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Cost of Problem Analysis, Solution Benefit and Solution Cost

I have recently learned a new approach to thinking about the cost of a client’s problem.

It’s called Cost of Problem Analysis (CoPA), and in this technique a salesperson guides a client through an honest assessment of the cost of not having the solution in place.

For example, a CoPA based on the installation of a new soda machine, might take into account such costs as:

  • the added maintenance of the old machine
  • the cost of having the janitor open the machine to retrieve lost change
  • the lost sales from not being able to sell crackers and cookies as well as sodas
  • the additional cost of electricity
  • any other costs that might be traced to the old soda machine that would not be incurred by the new

This is broken down to a single dollar figure.

On the other hand, the solution benefit outlines what gains will be made from having the solution put in place. In the case of the new soda machine,

  • it may carry more drinks, while also carrying a larger selection of drinks
  • it may help to sell more drinks by suffering less stock-outs.
  • crackers and cookies may offer a higher price margin,
  • it would create opportunities for people to make more than one purchase at a time

The Solution Cost is merely the selling price of the new machine.

From these numbers, it is easy to determine whether or not the investment is worthwhile.

It may not be, and the good salesperson can help the customer to diagnose the numbers with some honest assistance.

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A Quality Decision Process vs. a Sales Process

Jeff Thull’s book “Exceptional Selling” on the art of conducting High Stakes Sales continues to provide superior value. He has written several articles for management consultants that I have found particularly useful.

In a prior post, I mentioned that I have been doing some work to customize my own approach, based in part on this book.

He makes the point that a high quality sales approach is basically a high quality decision process, just mis-named.

He also advocates the production of a Cost of Problem Analysis (COPA) that describes the cost of the problem that exists. Once that is done, he describes a Solutions Report that is used to defines the Gains to be made from the solution, as well as the Solution Cost. The difference is the Solution’s Financial Impact. All these computations are described in a Solutions Report.

As I am learning more about this approach I am seeing that it takes some skill to devise these reports for the kind of work that I do — after all I am selling interventions, not machines.

This is where my industrial engineering background has been helping.

He says:

Next, explore the six major focus areas required to arrive at a quality decision process. They include: thoroughly diagnosing the problem; determining the financial impact of the solution; establishing measurable outcomes; understanding solution alternatives; defining investment parameters; and establishing the decision criteria. In each of these areas ask the following questions to help prevent decision mistakes:

  1. What types of mistakes do clients tend to make regarding this kind of decision?
  2. What do clients most frequently overlook or not consider?
    Make sure the decision process brings these elements into consideration.
  3. What are the most difficult things for a client to understand?
    Determine ways to communicate these elements precisely.
  4. What must a client understand to reach a fully informed decision?
    Make sure the decision process brings these to the client in an orderly fashion.
  5. What level of professional education or experience is required to understand each specialty area of the decision?

Make sure you engage people in the decision process that have the required experience or professional background.

In the article I read, he talks about helping the client to improve the way they make complex decisions, and preventing them from making mistakes. The same also applies to the sales professional.

Phew… this is going to take some thought!

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Why Framework Sells the Way It Does

I recently had the opportunity to solidify the way Framework does its selling.

Most of what passes for “selling skills” focuses on making the quick sale, which involves convincing a single person that they need to make a buying decision.

Unfortunately, this approach does not work for complex projects, products and services that involve more than a single buyer, or a significant dollar amount. Here in the Caribbean, I consider a “significant” sale to be more than US$10,000.

It all usually starts with a call initiated by either a prospective client or ourselves in which we discuss a potential problem. At this point, we only have an inking that a potential collaboration might exist.

The next step is to validate the problem through a round of informal interviews, in which we ask those impacted by the problem if they agree an issue exists, and whether or not it is worth putting time, effort and money into a solution. We try to get at the nature of the problem — the cost of its continued existence, and also whether or not it is a priority item, or should be a priority for the company.

Once these interviews are done, and we agree with the company that the issue is real, we sit down with them to co-design a solution, and issue a discussion document describing the solution.

After the discussion document has been validated, the following three questions are asked:

  1. What is the problem costing the company?
  2. What return can the customer expect?
  3. How much should the customer invest to achieve the desired result?

Once these have been discussed, a proposal is written to capture in writing what usually has already been decided.

In an earlier post, I shared why I run from RFP’s, but that was before I read Exceptional Selling by Jeff Thull, which put my years of experience selling projects in perspective in a powerful way. He shares the same point of view, and urges a salesperson of complex products to walk away if their standard process cannot be accommodated.

The problem I have had in the past is that I have been too willing to write a proposal based on a single conversation, with one person. The results of these proposals are usually problematic for both Framework and the prospective client — in short, no-one wins.

There just is no short-cut to the trust that is built when a process like this one is used.

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Why I Run from RFP’s

As a professional, I have always run away from RFP’s (Requests for Proposal.)

Only recently have I come to understand why my stomach churns and I politely demur, when I am told that several companies will be bidding on a solution.

An article on Allan Weiss — known as the consultant’s consultant — helps to point the way. He argues that a client that insists on taking charge of a selling process, and buying primarily on price is making a grave error. Click here for the article.

Also, Jeff Thull who wrote the recently release “Exceptional Selling” argues that winning an RFP is akin to winning the lottery, and is overly focused on the customer’s buying process rather than their decision process.

I agree with them both.

If I were about to have surgery, or hire a lawyer to represent me in a death penalty case in which I am the defendant, I would not think of creating an RFP.

The stakes are just too high for the decision to be made in this manner.

In like manner, an important consulting engagement cannot be reduced to simple to understand decision criteria, and the more important the stakes, the more complex the solution, and the less amenable it is to simple categories of comparison.

Given that my firm specializes in high-stake interventions, the presence of an RFP is an indicator that this job is probably not for me.

P.S.
The only exception I might make could be companies or governments that are restricted from doing business any other way by law. The same principles would apply however, and it’s not too hard to see where management treats the RFP as a smokescreen, rather than a necessary evil to be endured.

P.P.S. After wasting some more more on yet another RFP that went nowhere, I came across the following article:  Why You Should Ignore RFP’s.