I Guess He Told Me!

Well, it happened again. There I was trying to convince everyone in the audience that there are no commodities and I could tell by the body language that one person wasn't buying into the message. You know how it is when body language is shouting, don't you?

He is in building supplies and, like too many other people in that industry, was convinced that all of his products were commodities. "Plywood is plywood", he told me. (Why people in that industry use plywood most often is an interesting study!) He went on to say that plywood has to be sold on price because, well, plywood is plywood. My goal was to try to convince him differently.

Plywood is a fabricated product. That means that it starts with raw materials, goes through a process and then is offered as a value-added product to the customer. So, could he differentiate on raw materials - that is, were his raw materials better than anyone else's? Nope.

Could he differentiate on process - with quality control, for instance? Nope. Even though his company is one of the few in the industry applying the principles of Lean Manufacturing, he still saw his products as the same. Therefore, he has to sell on price, or so he told me.

We parted with him being unconvinced. He still believes that his products are commodities. But listen to what else happened. At one point in our conversation he asked me if I ever bought plywood. As a matter of fact, as a do-it-yourself homeowner, I buy plywood more frequently than most folks.

"So," he snarled (really!), "what is the difference in the plywood you buy? How do you choose plywood? Is one plywood maker any different than another?" He was firing the questions rapidly so I waited until he stopped to reload.

"I choose which plywood I buy by the side of the street the home center is on". This was my criteria. I want to make it as easy as possible for me to get the plywood home. I do not shop price; I do not shop stores. I make my selection based on the location of the plywood. For me, logistics is everything.

"See there! Plywood is plywood!" this was his reply after hearing one of his customers tell him that price didn't matter.

In P.L.U.S.H. Selling, we need to combine "L" (Listening) with "U" (Unique). We need to learn to hear why people choose to do business with us. Preconceived notions and preset responses will not help us sell.

Think about it this way. If you do not have the lowest price and ONE customer buys from you, price is not the real buying criteria.

What if logistics are important for his other customers? After all, he's the guy selling to the home center in truckload or carload (railroad) quantities. I'm the schmuck hauling out a few sheets at a time. Is the ease of getting the plywood on the shelf where I can pull it a good thing? How much value does that have to the home center?

For years I have been teaching salespeople to ask their customers why they bought from them. Just ask them. Their answers will often amaze you because it is not something you are thinking about.

So, after every significant sale, have someone in your organization go back and thank the customer for the order and then ask the question, "How did you choose us?"

Don't be like the salesperson who cannot hear the answer - be open to the idea that your customer may be using a different value standard than you are.

1. Acknowledge that it may not be a commodity in the customer's mind
2. Qualify and Quantify (See the next article)
3. Use Downside Loss and Upside Risk (See the article after next)

Qualify & Quantify

Downside Loss/Upside Risk

Whenever there is a problem or an opportunity, there are two factors to consider in qualifying and quantifying: Downside Loss and Upside Risk. Think of it as money coming in one pocket and money going out of another.

As we saw in the example above, with out-of-stock materials people would be standing around and not producing. There are at least two ways to calculate the out-of-pocket cost (Downside Loss) of this: 1) the hourly wages multiplied by the number of productive hours lost and, 2) the revenue-per-hour that would have been generated if the materials had been on hand.

Upside Risk would be asking what having the materials in place more effectively might mean to the customer's bottom line. Could they actually make even more products using your materials? If so, there is a loss of additional (Upside) revenue if they are not using the better material source.

Real world example (again from the world of plywood): a building products company focused on delivery as their differentiation and reached the point where they could offer their customers a 99% on-time guarantee and a 96% fill rate. (They also bundled a unique billing program with this to eliminate 70% of their customers' invoices). As a result of this program, their customers did not need to maintain the same inventory levels they had been. Once customer freed up over 300 square feet of floor space. The cost justification looked like this:

Downside Loss: Excess inventory cost: $137.00 per month

Upside Risk: 300 additional feet of fabricating space allowed one new cell which generates $8700.00 per month in finished goods.

Who cares if the plywood has a higher price? The cost is significantly less!

1. Qualify your value to your organization. What do you do that helps your company increase revenues or profits and what do you do to help lower costs?
2. Quantify each of those. Can you find specific examples of how you helped the bottom line? When you do, place a specific value on what your contribution was worth.
3. Ask yourself "What else?" you could be doing to increase your value to your organization.