Now, I know this isn’t the true meaning of the value of Christmas, but with my mind (sadly) focused just on money, I then started thinking about the cost of Christmas, as I do at this time every year. You’ll have got by now from the value equation that value is not the same as cost, as some retailers would have us believe with their ‘value ranges’.

I came across this amusing economic analysis by PNC Wealth Management for 2009. It’s based on the cost of gifts in the seasonal carol, The Twelve Days of Christmas.

The 2009 price tag is a total of $87,403 for all of the items in the carol, purchased repeatedly as the song suggests. The cost of buying each item just once increased this year to $21,466. Not bad considering the price is up just a bit at $794, or less than 1 percent, from $86,609 last year. PNC, who have been calculating the cost of Christmas since 1984, attributed the modest increase to lower energy costs and fewer wage increases.

Watch their great video to explore the 2009 PNC Christmas Price Index in detail.

Cindy

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• A demand for simplicity
  Even before the recession many people were feeling overwhelmed by the proliferation of choices (see the article More Jam Anyone? in this blog) coupled with 24/7 connectivity and were starting to simplify. The recession is accelerating this trend.
  The authors say, “Consider the rise of edited retailing (consumers are offered limited collections of coordinated product choices), a growing demand for trusted brands and value, an increasing desire for advisors – ranging from social networks to product ranking web sites – that can simplify choice making, and enthusiasm for less complicated, more user-friendly technologies.”
• A focus on the boardroom
  Like the simplicity trend, this issue has been building for years, spurred by major governance failures such as Enron and WorldCom. Misbehaviour in the boardroom is no longer acceptable. The huge tax payer bail-outs of badly managed businesses will accelerate this trend. This also builds on people’s well established reflex to punish companies for unethical labour or customer practices, as Nike and Nestlé have learned the hard way.
• Discretionary thrift
  A desire to be more wholesome and less wasteful is prevalent, with people recycling more and buying more used goods. “People are imbuing their children with traditional values – behaviours that dovetail with the growing demand for simplicity and a solid, though currently slowing, interest in green consumerism.” Many post recession purchases will be less extravagant versions of pre-recession ones.
• Mercurial consumption
  Buyers are more agile and more fickle due to technology and social networking. They are more likely to shop around and shift allegiances.

So what does this mean for sales and marketing? Here are some of our recommendations.
1) Focus on how to help people realise the true value of your offering. It amazing what great and simple ideas can come out of doing this
2) Be honest. In a world of mistrust, ‘spinning’ your messages is turning people off fast.
3) Don’t start by focusing on price! Price is relative and it’s a bad place to start any sales and marketing efforts. Get your customers talking about what really matters to them and then you can reframe the whole ‘price’ discussion.
4) Network. As buyers are shopping around and using technology and networking as part of their decision-making process, then you need to be part of it. Linked In, Twitter, Blogs are proving to be powerful influencers. If you’re not tweeting, then you need to start!

In what ways are you changing your sales and marketing efforts for this economy? What’s working for you?

⁽¹⁾ Understanding the Post Recession Consumer, P Flatters and M Willmott, Harvard Business Review July-August 2009, pp 106-112

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Answer: They all link and work together to create your value proposition.

The chances are that you have probably looked at each one of these things in isolation, but again, let’s apply some strategy here (see posting titled: Strategy and the Fat Smoker). Let’s plan a bit further forward, outside the immediate horizon of, “s**t, I’ve got to do something”. If you pull all of these areas together and use a framework and process such as Futurecurve’s Value Proposition Builder™, you can create a value proposition that stops price erosion and aligns your value with what your client needs and will pay for.

To stay in business and not only survive but thrive during this recession, you only have one sensible option: focus and hone your value. If clients complain that you are too expensive, then you are simply not demonstrating your superior value to them. You can, of course, keep offering the same product or service and cut your prices, if you want to go down the discounting route. But doing this means you are losing value during the sale – value that you won’t be able to regain in the future. So don’t do it! Building and developing your value proposition means proving to clients your superior value in bottom line terms, not making unsupported marketing claims about your value.

Our new book “Creating and Delivering your Value Proposition: Managing Customer Experience for Profit” (published by Kogan Page and available from September 2009), answers many of the ‘so what’ questions. “OK, I’ve done my customer satisfaction surveys, I’ve got my benefits worked out, I’ve even got my ROI or TCO calculated, but how do I pull all of that together to demonstrate superior value and make money?” Our new book shows you how.

Immediate Actions

1. To get a flavour: download our new Value Propositions white paper.

2. Attend our 1 day workshop: learn how to stop price erosion now and sell on value Link to workshop details

Written by Cindy Barnes

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The moral of the tale? Don’t be scared to reduce and focus your offering portfolio for greater profit. Now is a great time to apply rigorous focus and do this. The first step in the process of reviewing and developing your offerings is to categorise what you’ve already got.

We tend to think that it is easy for manufacturing and product companies to categorize their products, but more difficult for service companies to do so. There is a tendency for those of us in the services sector – particularly in consulting – to think that, because our Offerings are less tangible, perhaps more complicated, that somehow they are superior to the manufacturing and product equivalents. There’s a certain intellectual snobbery about it. But it’s nonsense.

If you are a service provider, or provide a product-service amalgam, for a moment think of your Offerings as products. That way, you’ll likely find it a lot easier to define the components – the Bill of Materials, so to speak – that go to make up the whole. So think of building offerings like building products.

Only when this mapping has been completed – and it may be quite a lengthy exercise – will you be able to position your Components, Offers, Solutions, and Co-created Value onto a Value Pyramid, as explained next.

It is our experience that the whole of this exercise is best carried out using workshops: create hypotheses and workshop through with your offering managers or solutions leads.

Map to The Value Pyramid™
Having identified your Offering portfolio you need to map the offerings to The Value Pyramid™. The basic components are Component, Offer, Solution and Co-created Value, and that the nature of the sales processes around each of these categories changes profoundly, as indicated here:

Value Pyramid

Value Pyramid 2

By way of example, we set out below an Offering Portfolio Map for a hypothetical market intelligence consultancy. We have envisaged an organisation that offers a range of research and analysis services to its clients. The map might work out as follows:

Value Pyramid 3

Once this mapping is complete, it is far easier to see the way forward because you are able to identify:

• What offers can be grouped together to form new Solutions or higher value offerings?
• What offerings in one part of the business can be combined with other offerings from other areas (sectors or technical lines) to create new offerings?
• What pricing needs to be used with which offerings and what level of required profitability?
• How should each type or group of offerings be sold? That is, which lend themselves to low-cost of sale, automated or transactional selling, and which to high-touch, problem solving, high value-add consultative selling?
• To whom should each offering be sold? Offerings suited to transactional selling will be targeted to expert buyers (e.g. procurement experts) whereas Solutions and high-value offerings will normally involve consultative selling with more senior management (e.g. CEO and other senior executives) who, although they may know generally what they want to achieve, will need value-creation support to help them shape the solution.
• How long will it take to sell the respective offerings? Offerings lower down The Value Pyramid™ generally have a shorter sales cycle than those nearer the top.

Profitability
We also recommended a radical review of the profitability of your products and services, which we will explore in another article.

Having identified your best Offerings, you should then examine whether (and how) your sales and marketing approach needs to be refined.

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