Software-as-a-Service (SaaS) and more generally cloud computing are now widely accepted as a perfectly viable IT strategy for large and small enterprises alike. There are even services companies focused on accelerating the adoption of cloud computing, such as Appirio. The implicit assumption is that SaaS delivers a compelling value proposition. In this post, we illustrate a value model for a particular SaaS solution, LeveragePoint for Value Management. Self-serving perhaps, yet a demonstration of the importance of drinking one’s own champagne — or eating one’s dog food.
First we need to set context. Our customer is a B2B (business-to-business) manufacturing business unit with $300 million in annual revenue. It has 5 major product lines and has a direct sales force of 100. The company uses a typical approach to value management, which is to say a combination of in-house training and custom-built, sales tools in the form of a spreadsheet-based value models. In this case we’ll assume there are minimal direct costs for this existing solution — a $5,000 budget set aside for sales training. Obviously there are indirect (i.e., opportunity) costs for the time required to build, deploy and manage the sales tools, but this is likely not a big concern for the leadership team. Rather, the lead marketing and sales executives are most concerned about revenue growth and profitability. Rightly, they expect value management techniques to maintain pricing levels in a tough purchasing and competitive environment. Clearly, they cannot afford to hire a top-tier consulting team to undertake a 6-to-7 figure project.
Given this situation, what value does a SaaS solution offer – particularly one that will involve more direct cost versus the current solution? Here are three key value messages for LeveragePoint for Value Management for this B2B company.
1. Marketers can understand the value that their solutions create for their customers better, faster and at a much larger scale. Many marketers don’t have the time or inclination to create value models for every product/market combination. It can take at least one or more man-weeks to build a single value model. That’s the reason why a typical B2B marketing group only has a few hand-crafted models used by a minority of marketers. This can result in value opportunities being overlooked.
LeveragePoint enables any marketer to create a viable value model for their solution/customer in less than an hour. The tool makes the process easy and is fully supported by help and learning. So marketers can quickly create their own library of value models. And because this is SaaS-based, the marketer never has to worry about the myriad of troubling issues associated with sharing spreadsheets like consistency, iteration, collaboration, version-control, security, etc. So with LeveragePoint, marketers can design more effective solutions and supporting programs that offer higher value to their customers.
What’s this worth? Assuming a 1% improvement in revenue growth because this capability at a 20% contribution margin would represent $600,000 of additional value. The improvement in revenue comes a combination of the higher price realization that value selling can drive and the greater efficiency of a properly supported sales force. One can tweak these numbers, but by understanding how a solution drives the business model one gets a real sense of business impact, and hence value.
2. Sales people can communicate unique value messages about your solutions more credibly to your customers. It follows that given the scarcity of value models in a typical B2B company (as described above) that sales people would therefore lack effective value selling tools. Our experience tells us that sales people tend to avoid home-grown models anyway because these complicate the communication process. Instead, value selling is often left to a small set of highly skilled sales veterans who’ve developed their own techniques to effectively position and communicate value. Sadly, there is never enough of this expertise to go around. So, less skilled/experienced sales people generally miss many value selling opportunities because they are not confident enough to engage in meaningful value discussions, focusing instead on features, deals and relationships. A wry quote we once heard captures this sentiment: “A salesman always wins a deal because of his strong relationships and always loses a deal because of price.”
LeveragePoint provides sales people with an online catalog where they can find customer- friendly versions of value models published by the marketers, called value packages. Sales people can use value packages to prepare for an upcoming appointment or print out as a cheat sheet or even as an interactive tool with the customer. Value packages are in an easy-to-read, summarized format that facilitates crisp and knowledgeable discussions. Sales people can customize them for individual accounts, add notes, and provide feedback/intelligence to marketing. The SaaS platform lends itself well to live web-based briefings. So with LeveragePoint, even new sales people can engage in effective value-based sales conversations with their customers. One important dimension of the value packages is the value footprint, which helps the sales person target value messages to specific buyers and influencers.
What’s this worth? Assuming a 0.5% improvement in revenue growth because this capability at a 20% contribution margin would represent $300,000 of additional value.
3. Marketers can create just-in-time, customized sales collateral for sales people. Most B2B marketing communication tends to emphasize overall features and performance characteristics because production costs and lead-times discourage customized collateral for individual accounts. Having a SaaS application like LeveragePoint enables marketers and sales to quickly design and deploy consistent, high-quality value-selling content that can be integrated into presentations or proposals.
What’s this worth? If the company was spending $50,000 to produce custom collateral for strategic accounts, this entire cost could be eliminated thereby creating $50,000 of additional value.
Collectively, these value messages associated with the SaaS solutions can be worth over $900,000 of additional value annually for this B2B company. Of course, one can (and should) debate the quantifications and even the messages. This is welcomed since it is the whole point of a value discussion.
If you want to see this value package in more detail, or see how your offer would look in LeveragePoint for Value Management, please email me.
Ed Arnold
VP of Products, LeveragePoint Innovations
