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  • Writer's pictureEd Engler

Unlocking Value by Reducing Costs



Welcome back to the 3 Points Rising series on value propositions. Saving money is often a compelling value proposition if you can get people's attention. Replace a competitive product with a lower cost solution and it becomes a win-win for you and your customers. Furthermore, the finance department gets a say at some point during every sales process. If your price exceeds the current budget, the finance department often becomes the “department of no”. Managers can’t typically spend more than what’s in the budget without a lot of approvals that are often hard to get. However, if your solution comes with a *smaller* budget and a reduction in any budgetary line item, the finance department is more likely to be pleased to support it.


While the possibilities for cost savings are as varied as the budget line items, today we’ll cover four models that companies are already using to reduce costs for your customers:

  • Product replacement

  • As-a-Service offerings

  • Virtual technology

  • Vendor management


Product Replacement

Replacing one product that is in use with another lower-cost product is an age-old value proposition. In today’s age of disruptions, technologies are able to provide 30-90% lower costs than existing products. Even when budgetary spend is modest, a 90% reduction in

costs is often compelling. Products that offer such a 10x value proposition are often the fastest to be adopted by their markets. When you can focus on one of the company's top expense categories, even a small reduction can be interesting if it adds up to a meaningful increase in profitability for the company.



As-A-Service Offerings

In recent years, new generations of consumers have shifted their purchasing habits to pay-as-you go models that don’t commit you to spending lots of money up front or on a long-term basis. Instead, pay-as-you-go subscriptions bring down the costs of technology adoption and reduce the capital needed to switch to a new solution. If you can take on the capital expense of creating a capability and offering it by-the-drink or on a monthly subscription, the savings for your clients in capital expenditures can be enormous.


Virtual Technology

Working from home and video conferencing have shown us that we don’t all have to show up at the office every day and that travel isn’t always necessary. However, companies with unique infrastructure or expensive hardware often find it necessary to bring employees or customers to large training centers or specific locations where they must learn the specifics of their new job. Travel and time-on-site are hugely costly so have started using virtual or augmented reality tools to enable education off-site. Digital twinning of devices, people, processes or systems can all provide dramatic savings in education, travel and employee errors. Live video feeds and real-time data can enhance value substantially when integrated with other systems and presented without too much fanfare or extra hardware.


Vendor Management

People and companies often get complacent with incumbent vendors. Personal relationships, perverse incentives, lazy vendors and opaque business processes all contribute to bloated spending with vendors of various sorts. While senior management and the board may be committed to best practices and outlier outcomes, layers of management, conflicted employees and organizational inertia make the results less than satisfactory. Providing process, tools and/or specific services can all align interests, create transparency and assure accountability in ways that can dramatically reduce the costs of vendors. Consulting, outside marketing and advertising and technology development are all subject to bloated budgets and can offer massive opportunities for savings. Bringing an outside perspective with industry benchmarks and a mandate from the CEO opens the door to dramatic business process reengineering. Just stay aware of personal relationships that can overcome even the best designed procurement processes.


Importance

Regardless of your suite of value propositions, it makes the sales process much smoother when you can offer cost savings, especially as part of your initial engagement. It makes the finance department of “no” much easier to get on board. Once you have established credibility and an ability to save your clients money you can offer more capital intensive solutions that may take longer to get a decision on or get budget for. Find opportunities that fit within your buyer’s budget and you are likely to find a shorter time to close. Look across all of their budget line items to find potential surprise areas you may be able to offer.


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