21 november 2007 20cc ltd independent management consultants marketing, selling & pricing...

21 November 2007 20CC LtdIndependent Management Consultants

Marketing, Selling & Pricing

Presentation at IMechE

About me

• I am a “one man” company• But, I can be a “Group of Associates”• Have purchased consultancy• Have sold consultancy• Marketing Manager for 2 US CAD companies• I earn most of my money:

– Optimising business processes– Defining asset management strategies– And giving strategic advice to small companies

A Continuum

Pricing

A Continuum

Marketing Pricing

A Continuum

Marketing Selling Pricing

The Desired Outcome

Maximised Profit!=

Marketing is….

1. Knowing what you have to sell

2. Knowing who to sell it to = suspects

3. Selling profitably

Marketing

• What have you got that is saleable?– Define it in terms of features – easy– Define in terms of benefits to buyers - harder– Are there different types of buyers

• Responsive to differing benefits

• What markets are they in?

• Where are they located?– How do I reach them?

How do I develop my plan?

• You know the features of your offering– “I can solve your problem” – is a hard sell

• For benefits - get into other(s) shoes

• List them – quantify them – value them

• Know the business problems the features solve

Who has the relevant problems?

• All this work is desk research

• Estimate sector size

• Is it easy to sell to?– What are the economic conditions?– What is the buying cycle– Private vs. public sectors

• Some trial marketing?

Getting the market size

• Hopefully more than one type of company

• So focus on key players in several sectors

• Where are they located?– Close as possible, reduces cost of sales

How to reach prospects

• Word of mouth, good, but can restrict price freedom

• Yellow pages, local & lots of competition

• Adverts, watch the cost per lead/sale

• Cold selling, by mail, phone or visit

• Website

Marketing is selling profitably

• Not chasing your tail

• Having a high hit rate– Visit to Quote (near 1) to Order (3 or 4 to 1)

• If you are selling you are not doing– Doing = income

• Do not deceive yourself– Know the buying attitude of prospects

Company market surveyRemedial marketing checklist – shorter version• What are the company’s marketing strengths?• What are the company’s marketing weaknesses?• What marketing problems does the company have?• What share of turnover is taken by the largest 10 customers?• What are the ratios of numbers of enquiries to numbers of quotations made to numbers of

sales made?• When did it last win a new customer?• How far ahead does the company plan its marketing operations?• What are the responsibilities of the head of marketing or sales in the company?• What use is made of market research techniques?• What regular analyses are made of historical sales information and records?• How are these analyses used in the control and evaluation of marketing effort?• Does the company employ its own sales representatives and/or agents, whether in the UK

or elsewhere?• What does the company know about the end markets for its products, or those which its

products help to serve?• Where does the company plan to be in five years time on an overall turnover and

profitability basis?

Selling is….

1. Is a communication skill

2. If you get it right – the price matters less!

3. Getting qualified prospects

Defining customer states

• Suspect, just job title, industry

• Prospect, a name who should have a need

• Qualified prospect, a known need and budget

• Customer, has/is buying

The Sales Process

• Suspects, anyone out there who fits your prospect profile, the role of marketing

• Prospects, have come to your attention, somehow, sales to convert them into qualified prospects (leads)

• Qualified prospects, you know what they need and when

• Customers when they are convinced on the price

Client Profile

• This is fundamental to successful selling

• Public or Private– Beware of stereotypes

• Greater or lesser formality

• Delegated authority of your contact

That first face-to-face

• Listen more than you speak

• Evaluate their needs

• Discuss – convince them of your competence

• Evaluate your worth to them

• Assess how serious they are

• Develop a rapport

Your Selling Process

• Get clarity on scope & acceptable delivery– What are the “hot buttons”– Establish your outstanding competence

• Do WE Possess Good Solution– Challenge the clients perception

• Can WE be the Supplier (approved lists)• Must determine T&Cs and RISKS• Understand Decision Process & Timescale• Know who are the competition

Prospects Processes

• Buying Process– Formal ITT or not– Usually firmer on price than the delivery spec.– Decision makers

• Budget Process– Annual cycle– Money available– Delegated authority

• Together often known as the Sales Cycle

Closing

• This is not a sales course

• Quote the benefits, agree their value and ask for the order

• Have clear minimum price

• Try to deduce what the market will bear

• Ask for more, be prepared to walk away

• Once a day-rate is set with a client it is hard to put it up

Prospect’s Paying Process

• Large organisations can be slow– Often just carelessness, your survival– Keep on top of debts

• Are they good for the fees?

• How quickly will they pay?

• Allow for retentions in the cost estimate

Selling Summary

1. Establish your worth to the clientDiminishes price sensitivity

2. Evaluate “value” to the clientDiminishes price sensitivity

3. Your market price comes from experienceTopic

Location

Your own perception of YOU

There must be satisfaction & reward

Pricing is….

1. Winning customers

2. And the price is a measure of one or a combination of:1. Value to the purchaser

2. Cost

3. The state of the market

4. Your desperation for work

Pricing - not a simple balance

Price of greatest perceived

importance

Price is NOT the easiestvalue to answer

Two extremes? – one side wants near to zero, the other wants every penny?

Next time

• Add in new slide splitting this part into sections

• Your costs

• Your rate

• Pricing

• Selling on Quality & Value

Types of pricing

• Opportunity pricing

• Cost plus

• Cost plus with no contribution

• Rate card

• There will be an element of negotiation in all of these

• Emulate your “open market” salary

Share of the profits

• New slide to be developed to respond to questions and being paid a proportion of the actual savings

• Notes• Needs “audit” and trust and may take time, also

component concerned may get scrapped for other reasons (in MoD)

• Recommend you go for fixed prices based on high (very high) day rate say £1000 – 1500

• Later with strong established you can try if it still looks worthwhile

Your Cost Base - Overheads

– Office Accommodation £ 2,000– Secretarial services £ 5,000 – Professional indemnity £ 1,000– Computer hardware/software £ 1,000– Stationery, postage, phones £ 2,000– Special equipment £ 500– Car expenses (depn, running costs) £ 6,000– Seminars, professional fees etc £ 500– Marketing costs £ 500– Accountancy fees £ 1,500– Healthcare £1,000

TOTAL £ 21,000A Pension at some point

Your Functions

• Managing director - plan the business

• Sales director - sell your experience

• Marketing director - promote your business

• Administrator - pay bills - issue invoices

• Book keeper - records for tax, vat, etc

• Technical expert - fee earning aspect

The hours in a year

• The sum needs to be borne in mind

• 35x52 = 1,820 for ONE year, under 30!

• Statutory holiday 2 weeks

• Personal holiday 3 weeks

• Keeping up to date 2 week

• Marketing (most variable) 6 weeks = 13

• So 35x39 = 1,365 = 75% for the fit & lucky

The 65% sum

• General management 5%

• Administration/records 5%

• Sales/marketing 20%

• Keeping up to date 5%

• Fee earning 65%

Your Fee Rate Structure

• Depends on number of employees

• In small companies if you are selling– You are not doing– So you are all roles

• Ratio of fee earners to non-fee earners

• Use of contractors or associates

Rate CardProject

Director

Not applicable

Project Manager

Management or Technical

Consultant

Technician 400

Keep it simple – E.G. no expenses within M25“Professional Day” – hourly, usually lower, if you have to

Rate CardProject

Director

Partner/

Project Director

Project Manager

700 1000

Sen PM

Project Manager

Management or Technical

Consultant

600 900

Sen. Consultant

Tech. Consultant

Consultant

Technician 400 600

Sen. Technician

Technician

If the competition is the Big 5 – YIPPEE!

Your Budgeting Process

• Days available for sale

• Budget achievement often set at 65%– Not in larger scale (engineering) contracting

• If you operate alone, you need a fair salary

• If you employ people you have to cover overheads

• You must control overheads

A detailed estimate/work planMobilisation 5 80 400

Travel to see them 310 0.5 155

Interviews at site 1 7 80 560

Interviews at site 2 7 80 560

Travel 340 0.5 170

Overnight 1 80 80

Study documents 5 80 400

1 Produce numbering statement 5 80 400

2 Produce training needs analysis 1 80 80

3 Data acquisition recommendations 0.5 80 40

4 Statement of documentation gaps 5 80 400

5 User support statement 0.5 80 40

6 MAXIMO Configuration 5 80 400

7 IT needs 1 80 80

8 Back up needs 1 80 80

9 Interface needs 1 80 80

10 Managing Contractors 1 80 80

11 Project Plan 4 80 320

12 Business Benefits statement 2 80 160

Prepare presentation 5 80 400

Visit to make presentation 7 80 560

Travel 340 0.5 170

Your Estimating Process

• Detailed costing – include everything!– Variable rates, try some for size– Realistic contingencies

• The real effort, how fixed are the costs?

• Cut the rates, as allowed, but NOT the effort involved

• A job that loses money is in no-one’s interest

Your Estimating Process

• Contingencies cover normal operational risk

• Abnormal risk has to be assessed

• Resulting in negotiation to remove it, insurance to cover it, or declining to bid

Discounting Policies

• Most of my work is fixed price against a defined scope

• Time & rate based are often discounted

• Duration and volume of work based

• Avoid compromising the 65% for too long

• Lower rated staff are often contracted

Difficult Balancing Act

•Real costs

•Nice to have extra cash

•How keen are you for the work

•What is the competition charging

•Your “priceless” experience

•Real Skill

•Actual value

•How much is it worth

•Big 5 Prestige

What is the job worth?

• To you– What is the cost– Depends on size of company– Recovery of marketing costs

• Annual budget & Cost of Sale

– When compared with “big 5”

What are you worth?

• To the potential client– Cost of not having your service or product

• Is there a regulatory issue – fear factor

– Price they are comfortable with• Individually

– Their level in the organisation

• As a business unit

Your Selling Value

• What are you worth to a client?• Can they use someone else of comparable

benefit at lower cost?• Can they use a less experienced but less

expensive consultant?• How can you prove your worth?• What is your minimum fee rate?• What is a reasonable fee rate?

Further key points

• Cannot work around the clock for ever

• Do not undervalue yourself – for too long

• Do not be afraid to “walk away”

• Even from a poor job – contract permitting

• Long term projects must also “grow” you

• There must be satisfaction & reward

The Myriad of Issues

Size of prospect

Your Company

Purchase authority

Need for workT&Cs

Discounts

Public or Private Formal ITT

Perceived value

An acceptable deliveryWork breakdown

Quoted price

Packaging the proposal

Negotiating skills

Sales skills

Charging rate

Compliance

Available resources

Budget holder

Payment terms

Professional competence

Your Desired Result

Win!Win!

Any Questions?

Now or later to

consult@20cc.co.uk

020 8680 3511 or 0788 799 2427

21 november 2007 20cc ltd independent management consultants marketing, selling & pricing...

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