, you must align your marketing and sales model to meet one or more of these three objectives. If you can increase all three metrics, you will soon have a world-class operation. And while there are many possible ways to achieve a revenue objective, some organizations (perhaps yours) are not using the best strategy. Each of the possible methods has its plusses and minuses, and the best choice for you is not always the obvious choice. You should not make decisions regarding your marketing and sales model simply based on what your competitors are doing but rather on your unique assets and weaknesses.

When I talk about a sales and marketing model, I am referring to the specific methods and processes that are used to generate revenue. A sales and marketing model can be as simple as a corner lemonade stand, or as complex as Amazon’s e-commerce engine. Major sales models include direct sales, telesales, channel sales, retail sales and ecommerce sales with many hybrid options.

Tough Questions That You Need to Answer

Before considering a new way of doing business, it is helpful to understand your current situation. Begin by asking these questions:

  1. How did your current marketing and sales model evolve?
  2. What is your motivation for keeping the status quo?
  3. Are you doing things out of habit or by deliberate choice?
  4. Is your sales force earning its keep?
  5. Are your current channel partners helping or hindering progress?
  6. Are there any time bombs at your company?

Time bombs are those issues that, if not addressed, could have serious consequences downstream. If you prefer a different analogy, think of time bombs as the potential Achilles tendons of your organization – where you are most vulnerable to atrophy or attack. The Andy Grove statement, “Only the paranoid survive,” certainly applies here. Sometimes, the best time to be paranoid is when you don’t feel that you have to be. Here are a few of the most insidious time bombs:

  • Metrics that are way below standards – for example, a high cost of customer acquisition.
  • Good products, but a sales team that is stable, comfortable, and very inefficient.
  • Channel partners that are leaving you for the competition.
  • A prohibitive cost-of-goods.
  • Products that are more than one generation behind the competition.

This post was excerpted from the white paper, How to Choose the Best Marketing and Sales Model.

Relationship Marketing

Relationships are Dead? Smart Sales Models Resurrect Them

For me, reading the Bain and Company white paper, Is complexity killing your sales model? was like being splashed in the face with cold water. The ideas presented here about relationship selling were counterintuitive, at least for this former sales force communications manager. After all, I was used to the sales success mantra of—Relationships are everything! Then I read:

“Buyers can readily gather basic information about products online. Then, in the vendor selection stage, total cost of ownership and return on investment trump relationships. Purchase decisions that were previously controlled by one manager now involve a web of stakeholders.”(page 1)

Crazy, right?

But after I read the entire paper, I realized Bain was telling me how we need to rethink current B2B sales relationships and stop creating complex, inefficient sales models that use these relationships ineffectively.

  • The changing shape of demand means that customers are researching more before they buy, expecting to find solutions for their business problems, not just one-time products. The sales relationship thus becomes more consultative and the relationship even more crucial
  • Smart sales models reward their sales personnel for expanding the customer relationship through cross selling but also put a high premium on the difficult process of landing that new account.
  • Early in the sales cycle, smart sales organizations are loading their sales bench with specialists who are industry experts. That’s how they avoiding losing sales because customers fear salespeople “don’t know their industry”
  • Sales models that include a specialist and a generalist create a team that will grow with the product line. The relationship that a specialist builds with the “new kid on the block” is also rewarded somewhere in her compensation, to ensure that the knowledge needed to close deals expands across the company, across time, and in tandem with the sales cycle.
  • Make sure the relationship between the back office and the sales organization is seamless. According to Bain, the back office is the company’s “secret weapon” in protecting customer loyalty and freeing up to 30% more of the sales representatives’ days for actual selling. (10) Allowing a well-staffed, expertly trained back office to protect the relationship with new and existing customers can save money, untold heartache and, yes, Virginia, I’ll say it — relationships. To download the entire Bain and Company white paper, click here.