Value = Revenues – Costs

Revenues

Examples of objective revenues include:

  • ROI, profit, savings, market share…  ‘Positive’ revenues generally have little impact on the client and are therefore not so effective. Positive revenues are a condition but not a trigger. They don’t produce business.
  • Avoiding loss or risk (Selling the ‘pain’). Avoiding the ‘pain’ creates a certain tension and can be more effective, but still isn‘t enough to get the client to act. A question such us “Suppose that you continue to smoke for 10 years, what impact will that have on your health?” generally has little effect.
  • There are also more subjective revenues such as reputation, career, security, power, ego… ‘hidden agendas’ let’s say, which can advance but also hold back sales, as with every type of negotiation.

We can still see that possible clients will put up resistance, even for positive revenues. That’s why we need to look at the costs.

Costs

  • Investment costs: these are not usually experienced as being problematic, as long as the revenues are higher than the costs.
  • Change costs for switching to a different supplier: these slow down the sales cycles and create internal resistance.
  • Risk: very important in the purchasing decisions made by risk-shy mainstream clients, hence the need for ‘references’ and reliable sales people who instil confidence and listen.
  • The more subjective costs, such as the stress or pain of change, overcoming internal resistance to change.” Do we want it hard enough?”

Real resistance is caused by this more emotional and subjective side of costs, which is very strong and for which there is no proven ‘logical argument’. What was urgent yesterday might not be today!

Copyright © 2011, René Knecht