DifferentiatedValue.doc February 27, 2004
Differentiated Value—Another Look
The equation as given is:
DV x q = $.
That is, Differentiated Value times quantity produces maximum dollars for a business.
There is no doubt that if a business can not differentiate itself from its competition, it is in trouble.
The other day, I was in a client’s office—they were pitching promotional products to a security company, let’s call it Acme Security. Well, Acme is in competition with others, primarily Jones Knight and Beta Security.
Each of these companies offers virtually the same product—a basic installation for a homeowner at $800 plus a $20 per month monitoring charge for 24/7 coverage. How can they differentiate themselves?
Well, Jones Knight tells their clients that they should buy from them because they are locally owned and that they can get the owner on the phone at any time.
The other two pitch the fact that they are not locally owned; they are publicly listed and they have strong financials and will be around in the long term, or so they say.
So how does a homeowner really choose? The arguments either way are pretty weak…
My client decided to pitch his client (Acme Security) on a new approach—each of Acme’s sales reps would give every new client two premium incentives to sign up—a) a digital camera and b) a pre-printed pad. Their pitch now is: “We care about you. We want you to take a digital inventory of everything you own and write down everything you buy (at least the major stuff) so in the event of a loss (Heaven forbid), you have a record.”
Now this is differentiation.
I think there is, however, another dimension to the equation and maybe it should be written like this:
DV x Q = $
or
DV x (M x v) = $.
By capitalizing ‘Q’, I am implying that there are other atomic sized ‘particles’ within this variable—these are M (for Mass) and v (for velocity).
In other words, if you want to boost sales, you need to have not only Differentiated Value but also hefty contract proposals (higher prices or simply bidding on more massive contracts) and then you need to be able to move more of them through the pipeline faster.
Higher prices based on significant product differentiation and bidding on larger contracts or jobs and moving them speedily through the pipeline is a triple whammy for your business; it implies faster revenue growth, higher margins and greater profitability.
For many of my clients, it takes just as much work to prepare a bid for a $10,000 order as for a $100,000 order, so why not pitch more $100,000 orders.
I know that some of my clients seem to take forever to get a proposal out the door—I am continually forcing them to re-engineer their internal processes to get the proposal writing stage down to a few days or even a few hours. If you can do all four (faster proposals, higher prices, more massive bids, greater differentiation), you can really make a difference in year end results.
Dr. Bruce M. Firestone,