Creating Value That Customers Are Willing and Able to Pay For
In a 2011 MAPI survey of chief procurement and sales officers, we saw some interesting statistics. Only 13% of sales executives felt that purchasing departments were interested in proposals that address total cost of ownership (TCO). On the flip side, only a third of procurement executives felt that sales reps were good at emphasizing total cost. Not encouraging numbers, but there is a growing understanding in the marketplace of the importance of TCO. At MAPI's recent Executive Summit, we heard from one of the most prominent thought-leaders in the field, SKF's Global Value Manager Todd Snelgrove, on getting out of the trap of focusing on initial unit price.
Todd's breakout session sought to help attendees answer a key question: How can manufacturers quantify (and get paid for) the value that they create for customers? Without a doubt, it’s a lucrative goal. Companies that are good at value selling enjoy a 60% higher customer retention rate and those that buy on total cost have a 35% higher net operating margin than their peers. Todd shared his perspective on measuring the value that you bring to customers to justify a price premium, and how to incorporate total cost of ownership into a sales, pricing, marketing, and purchasing strategy.
Click here for more information on how SKF approaches selling (and buying) on total cost.