May, 2009

Price versus Value

In these times, price seems to be coming up more and more in discussions with customers.  I understand that companies of various sizes, markets, and geographies are seeing different levels and types of impact from the economic challenges of late, but I’m not an economist and won’t dwell on that.  What I am concerned about is that the “Value” proposition is often left out or not fully articulated frequently today.

I have a customer who’s owned Microsoft SMS for over 2 years, but never deployed due to time and some architectural issues with their network.  A year ago, we sat down and did a design session to deploy SCCM across the company and allow them to centrally manage their systems.  By manage in this case, I mean:

• Application Inventory for license auditing
• Patch Management
• Application Deployment
• Desktop/Server image automation
• Remote desktop support
• Application virtualization
• And other areas

We worked up a proposal and had a verbal that they would like to go forward pending some other projects getting done first.  Then the economic issues came up and they went on a spending freeze.  At their request, we worked up a smaller project to get the base infrastructure out and allow them to turn one some of the easy pieces and get their inventory going to allow them to proactively manage some 3rd party licensing costs.

Things seemed to be turning around for them and we re-engaged to start the process of kicking the process off.  Then, before we could start the wheels rolling, a segment of the IT staff found a couple alternative product to do inventory and application deployment.  The alternative products were less expensive on paper, had direct integration with their help desk/ticketing system, and was said said be installed and functional within an hour…  The later of these three items put up a red flag for me.

So, at this point, what was a done deal turned into a competitive situation.  Just to be clear, the customer has an Enterprise Agreement with another vendor.  On paper, we’re just in this project for services and possibly some hardware.  In the bigger scheme of things, I’ve spent a lot of time with the customer over the past couple of years helping them streamline some things and offering advice on how to simplify and improve things to be more stable and more manageable.  The alternative product uses tools and practices that my experience have shown to be less stable and less predictable than SMS/SCCM.

We quickly went into compete mode and sent a feature/function/cost spreadsheet back and forth a couple times to pull together a reactive answer to why the more expensive product was better.  There was item missing from the conversation, value…  The customer is making a decision this week, and luckily they did offer an opportunity earlier this week to come in and do a demo of SCCM and talk about some of the differences, beyond the magic spreadsheet.  The reality is that the pricing that was in the original comparison was inaccurate and did not take into account all the other functionality that SCCM has to offer, in particular around baseline configuration checking and operating system deployment.  OS deployment was the majority of the project originally proposed, as it would mark a fundamental shift in how desktop deployment and life-cycle for the customer.  This shift alone adds significant value to the proposition and increases the ROI.

So what is “Value“?  In my mind, value can be demonstrated easiest by articulating the following aspects.

• TCO (Total Cost of Ownership) - You need to be able to show how over time, the proposed option will either drive down TCO.  In this case, it’s about setting desktop standards, implementing them with common images, and maintaining them from a single console.  The result is a simplified support experience, fewer support issues, increased user productivity, and the ability to provide an SLA for desktop support.  Those are just a few items, but you need to go deeper and explain each point and back them up with solid numbers.
• ROI (Return on Investment) - In many cases, you may need to demonstrate how quickly the initial price will return enough savings to have paid for its self.  This may be a simple calculations of how many fewer staff need hired multiplied against the average salary+benefits costs divided by the initial purchase price.  It may be something more complicated as well, as some solutions will have a way of making money for a customer depending on the scenario and if it’s customer facing or internal facing.
• Productivity - This can be hard to build solid numbers around at times, but it is something to be prepared to talk about.  This may be a matter of calculating how many more transactions can be processed during a day or how many fewer support tickets are generated in a week.  This is all relative to the solution and other systems/solutions that may be indirectly impacted at times.

Ultimately, I don’t believe in recommending a product to a customer simply because it is what we have on the shelf or what I read in a book.  If you struggle to position the value of a solution to a customer, either the solution doesn’t fit or you need to work on your knowledge of the solution.  I realize I am not an expert on everything, and I will walk away from opportunities at times because either it is in the best interest of the customer to go elsewhere or the solution I have to offer doesn’t provide the value the customer needs.  The ability to not “sell” to a customer at times can provide a different value to your own organization in customer respect and appreciation.  There is also value to yourself and/or your organization in not risking the customer relationship by missing the value proposition and focusing on feature/function/price.  That value is customer loyalty over the years.  Along those same lines, it doesn’t do any good to try forcing the best solution on a customer if they actually don’t have the pockets for it.  In those cases, you may need to either walk away or work with them to narrow in the requirements and try defining a solution that hits their key requirements, without all the fuzzy stuff around the edges.

Back to my delima, I think we managed to demonstrate the value to the key people, but we won’t know the answer to that until next week.  In the meantime, was a good exercise to go through the value again and refresh my memory, since it’s been a while since I’ve had those discussions.

Lessons learned

• Positioning on value should overcome selling on price if done properly and within reason.
• If you can’t effectively position value for a solution, it may not be the right solution for the scenario, you may need to work on your knowledge of the solution, or the customer may really be focused on the price and that was missed during the discovery phase.

Another day gone

I hope this has been a useful post.  Look for more soon.  Until then, keep on learning!