Organizational characteristics affect customers` goals

written by: Patricia Terrone; article published: year 2006, month 12;



In: Categories » Business » Strategic planning » Organizational characteristics affect customers` goals

Even taking into account styles, attitudes, and personalities, customers' goals are not as arbitrary as one would imagine. Two factors influence what goals customers seek and the market segments they belong to: the characteristics of their organizations and their positions. Using these two factors helps you to suggest goals that customers can relate to when you initially contact them. Your knowledge of their goals helps to solidify your status as a customer expert.

Note  Sources of information can range from Google on the Internet, www.ceo.com, annual reports, company homepages, Wall Street Journal Interactive, local newspapers, tradeshows, industry publications, other departments in the company, other noncompeting salespeople who sell to the same account, and so forth. Siebel ebusiness has an excellent booklet, called "Information Sources Handouts," which provides numerous ways to gather data.

In addition, a company's sales brochures tell you how it is trying to sell value or position its offerings. How a company sells value is often how it measures value. For example, if the company sells reliability to its customers, it is going to seek solutions that improve reliability for them. (For example, FedEx guarantees delivery to its customers and looks for business partners that sell solutions that do the same). Also, try to obtain the sales literature of the company's competitors to see whether you can offer solutions that help it to offset its competitors' strengths or exploit their weaknesses.

Organizational characteristics are the primary attributes that influence the way companies view themselves. They are the undisputed traits customers readily identify about themselves. These traits help establish the goals customers want to achieve. Here are a few examples:

  • The product or service the company is selling. Does the company sell a mass-produced product or does it focus on niches? The primary goal of many car manufacturers is to standardize components. Their huge economies of scale motivate them to have as many models as possible share common components, which keeps their inventory and design costs down. If you sell products that standardize components, you know they "should" interest car manufacturers.

  • The degree of contact that occurs between the company's employees and its customers. Is the company isolated from the end users of its product or does it have daily contact? One of a credit card company's main goals is to improve customer services. Its daily contact with customers means its fortunes directly tie into how well it excels at customer service. If you sell products that improve customer services, you know they should interest credit card companies.

  • The operating profile of the organization. Does the company operate on an eight-hour day, five days a week or around the clock? A main goal of a convenience store that operates on a twenty-four/seven basis is to improve security. If you sell products that improve security, you know they should interest around-the-clock convenience stores.

  • The human and dollar costs of interrupted service. Is the company's operation of a critical nature or low urgency? One of a hospital's main goals is to minimize downtime. Lives are at stake if the electrical or mechanical system fails. If you sell products that minimize downtime, you know they should interest hospitals.

  • The image the company is cultivating. Is it high technology or low technology? Is the company viewed as a leader or a follower? One of a sporting goods company's main goals is to maintain a youthful and healthy image. If you sell products that project a youthful and healthy image, you know they should interest sporting goods companies.

  • The company's business climate. Is it in a high-profit, fast-growing industry or a low-profit, declining business? One of a cutting-edge computer company's goals is managing growth and change. If you sell products dedicated to managing growth and change, you know they should interest computer companies.

  • The company's tolerance for risk. Is it willing to take chances or avoid risks? One of an insurance company's goals is to improve safety. If you sell products that improve employee or policyholder safety, you know they should interest insurance companies.

If this section is beginning to sound repetitive, that is good. The repetition of the phrase will help you to commit it to memory. By now, you are probably saying to yourself, "If companies have these organizational characteristics, then they have these goals. If those goals match up to my unique strengths, then I want to contact them. When I mention their goals, they should show interest." You have got it.

Note  Your list of market segments and organizational characteristics can vary and might be quite long, depending on your industry. Again, use your unique strengths and strongest features to determine the characteristics of the market segments that produce the customers' goals that you should focus in on.

How Your Contact's Position Affects His or Her Goals

The position of the person who is your contact at a company further narrows the goals he or she wants to achieve. The roles and responsibilities of a position determine individual goals. The director of purchasing has different goals (and sometimes conflicting ones) from those of the vice president of operations or the engineering manager. The head of finance has different goals from those of the director of maintenance or human resources or vice president of sales.

In addition, your contacts' positions also determine how their performance is measured (which helps determines their goals). For example, if a vice president of operations receives his performance review (or bonus) based on reducing downtime by 10 percent, that will be his goal.

Note  If you can't through questioning uncover the customer's goals or the person isn't sure what you mean, ask how his or her performance is measured.

The following examples demonstrate how people's positions, combined with the characteristics of their organizations, further predict their goals:

  • Is a vice president of a national sales force interested in sharing customer purchasing information better?

  • Is the vice president of finance for a credit card company interested in improving cash flow?

  • Is the director of manufacturing interested in improving on-time deliveries?

You bet they are! Your sales go up as your ability to understand customers' goals improves. Discussions about goals provide a great starting place for your sales calls. Customers appreciate that you are focusing on their destinations (goals), not yours (products).

Note  In sales situations involving more than one decision maker in various positions, divide your written proposal into areas of interest sections for quick referencing. These sections reflect their different areas of expertise and their separate goals. You might need to make different types of presentations within the same organization depending on the positions of those in your audiences.

How Customers Assign Value to Their Goals

You help customers to figure out their goals. Next, you want to help customers calculate the dollar value they receive from achieving these goals. The computing tools you use in this endeavor are Systems of Evaluation (SOEs). You find out their numerical details in MP 2: Measure Potential. As you will see, more sales are won or lost at the SOE level than at the product level.

Note  SOEs or often referred to as key performance indicators (KPIs). However, SOEs focus more on calculating measurable value than do KPIs, henceforth their difference.


Example

A customer wants to purchase a new piece of manufacturing equipment to improve reliability (goal). If the salesperson of the product with the best-documented performance persuades the customer to use the SOE of mean time between failures to calculate reliability, he will win the sale.

Yet, if the salesperson of the product with the best predictive diagnostics convinces the customer to use the SOE of warning time before failures occur to calculate reliability, she will win the sale. The key lies in which SOE produces the most measurable value in dollars.

The number one requirement of SOEs is that they must accurately reflect the attainment of customers' goals.

Customers' Goals Systems of Evaluation to Assign Value Numerical Details Examined in MP 2: Measure Potential
Minimize initial cash outlay Initial purchase prices Dollar differences between competitors' sell prices
Reduce life-cycle costs Total cost of ownership Dollar amounts of operating, maintenance, and repair costs
Increase reliability Number of hours lost to downtime Number of annual downtime hours and the cost per hour

SOEs must reflect the attainment of customers' goals.
Note  Besides knowing their goals, you can often determine which SOEs customers use to calculate value by reviewing their Web sites or sales literature. The SOEs they use to sell value to their customers are the same ones they will use to measure value. For example, a computer manufacturer stresses reliability and an SOE such as "lowest defect rate per million parts" to their customers. If you show how your products improve reliability via the same SOE that the company uses, it will respond positively. Your sales approach becomes a unique strength when you help customers to identify valid SOEs that competitors have no experience with.

Systems of evaluations have two tremendous benefits that you use to outvalue the competition and earn compensation for doing so. First, they provide customers with the means to convert perceived value into measurable value. Each SOE adds a measurable benefit row and dollar amount in Column 2. If you have four SOEs, you have four rows of dollar amounts that add to your total measurable benefits. Each additional SOE helps to offset the actual and perceived dollar value of the four Column 1 items.

Second, you use SOEs that favor your unique strengths to dominate a marketplace. While either benefit is acceptable, having both is overpowering as illustrated by the following real-life example.

Example

Ray Kroc and McDonald's made billions selling what many considered to be the ultimate commodity, hamburgers. Kroc used SOEs to make the perceived value of customers' goals such as good taste, consistency, high food quality, and cleanliness of facilities all measurable. Case in point: McDonald's measured taste and consistency by using identical ingredients, weights, standardized cooking methods, and uniform packaging. You knew McDonald's made its hamburgers measurably more consistent than did mom-and-pop burger joints. No surprises as to what a hamburger looked and tasted like at McDonald's.

Kroc used these SOEs to turn a so-called commodity into a product with unique strengths. He dominated the marketplace by establishing SOEs that favored McDonald's unique strengths. He highlighted the unique point-by-point checklists McDonald's used to ensure cleanliness as a unique strength of the company's.

He forced other burger joints and fast-food restaurants to compete on terms that matched up to his unique strengths. No surprise who won. The competition's only immediate defense was lowering its prices. This tactic probably explains why most independent hamburger joints went out of business. You cannot continue to use lower prices as a marketing tool without eventually losing money and diminishing quality.

Yet, systems of evaluation vary sharply in how customers calculate value. They include methods stressing lowest prices to ones emphasizing highest returns on investments.

As the McDonald's example demonstrates, SOEs put either you or competitors at advantages or disadvantages depending on whose unique strengths best match up to them. When customers use SOEs that bind their goals to your unique strengths, you outvalue competitors to win sales. You dominate the marketplace. The opposite is also true, which again reinforces the need for you to know which SOEs favor whose unique strengths.

How to Calculate the Value of SOEs

To know the customers' SOEs is one thing, to calculate their value in dollars is another. Your goal is to provide the formulas to use for the calculations and let customers plug in their numbers. If they don't know these plug-in numbers find out who does, or as an industry expert, use industry averages (if acceptable to the customer).

Systems of Evaluation Typical Customer Calculations and Formulas Used to Measure Value (in Dollar Ramifications) Typical Unique Strengths They Favor
  1. Return on investment (ROI)
 Net profit divided by invested capital Highest performance track record
  1. Payback
 Total savings divided by total investment Quickest recoup of initial investment
  1. Initial costs
 Total purchase price Lowest prices
  1. Life-cycle costs (costs of ownership)
 Total purchase price plus add in all lifetime operating costs (operating, training, parts, maintenance, repairs, utility, upgrading, etc.) Lowest product-life operating costs
  1. On-time delivery percentage
 The percent of missed deliveries multiplied by the cost for a missed delivery (return costs, lost or delayed revenues, penalty costs for missed deadlines, etc.) Computerized scheduling
  1. Number of distribution centers
 The percent of missed deliveries multiplied by the cost for a missed delivery (return costs, lost revenues, penalty costs for missed deadlines, interrupted production costs, etc.) Worldwide parts depots
  1. Percent of in-stock merchandise
 The percent of unfulfilled orders multiplied by the cost for a lost order (average order size, lost revenue, interest charges, costs of inventory, etc.) Highest order fulfillment rate
  1. Costs of changes (switching out suppliers or products)
 Total costs in new training, parts inventory, equipment, etc. Highest flexibility
  1. Number of product lines
 Total dollar benefits of different goals customers want to achieve addressed by various solutions from the same vendor (such as transaction costs and economies of scale) Broadest selections
  1. Hours of downtime
 Number of downtime hours multiplied by the average hourly cost (labor, administrative, lost revenue, etc.) Quickest response times
  1. Percent of on-time project completion dates
 The bonus or penalty incurred for each day ahead/behind schedule Comprehensive project management
  1. Total profit impact
 Total savings or costs reduction achieved Highest documented savings
  1. Market share impact
 Profit or revenue calculations for each point increase/decrease in market share Most competitive products
  1. Cost of doing nothing
 Total dollar value of unrealized benefits Existing supplier or status quo if savings aren't measurable; the most dollar savings if they are.


Everyday examples of SOEs.

 

Note  When customers use systems of evaluation beyond their technical expertise, it usually indicates that an outside consultant is helping them select one. In addition, to find out which SOEs favor your unique strengths best, ask your highest-value customers what measurable benefits they received from the goals you helped them achieve and how they calculated their SOEs.

Example

Michelle Ross sells a product costing more than that of her competitors (sound familiar?) Yet, her unique strengths produce two-year paybacks. Her lower-priced competitor's product has a four-year payback. She knows that with customers who favor the goal of largest savings versus lowest up-front costs, she wins the sale.

Michelle must prove to customers that achieving the former goal over the latter provides more value to them—if they use the SOE of total dollars saved over a four-year period.

Note  Customers without any SOEs are tough to sell value to. Subjective or emotional factors found in Column 1 and their simplest calculations, price or delivery, become their primary SOEs for calculating value

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