Solution Selling for a Promotional Products Company

SmithToyotaExample

January 28, 2003

Solution Selling and Measuring the ROI for a Potential Client of a Promotional Products Company: AcePromotions.com

Let's look at an example of solution selling where a promotional products company (AcePromotions.com) has decided that they need to be more than just product pushers. The sales manager for AcePromotions.com is writing to one of her sales people about approaching Tom Smith Toyota (TST) using a new approach for promotional products. This is what she writes.

Hi Guy: why don’t we try something like this with the Smith Toyota people? Call your contact over there and try to up sell them on this new solution selling thing we are trying. Let me know how it goes. Btw, take the lap top with you and the attached spreadsheet—I am sure that they will like the new approach. Here it is:

1. Let’s suppose that TST agrees to buy 10,000 windshield scrapers from us for $4 each or $40,000.

2. The scarpers say something amusing and informative about TST with a tel. #, web address, RL address on them.

3. TST also says that anyone who brings their scraper in to show them that they have one before, say, June 30th is automatically entered into a contest to win a free lease on a car for a year—cost to TST is $300 per month say or $3,600 for the year.

4. They are also entitled to a $250 cash rebate from TST on every new car sold before June 30th just by showing up their scrapers.

5. TST pays AcePromotions.com another $6,000— and AcePromotions.com hires students to go around to selected gas stations, collision repair places, car washes and give them out free.

6. We will already have pre-sold these non traditional outlets on this delivery option. They get the scarpers for free and can use it in their promotional efforts too.

7. We then gives selected gas stations, collision repair places and car washes the option to co-brand the scrapers and let’s assume that 50% of them choose to do so at an additional fee of $2.00 per scraper. Note that AcePromotions.com is selling half the scarpers for $6.00 and yet the distribution outlets are getting scarpers for half price. TST is happy too because they are getting their message into the hands of consumers who are not yet TST customers.

8. There is an advertising budget of $8,000 to support the new campaign paid by TST and managed by Brymark.com with TST’s ad agency.

9. To see how you measure ROI, see attached spreadsheet.

10. In this model, TST has to sell 14 new vehicles and 7 new leases in five months to have benefits that are 33% higher than costs.

11. You can play with the spreadsheet numbers and vary all of the inputs.

12. You should sit down with TST with this spreadsheet and go through it with them—they will know the variables better than we do.

13. Then we will track the program with the TST people over five months.

14. This is the level of detail we need to do for every proposed solution selling opportunity.

15. It is very engaging for our clients too—they really enjoy this type of involvement and will fool around with our spreadsheet model till the cows come home.

16. Also, most clients like TST get the fact that that there are other indirect results of a program like this—they will get a ton more sales after the five month period is over that are never actually measured. People like me don’t enter contests or take freebies but I would keep a TST scraper for a long time and when it is time to buy a new car, why there it will be as a reminder about what a good outfit TST is and how I should consider buying a Toyota anyway.

17. Note that: a. AcePromotions.com’s sales are much higher than if we just sold promotional products, b. we will have created a host of new selling opportunities (in the distribution channel—i.e., selling co-branded promotional products to the collision repair, gas station and car wash industry an selling them their own promotional products and delivery solutions) and c. our margins are much better too.

18. Furthermore, AcePromotions.com is more likely to make this sale because: a. we are providing a total solution, b. we are targeting the potential clients (future car buyers) of our client (TST) rather than our client, c. we are measuring ROI for our client.

Good luck, Sally

28-Jan-03				Confidential

Measuring Tom Smith Toyota (TST) ROI

Costs

Scrapers		$4
		10,000		$40,000	PRO

Delivery Solution				$6,000	DEL

Car Lease Prize		$300
		12		$3,600	PRZ

Cash Rebate		$250			REB

Advertising Budget to Promote Program				$8,000	ADS

Benefits

Average Profit per Car Sold			$3,000		APC

Average Profit per Car Leased			$2,000		APL

Average Profit per Car Serviced			$1,200		APS

How many additional cars does TST have to sell to have benefits greater than costs?

Solve this set of equations by iteration				1.333	MAR	(Margin of benefits over costs)

[APC * n1 + APL * n2 + APS * n] - MAR * [PRO + DEL + PRZ + ADS + REB * n] = 0

n1 + n2 = n

n1 = additional new cars sold

n2 = additional new cars leased

assume:

n1 = 2 * n2				2

n1 =				0.666667

n2 =				0.333333

Number of new cars and leased cars such that benefits are 50% greater than costs

try n =	22			$954

Therefore, TST has to sell in the five months before June 30th

	new cars			14.66667

	leased cars			7.333333

http://www.dramatispersonae.org/GuerrillaMarketingAndFinance/GuerrillaMarketing.htm