Beyond Price

1. Beyond Price Differentiate Your CompanyIn Ways That Really Matter!

2. Objectives • Enjoy the session & have some fun • Participate in the session • Gain a new idea or refresh an old one • Take-away something you want to apply, learn more about, or do something with

3. Why Build a Strategically Differentiated (Hard to Replicate) Business Model? You’ll gain: • Price premiums • More loyal customers • Faster decision making • Clearer direction and focus • Superior resource utilization • More collaborative teams – starting at the top

4. Win as Much as You Can!

5. Win As Much As You Can! • The objective of this exercise is to WIN AS MUCH AS YOU CAN! • For 10 rounds, you and your partners will be asked to discuss and vote as a group for either BLACK or RED, depending on how much money you want to win. The “payoff” for each round is dependent upon the pattern of choices made (as shown on next screen) • Your decision for each round must be recorded on the “Choices/Payoffs” table with an “R” or “B” before announcing your vote to the facilitator. • A negotiator agreed upon from your group may confer with the other three negotiators for 2 minutes before rounds 5, 8, and 10. No choice is entered, however, until you and your partners confer privately. • There is a bonus payoff round on rounds 5, 8 and 10. • The facilitator will answer no questions after the game has started; she is only a scorekeeper. She will record the choices and tally scores after each round.

6. Payoff Schedule If the vote is:The group choosing each color: 4 Blacks Loses $1 each 3 Blacks Wins $1 each1 Red Loses $3 3 Reds Loses$11 Black Wins$3 2 Blacks Wins $2 each2 Reds Loses $2 each 4 Reds Wins $1 each

7. Win as much as you can - Scoresheet

8. By choosing to play the price game, know there can only be one winner---and chances are it won't be you. “More than any other time in business history, we're in danger of giving in to sameness.”

9. So - are you in a price-driven market?

10. Are you in a price-driven market? • Is it easy for competitors to copy each other’s technology and features? • Markets are mature—that is there have been no major changes in products or services or their applications for an extended period of time. The products or services are solving the same problems today as they did in the past. • A few customers make up a large percentage of your total revenue. • Customers – for the most part -want a standard product with no genuine customization.

11. Are you in a price-driven market? • Customers can self-perform your service • A particular supplier’s products or services are not essential to the quality of the customer’s finished goods or services • There are a number of acceptable suppliers that customers can consider • Customer’s profit or income is low and being squeezed

12. Buying Power is demonstrated in the following types of statements: • “Tell me your final price.” • “Here’s exactly what I want—read the request for proposal (RFP).” • “I’ll only accept qualified bidders —those that have the capabilities to provide this quality level within this time frame.” • “The cheaper brand is good enough for me.”

13. If you can not become (and remain) the lowest cost supplier that is forcing you to compete primarily on price, there is only one way to earn consistently attractive returns… You must become the ONLY or CLEARLY SUPERIOR company to offer benefits that are highly valued by customers (strategically differentiated).

14. - Strategic Differentiation -The process for lifting your company’s offerings out of the commodity market quicksand. Differentiation – doing things differently from anyone else. Strategic Differentiation – focuses on creating higher value across ALL your company’s offerings - not just with one product or product line!

15. Examples • Become an expert at tapping into rebate $$ • Advisors for driving down a company’s energy cost • Energy awareness and measurement • Energy recovery – can we help them save energy in other processes besides compressed air. • Become a key solution provider • Rapid response – across the entire organization

16. True or False

17. True or False All purchase decisions are based on value, even in commodity markets.

18. True or False The profit margin that a business earns depends on supply relative to demand.

19. True or False There is only one winner in a commodity market—the company with the lowest cost-structure.

20. Economics 101 - All True! • All purchase decisions are based on value, even in commodity markets. • The profit margin that a business earns depends on supply relative to demand. • There is only one winner in a commodity market—the company with the lowest cost-structure. These basic economic principles explain WHY a strategically differentiated business model is necessary for HEALTHY PROFITABILITY

21. Exploiting Strategic Differentiation A strategically differentiated business earns higher returns when the following conditions hold: • The customer genuinely gains additional value from how you are different • The incremental value the customer derives from you exceeds your cost to create the differentiated position • Competitors can not copy you without significant ongoing financial consequences • You continue to make changes that further increase customer value

22. Price Driven or Market Driven?Commodity Mentality or Strategically Differentiated Company? Which do you choose? The answer rests in unearthing new, attractive, and actionable insights about customers, markets, competitors, and your company’s performance in its markets.

23. Steps to Strategic Differentiation • Forget Customer Driven – Become Market Driven • Conduct an assessment • Design a new business model • Realign the Leadership Team • Establish goals and create an annual planning process to achieve them • Align culture with strategy

24. True or False…Customer satisfaction is a differentiator? FALSE

25. Customer satisfaction is now a commodity – it is not a differentiator. Customer satisfaction is vital. But satisfied customers do NOT ensure your future success.

26. Why market driven and notcustomer driven ? What’s the difference?

27. Market-Driven Companies… Delight strategic customers with what they need but could not articulate!

28. Market Driven Companies… Know that not all customers are equal.It means that you make you make deliberate decisions about where you compete.

29. Key Differences Between Customer Driven and Market Driven Companies

30. Key Difference Between Customer Driven and Market Driven Companies

31. Provocation-Based Selling Persuading customers that the solutions you bring to the table are not just nice but ESSENTIAL. Provocation-based selling helps customers see their challenges in a new light that makes addressing specific painful problems unmistakably urgent

32. Types of Selling • Product-Based Selling – pushes features, functionality, and benefits, usually in a generic manner. • Solution Selling – seek out current concerns in a question-and-answer dialogue with customer managers and used when customer understand the problem)(i.e. Pepsi – reduce water consumption; Coca Cola – compressor optimization) • Provocation-based selling helps customers see their competitive challenges in a new light that makes addressing specific painful problems unmistakably urgent.

33. In a severe downturn, provocation-based selling may be the only way to move past the “buy nothing” mantra emanating from customer organizations. In sunnier economic times it can lend power and urgency to products or services that are relatively undifferentiated in their markets.

34. Provocation-Based Selling - Best When: • Customer’s problem is unacknowledged or poorly understood • The budget doesn’t exist – but compels project investment outside the budget • Targets strategic problems --- the customer’s main question is “How can we change our approach to this problem, because we haven’t yet managed to deal with it effectively?”

35. Criteria for Selection • Would it meet the CEO’s “keeps me up a night” threshold? (Does this problem seriously jeopardize the organization’s ability to compete?) • Is it being ignored, neglected, or ineffectively addressed by existing processes, systems, or services • Are you a credible source of advice on the issue? Is your company’s track record better than your competitor’s when it comes to helping others in the customer’s industry solve related problems?

36. Steps to Strategic Differentiation • Forget Customer Driven – Become Market Driven • Conduct an assessment • Design a new business model • Realign the Leadership Team • Establish goals and create an annual planning process to achieve them • Align culture with strategy

37. Strategic Assessment It is impossible to create a differentiated business model when you and your leadership team is so focused on operational and financial performance that it has no idea where the road leads.

38. PerformTen Strategic Questions • Why are our sales what they are?

39. Why are our sales what they are? REVENUE = Served Market Size x Awareness Rate x Consideration Rate x Win Rate x Relative Purchases Per Customer x Relative Selling Price of Your Offering

40. What does the data tell you? REVENUE = Served Market Size x Awareness Rate x Consideration Rate x Win Rate x Relative Purchases Per Customer x Relative Selling Price of Your Offering • What if you have high awareness and consideration rates but low win rates? • What if you have high win rates but low awareness and/or consideration rates?

41. The Sales Equation • If you have high awareness and consideration rates but low win rates, you should dig into the reasons why potential customers do not select you. • If you have high win rates but low awareness and/or consideration rates, you will find increased opportunities in marketing communications and/or sales strategies. • You may discover that your market is very slow growing, demanding an expansion of the your company’s offering to the current target market or the addition of a new target market to grow. • Or perhaps you can increase revenue per customer by broadening your offering to current customers.

42. PerformTen Strategic Questions • Why are our sales what they are? • Do we or could we have a unique competency that benefits a group of customers?

43. Core Competency • Competency – a collection of skills and knowledge that creates an overall organization capability. • Core Competency – - Creates customer perceived value- Difficult to replicate- Extendable—can build on it to succeed in new markets- Clearly superior to what competitors can do

44. PerformTen Strategic Questions • Why are our sales what they are? • Do we or could we have a unique competency that benefits a group of customers? • What factors drive our profitability?

45. What factors drive our profitability? • Identify customer segments • Identify situations when they buy • In what locations? • At what times of the year? • What products are services are most profitable? Find the combination of factors that products the highest profit margins (these are the most differentiated and have the best growth opportunities)

46. What factors drive our profitability? • Ask – What’s different about these customer segments – or products – or services that cause them to contribute more profitability than others.(This answer helps you determine what drives financial success) • Example – WalgreensDiscovered the key to profitability was sales per customer rather than customers per store.

47. PerformTen Strategic Questions • Why are our sales what they are? • Do we or could we have a unique competency that benefits a group of customers? • What factors drive our profitability? • Where do we compete, and what are the pros and cons of where we compete?

48. Where do we compete? • Helps you define the boundaries of your market • Ask – How do your customers describe you? • In which purchasing decisions are you considered and which are you not? • Is there a way to describe your business that creates a category of one? • What are the strengths and weaknesses where you compete?

49. PerformTen Strategic Questions • Why are our sales what they are? • Do we or cold we have a unique competency that benefits a group of customers? • What factors drive our profitability? • Where do we compete, and what are the pros and cons of where we compete? • Are we currently strategically differentiated from our competition?

50. Are we strategically differentiated? • Designed to help you understand how and what your current and potential customers think about your business (risks and opportunities) • Do customers clearly see the distinction between you and the competition? • Do they value this distinction? • Are your margins high and attractive (vs. the competition) • Do you have loyal customers other than too much demand chasing too little supply • You’ve shifted from bid to negotiation – or to winning on benefits over price