The ‘Hard’ versus ‘Soft’ Benefit Conversation – part one of two

by Bob Caravella

Bob Caravella is one of the industry’s leading experts on value engineering.  He built and led the business value engineering and consulting practices at Mercury Interactive and HP Software – including value model engineering and enabling the worldwide sales teams to carry on meaningful value conversations with customers.  He is a member of the DecisionLink Management Advisory Board. 

The following is the first part of a blog series that explains an important aspect of Customer Value Management (CVM) and value selling — the justification of investment in B2B solutions using ‘hard’ vs. ‘soft’ benefits.

When 30 professionals recently weighed in on the issue of using ‘hard’ versus ‘soft’ benefits to justify investing in B2B solutions, the responses (perhaps not surprisingly) were uniformly consistent: ‘it’s in the eye of the beholder (aka, the Economic Buyer).’ Nevertheless, because the professionals represented a diverse group of individuals across different roles (buyer, seller, delivery) and different business functions (IT, Supply Chain, Value Engineering), their perspectives and responses are worth noting.

 One person, commenting on the importance of the hard versus soft debate noted, ‘it’s a great question that strikes at the heart of credible value messaging, and the reason why c-level buyers don’t take claims of 600% ROI with 3-month payback seriously.’ Here’s a summary of the exchange and some food for thought.

First, let’s try and define hard versus soft

  • Hard Benefits, sometimes referred to as ‘Direct’ or ‘Tangible’ benefits, are the line items that directly impact P&L. They are typically found as line items in budgets or project plans. Hence, they are ‘measurable’ and someone can be held accountable for performance. Examples include FTE (Full Time Equivalent) labor costs, annual contract service expenses, hardware or software expenses. The mantra for this type of benefit is ‘Doing more with less.’
  • Soft Benefits, often referred to as ‘Indirect’ or ‘Qualitative’ benefits, are line items that do not show up in budgets. Typically, they are risks that would be mitigated to a degree by making an investment in a B2B solution. For example, mitigating the risk of end user productivity or revenue loss, customer disloyalty, or regulatory non-compliance penalties. The tagline for this type of benefit is ‘Doing more with the same.’ The point being that existing people can be reallocated to more strategic work, perhaps increasing revenue or improving the customer experience. These are harder to measure.

Become Your Customer’s Trusted Advisor

Never assume you know what the customer means by ‘hard’ versus ‘soft.’ Establishing a Trusted Advisor relationship with your customer requires clarification on what Benefits are ‘hard’ versus ‘soft.’ That way a meaningful measurement baseline can be established. Here are some lessons learned to consider.

  • Focus on the buyer’s desire to change
    • Don’t get caught up in philosophical debates about hard versus soft costs. Rather, understand the nature of the change the buyer is committed to making.
    • If a customer is going to realize the benefits, they need to make changes. Help your buyer think through the changes needed then focus on the best way to quantify the potential benefits realized from those changes.
  • Reframe the conversation
    • Challenge the status quo and push for alternative ways to move the needle. Productivity measurement can be applied to any form of capital or human resource and knowing how productivity efficiencies align with competitive advantage and bottom line results should be where the conversation starts.
  • Gain insight into the buyer business transformation strategy and drivers
    • Understanding the customer’s strategy and expected outcomes will dictate how you position benefits. In some cases, you may need to shift the conversation from cost savings to revenue growth. A high revenue growth company views benefits differently than a mature, slow growth business with a need for cost savings.
    • Positioning benefits depends on the growth curve of the buyer: a fast-growing company can avoid adding headcount in the future, or reducing workload so that people can work on more strategic activities with a bottom-line impact. Gain insight into the drivers of growth (e.g., case call volume) over the coming years. Ask if they plan to hire to cover this growth and if hiring can be avoided, would that be tied to hard savings.
    • If you know that the customer isn’t looking to reduce FTEs, but is looking to expand to a new market, align the FTE benefits to this strategic initiative and refactor the benefits around revenue growth. You may say something like, “By streamlining and automating this process, we can add five FTEs to the market expansion project, reducing the time to market by two days resulting in $xxx of additional revenue.”
    • Are mergers and acquisitions part of the strategy? If so, a productivity argument can be made such as, ‘you can assimilate the acquisition without the need to hire more people, resulting in a tangible and measurable cost avoidance.’
  • Go with the flow
    • Ultimately, the buyer decides what’s ‘hard’ versus ‘soft’, not you. Never draw attention to the type of benefit that is being measured. Wait for a buyer to request a breakdown, don’t volunteer it. Once the decision is made, always lead with hard benefits. While soft benefits can be quantified, they should come along for the ride.
    • A “soft” benefit that can be tied to an opportunity cost, like deferred hiring, customer retention, or a faster product launch, becomes significantly more tangible; thus, it can be treated as ‘hard’. This often removes a buyer’s hesitancy to include it in the business case.
    • Productivity savings are more compelling for some roles than others. CEOs, other executives, and people in the supply chain (like strategic planners, material planners and designers) typically prefer hard benefits. Support functions, general employees, agents are usually more receptive to soft benefits.
    • Soft benefits may be treated as ‘Other (Qualitative) Considerations’ in your business case. Keep in mind that soft benefits may play a larger role with quality or process-oriented customers. Some companies discount relevant soft benefits to 10-25% of the value of a hard benefit.

In part two we’ll explore how to reposition the nature of a benefit, dealing with push back, bridging the expectation gap, and how to ensure you’re asking the right questions.

Would you like a free customer value assessment? If so, please click HERE

DecisionLink at the Pre-Sales Value Engineering/Pre-Sales Leadership Collective Fall Workshop: Customer Value Management for Pre-Sales Leaders

John Porter and Kristina Cutter of DecisionLink recently led thought leadership discussions surrounding Customer Value Management and value selling for pre-sales leaders at the Pre-Sales Value Engineering/Pre-Sales Leadership Collective Fall Workshop on October 14, 2019.

John Porter is the CTO and Co-Founder of DecisionLink. He is the visionary and pioneering technical expert creator of DecisionLink’s ValueCloud ®. John is a pre-sales thought leader who also leads the Customer Value Management group on LinkedIn.

John has split his career almost 50/50 between pre-sales/pre-sales management and value engineering for small and large technology companies like edocs, Siebel Systems, Oracle and SAP. John and his team have built the DecisionLink ValueCloud® to help customer facing resources (pre-sales, sales, customer success and product marketing) to easily quantify, articulate, defend and ultimately measure customer value throughout the entire customer journey.

Kristina Cutter is the Senior Director of Customer Enablement for DecisionLink. She is former Director of Sales Operations and Enablement at Amadeus Hospitality. While there, she successfully launched and led a value selling program for over 70 field reps internationally. She is now a part of the DecisionLink team working with customers from Pre-Sales through Implementation and Enablement.

Together John and Kristina led a presentation at the Pre-Sales Value Engineering event at the Seattle Pre-Sales Leadership Collective that was held at the Smartsheet offices in Bellevue, WA on October 14, 2019.

The Seattle Pre-Sales Leadership Collective is an exclusive community of the best pre-sales leaders at growth companies that work together to network, share experiences, and learn from one another. Our membership consists of leadership from companies such as DocuSign, SAP, Concur, Tableau, Smartsheet and many more. They host Seattle-based workshops specifically for pre-sales (sales/solution engineering/consulting) leaders for networking and group discussions. The workshop topics revolve around leading a pre-sales function within a growing sales organization.

This was a full day event that was focused on why it is crucial to include a business case with every opportunity and how Pre-Sales can help as the “tip of the spear” with speaking to value EARLY in the sales process. The first half of the day was spent on what we are seeing in the marketplace, followed by a panel made up of folks who implemented “value practices” at their organization. The second half was more tactical and focused on how to create value statements and benefits in an easy to understand/scalable way.

There were 20 pre-sales leaders in attendance, and they were all really engaged and interested in learning more about insights into trends in the evolving Customer Value Management market. The presenters explained how pre-sales can facilitate value selling conversations, lead value programs, and elevate the acumen within customer facing personnel across the board. During the session, John and Kristina also conducted a workshop that taught participants how and where to build their first value model and apply it to a customer scenario.

In addition, Kristina Cutter participated in a panel discussion on the topic of Customer Value Management with the following participants:

Trent Isaacs
Trent serves as Regional Vice President, Solutions Consulting and Value Selling at Verint systems.  In this role, he leads teams of presales Solutions Consultants in supporting enterprise software sales in the Americas.  He has successfully launched a value-selling program in the region used for over 100 field staff. Prior to his 13 years with Verint, he held senior leadership positions responsible for the management of contact center operations in the BPO space for 10+ years.

 Taylor Boldt
Former retail strategy consultant at Merkle Loyalty Solutions. While there Taylor worked with companies like L’Oreal, Sony and Michael Kors to maximize customer spend and retention. Taylor is now a member of Value Engineering team at DocuSign where he is responsible for all things DecisionLink. The tool has been rolled out to over 500 users across North America.

 Josh Lankford
Josh is a former Sr. Value Engineer within JDA’s Global Value Engineering team, where he specialized in understanding client needs and mapping them to JDA solutions in order to drive value attainment.  Josh has over 20 years of experience across Manufacturing and Retail organizations, and has held various roles across operations, IT, consulting, and software sales. Josh’s strengths include both a depth as well as breadth of knowledge across Retail, Merchandising and Supply Chain operations gained as a practitioner as well as a consultant / vendor.  Josh’s passion lies in helping others define the strategic initiatives and roadmaps needed to unleash the value within their organization and his diverse background enables him to successfully lead cross functional and cross-cultural teams in achieving their objectives.

Would you like to schedule a free DecisionLink ValueCloud® customer value assessment for your company? Please click here to schedule.

Handling Objections to Starting a Customer Value Management Program

A Customer Value Management (CVM) program uses metrics to ensure high levels of value are delivered to every customer based on their needs throughout the life of the relationship. Managing customer value as a practice and with an enabling application allows enterprises to treat customer value as a strategic asset and win business and retain customers more often; decrease discounting, accelerate deal cycles, market and showcase value, price more effectively and reduce churn.

One of the biggest challenges, especially at organizations that are just dipping their toe into formal customer value selling, is push back on “why do we need this?” and “can this wait?” This flies directly in the face of almost every sales methodology which says aligning your solution and value to customer initiatives is imperative in:

  1. Reducing loss to no decision
  2. Minimizing deal erosion, via discounting, at the negotiating table
  3. Speeding up the sales cycle

Why all the push back? And what do we typically hear:

  1. My sales people are not ready to have these conversations
  2. Our customers are not asking for this
  3. We are in the middle of rolling out a formal sales methodology

Let’s take each one of these in context…

My sales people are not ready to have these conversations

It is true that today, in many cases, only the top 20% of sellers are ready, willing and able to have these conversations confidently. Coincidentally, they are almost always your top performers. If you can, through a Customer Value Management Program, bottle the DNA of these top performers and make it available to others, you could double or even triple the number of top performers in your organization. What would that mean for sales leaderships and your company’s success? To that end, the right time is yesterday not tomorrow.

Our customers are not asking for this

Your prospects/customers may not be directly asking for a business value assessment or business case, but they are going to be lucky if they get funding approval from the company for this quarter without one. In reality, most of your “buyers” have not bought your type of solution before, they are not experts in the value it brings and what differentiates it from, not only competition, but also “do nothing”. By leaving this in their hands you have effectively removed any control you have over the sales / buying cycle. Additionally, there is no better way, within the buyer, to figure out who has to get involved and what steps are needed to sign than to start socializing a business case for changing the status quo.

We are in the middle of rolling out a formal sales methodology

Let’s face it, the #1 reason sales training and methodology implementations fail is because two days after the training everyone forgets what they have learned and ultimately reverts to the prior habits. A Customer Value Management Program, at its essence, is a way to reinforce most of these sales methodology and training investments through tooling and support. Now the investment in making your people successful can be reinforced in their daily deal engagement.

When it comes down to it, selling value offers many benefits and delivers results that improve sales performance across the board. There are always excuses to put things off, but the faster the process begins, the sooner the benefits are enjoyed.

Would you like to schedule a free customer value assessment for your company?  If so, please click here now!

Why Quantifying Customer Value is so Hard Part 2

by John Porter, CTO and Co-Founder for DecisionLink

This blog is the second in the series on why quantifying customer value is so hard.  (If you missed the first in the series you can read it here)

The key topic here is understanding and audience.  One of the biggest challenges a Business Value Consultant (BVC) or Value Engineer (VE) faces effectively communicating the customer value quantification of your solutions.  An old adage says “it very easy to make the simple complex, but simplifying complexity is a true art” and let’s face it most of us are consultants and engineers not artists.  We focus on spreadsheets and data to convey very detailed and complex topics and many times we are the only one in the room who can explain.

Herein lies the issue!  In most cases, the collective “we” (BVC, VE, SE, etc.) is not in the room when the real decision is made to buy and are completely dependent on our business sponsor to sell on our behalf.  If our buyer, who is not an expert in our solution or the value it brings them, is ineffective in positioning the need for our solution to solve the business problem and demonstrating the payback the customer will achieve, the chance of the dreaded “no decision” is very likely.

I pose these questions:

  1. How have you simplified how your sellers and ultimately your buyer’s ability to communicate your business case during the buy cycle?
  2. How many benefits / areas of value do you find effective as focus for engaging customers?

 

Productivity Benefits for Customer Value Management:  Hard or Soft? 

Productivity Benefits for Customer Value Management:  Hard or Soft?

Mark Camilleri
Director of Value Engineering
DecisionLink

Do you position improved productivity benefits of your solutions as a hard or soft dollar savings as you work towards improving customer value management?  Most practitioners place productivity improvements in the soft bucket, however, I would argue that depending on the benefit and how you position it, they could be counted as hard savings as well.  Ultimately, it’s going to be whatever your customer / prospect buys-off on, but if they can be convinced to count them as hard dollar savings, that just further improves your customer value positioning.

So, what kind of benefits are good candidates for hard dollar savings to help sell value?  It is going to be difficult for any customer / prospect to agree that “generic” productivity gain benefits are hard dollar savings.  However, if you can tie benefit to the actual cost of something (typically some sort of event) it can potentially be brought to the table as a hard cost savings, especially if it is tied to an important KPI for the customer / prospect.  Taking a simple call center example.  If you articulate your benefit as improving call center agent productivity by 20% you are going to have a difficult time convincing any financially savvy customer that is a hard savings unless they have plans on downsizing.

However, by simply positioning the benefit differently, you may have better success with your customer value selling efforts.  Imagine their cost per call center call is $5.  If you still claim your 20% productivity improvement, the cost per call is now $4.  If you are saving $1 per call (a vital KPI in the call center world) on 1M calls, that $1M savings can now be better argued as a hard dollar savings.

Again, it’s always going to be boiled down to what your customer accepts, but to simply always categorize your productivity gain benefits as soft savings allows your potential customer value of your solutions to be diminished.

What are your thoughts?  When / how have you been able to achieve hard dollar saving buy-in for productivity gain benefits?

If you’d like to schedule a free customer value assessment, please visit this page:

https://www.decisionlink.com/free-stuff/

Why Is It So Hard to Quantify Customer Value?

Customer Value Management Is Key to Solving the Problem

by JOHN PORTER

This is the first in a series of blog posts which will cover why quantifying value is so hard.

Value Engineering, in its purest form, is designed to align the value of what you sell to the opportunities that buyers have, quantitatively. The hope has always been that by doing this, it would help create budgets where they don’t exist and/or protect your margin against erosion when negotiating. Doesn’t seem too difficult. Right? Think again!

So why has automation eluded us for the most part? One of the main reasons is your value constantly changes.

Take for example a software company:

  • You have at least one major release per year which adds to your value
  • Your customer use cases are constantly evolving
  • Your competitors are doing the same

Should you look to automate the process of Value Selling or Value Engineering, you need to catalog and evolve your value constantly and consistently. You also will need to make sure this catalog is something you sales team can understand, or your will not be able to enable the “tip of the spear.”

Failure to constantly evolve your value or put it in terms so that your customer facing resources can understand, articulate and defend, is to maintain the status quo. The effective management of your customer value is key. This is a major reason why we think that Customer Value Management is a huge deal and why companies who master using the right technology and discipline will win!

As I look at the market at the present moment, granted from my DecisionLink point of view, I do not see a lot of companies that seem to be getting this right.

So, I pose a few questions:

. How have others done this effectively?
. What has worked and what has not?
. Why are we only supporting a small fraction of deals?