Negative Cost Selling Presented by Professor Bruce M. Firestone Founder, Ottawa Senators, Executive Director, Exploriem.org, Entrepreneur-in- Residence, Telfer School of Management, Broker, Partners Advantage GMAC B. Eng. (Civil) [McGill], M. Eng-Sci. [UNSW], PhD. [ANU] Helped establish > 70 enterprises incl. Sens Contents Do you want to learn how to really make people want to buy from you? Are you in the solution selling business? Do you know how to get on the ‗same side of the table‘ as your customers and clients? Do you want to learn negative cost selling? Do you know how to think in terms of 2-D and 3-D business models so that you can not only take care of your clients but your clients‘ clients too? The Power of the Brand ―People like to buy from people they like and trust,‖ Prof Bruce, Ottawa, Canada. ―Have you ever bought anything from someone you didn’t like or trust?‖ Trust (not love!) is the no. 1 thing in life and business Marketing Builds Brand Builds Trust Creates Opportunity to Sell The Power of the Brand Mutual Life Assurance Co. of Canada Clarica Life Insurance Co. New sell-line: "Clarity through dialogue― Funny TV ads– Clarica Agent appears on scene to clear up W/C ambiguity No call to action How many people head for the phone to buy some insurance? The Power of the Brand None! Separate selling process ―VP, Marketing and Sales‖ Doesn‘t know what he/she is doing Living room pitch: ―Take care of your kids!‖ ―Where‘re you from again? ―Pirate Insurance Company of Kinakuta‖ or ―Clarica‖– which helps you to close the deal? The Process (1) Marketing through a (2) Marketing Your Reputation Process builds and Brand your build Reputation and Trust in you Brand (3) Trust in you creates an opportunity for you to Sell in a separate Sales Process ‘TRUST POWERS SALES’ Ethics Probably < 1,500 key entrepreneurs in a place like Ottawa Even NYC < 5,500 Protect your reputation Major Arch firm bids on Urban Design of new Ottawa Congress Centre with our group Jumps to winning bidder/takes IP w/out permission Ethics Their name is … DIRT No longer active to any great degree in Ottawa What should they have done? Ask for permission and ask winning bidder to compensate group for their IP– would not even have had to pay it themselves! ‘Intricate’ Your Clients The late Elliot Richardson, former Attorney General of the United States US Counsel to BRING BACK THE SENATORS ―Bruce, first we’ll intricate the NHL. Then we’ll get the franchise.‖ (To honour Elliot, UrbanDictionary.com: http://www.urbandictionary.com/define.php ?term=intricate+) ‘Intricate’ Your Clients ―To bring people on board or to get them onside with an idea or a proposal or an initiative of some type by getting them 'intricated' into the process bit by bit, almost without their noticing that they are making a commitment.‖ ‘Intricate’ Your Clients How do you do this? Become an indispensable part of your clients‘ business ecosystems/if you know your client‘s History, you can become indispensable/hard to replace How not to do it? E.g., typical Ottawa law firm: Don‘t keep clients‘ clients tel. #s, email addresses on file Lose client e-documents Don‘t know their r.e. client‘s Banker, Surveyor, Environmental Consultant, Insurance Broker, Title Insurer, Mortgage Broker, Appraiser or other suppliers Wait to be told what to do Firestone’s Three Laws of Power Selling Law No. 1: SITTING ON THE SAME SIDE OF THE TABLE Law No. 2: SOLUTION SELLING Law No. 3: NEGATIVE COST SELLING SITTING ON THE SAME SIDE OF THE TABLE GradeATechs.com Alt. 1: ―We can sell you XYZ virus scan software from Acme Corp. for 200 bucks. What do you think?‖ Alt. 2: ―We can get you XYZ from Acme for $200 or MNO from Beta for $150. If you don‘t like either, we can get more quotes for you.‖ SITTING ON THE SAME SIDE OF THE TABLE In Alt. 2, GradeA becomes: ‗trusted advisor‘ Sits on same side of table as client XYZ and MNO (+ all other suppliers) are on the other side GradeA has changed the equation! SELLING TO A CLIENT HELPING A CLIENT BUY! SOLUTION SELLING In r.e., buying a lot is a problem Buying a home is a solution New sub-division with 21 lots to sell ($125,000+) for client in Kanata What to do? Make a deal with top quality home builder to offer his homes w/ lots SOLUTION SELLING How to sell this to builder? Intricate him! Offer him 6 lots for $500 each! $500 each? Yes! SOLUTION SELLING That‘s $500 for an 18-month option on those lots Only pays for lots when sold to Homeowner Co-brand sub-division with Builder– piggy back on his marketing SELL SELL SELL SOLUTION SELLING Know your client‘s History and Biz Ecosystem Hard to sell a solution when you don‘t understand the problem Ace Promotions– problem wanted to sell Golf Pros promo products Issue? Most golf pros don‘t have much spare cash SOLUTION SELLING But they have something of great value– a client list Accounting firms and legal firms would like to get access to those clients Eureka! Golf Pros have lots of time and no money Accounting and law firms have lots of money but no money SOLUTION SELLING Let‘s solve all three problems (money, time and client access) together By helping 10 Golf Pros buy 1,000 mouse pads each at $5.00 per item That‘s a $50,000 order for Ace Promotions Each mouse pad is co-branded: golf pro w/ accounting or law firm Latter put up the dough/former becomes distribution channel (gives them to each golfer) MORE SOLUTION SELLING Ace is also trying to break into the auto dealership biz– SELL SELL SELL Tom Smith Toyota is looking for more car buyers! Ace must solve the problem: ―How do you give out promo products to people who are not yet your customer?‖ Ace comes up with new distribution channel for Smith Toyota! MORE SOLUTION SELLING The humble ice scraper– solves all Ace sells 10,000 ice scrapers to Smith Toyota at $4.00 each Smith Toyota also pays Ace $6,000.00 to hire wage slaves (aka students) to go to co-operating: gas stations collision repair places car washes and give them out for free! MORE SOLUTION SELLING Non-traditional outlets! They get the scrapers for free Can use them in their own promotional efforts too– ―Fill up here and get a free ice scraper.‖ Car owners who frequent collision repair shops might need a new car some day (soon) MORE SOLUTION SELLING The ice scraper also communicates! ―Bring this ice scraper with you to Smith Toyota < June 30th and we‘ll pay you $250.00 to test drive one of our cars!‖ Take solution selling one step further– provide your clients with ROI data By investing (!) in your products or services (the ice scraper), they increase their revenues/lower costs or do both NEGATIVE COST SELLING More from UrbanDictionary.com (http://www.urbandictionary.com/define.ph p?term=negative+cost) ―Negative cost selling is all about understanding your client‘s business from their point of view and being able to measure the benefits you create and the cost reductions you cause.‖ NEGATIVE COST SELLING Anthony owns (snail) mail order house Knows that CPC/USPS now allow lumpy mail campaigns Visits with local children‘s charity Wants to sell them on 3-year campaign at $15,000 per year His pitch? Solve their problems: How to get folks to open their snail mail? What‘s the distribution channel? What‘s the ROI? NEGATIVE COST SELLING Includes flat (stone skipping) rocks with each letter Sends letters to 800 (local) CEOs/Biz Owners His firm has the names/contact info Each letter challenges the CEOs (v. competitive people) to rock skipping contest at Children‘s Camp NEGATIVE COST SELLING 94% open the envelopes > 50% commit to attending themselves or sending a rep > 400 attend at $750 each 3-year commitment Can buy extra rocks @$100/throw! Raise > $40,000/year Plus CEOs on-site see the kids and become sponsors…and fix stuff NEGATIVE COST SELLING $15,000 investment $40,000+ = ROI Multi-year commitments recurring revenue + create opportunity to not be a MLB-type player where every year you start with 000 home runs YOU CAN NOT BUILD A SUCCESSFUL SALES PRACTICE IF YOU HAVE ALL 1- YEAR CONTRACTS NEGATIVE COST SELLING $15,000 investment $40,000+ = ROI Anthony‘s pitch: ―I‘ll pay you $25,000.00 per year to hire me!‖ NEGATIVE COST SELLING Peter Patafie built Patafie‘s Moving Supplies Inc. into $16 million/yr operation w/ one crucial sales innovation His pitch: every moving co. would buy (cardboard boxes, wardrobe boxes, bubble wrap, tape, tape dispensers, wrapping paper) from Patafie‘s But instead of delivering them to the moving co., would deliver them to their clients instead NEGATIVE COST SELLING Saves moving co. warehouse space Increases moving co. revenues because their salespeople now have more time to sell moves rather than redeliver packing supplies to their clients Got 98% market share (more than Microsoft) NEGATIVE COST SELLING Peter understood his client‘s ecosystem– including the needs of his clients‘ clients (2-D Biz Modeling) Sits on same side of the table as his customer (his customer‘s customer becomes his customer– e.g., Peter sells them refurbished boxes and buys them back > move) Uses ‗solution selling‘ (by making his customer‘s salespeople more productive) Sells based on negative cost (since his customer‘s customers are paying for the packing and moving supplies and ROI to moving co. ~ infinite!) Jeff Hunt and the Ottawa 67s New way of responding to the 500+ charity and community requests $600 needed for minor hockey tournament Give $600 x $500 or $300,000/yr.? Not affordable for Junior Team Let them buy 120 game tickets at around $5 each that they resell for, say, $10 Jeff Hunt and the Ottawa 67s Cost to 67s? -$600 Cost to minor hockey team? -$600 Developed new distribution channel: 500 charity requests 60,000 tickets sold/yr. raised $300,000 for 67s raised another $300,000 for charities ―Give a person a fishing rod, not a fish,‖ Anon. More from Jeff Hunt and the Ottawa 67s Cost for naming rights for the Civic Centre $30,000 No takers Instead sold 30 companies @ $1,000 each Draw winner: Civic Centre Urbandale Centre for 1-yr term Cost of Naming Rights for Urbandale? -$29,000 -$550,000 (value of PR/earned media) = -$579,000 Satellite Tracking Service Sell Personal Tracking Devices (PTD) for executives visiting high risk countries Not much bigger than cell phone Reduces cost of insurance Reduces frequency and cost of lawsuits—duty of care Reduces losses from kidnapping, injury or death Reduces lost productivity from above and impact on morale Can demonstrate very high ROI Crowd Wave Games In-arena cameras, gesture control and vector aggregation software ~ 7th Inning Stretch with ‗brains‘ Cleveland Cavaliers– launch client ‗Intricates‘ sponsors– Section 315 plays against Section 112 Winners get (say) $10 Verizon Calling card Crowd Wave Games Crowd Wave Games Reduce sponsor exodus Bring new sponsorship dollars Increase game-day ticket sales and reduce season ticket churn CWG demos very high ROI for Cavs Improve in-arena experience for fans/create team play feelings for average citizen/not available at home Yoga and Injury Reduction in the NHL Heather Moore, at Mountain Goat Yoga Centre in Kanata More core strength, more flexibility, greater agility, better balance, faster healing and lower stress levels Perfect fit for NHL Players Heather‘s Yoga Fees: $7,267.86 for the season Savings to Team from Reduction in Injury: $352,201.28 Increase in Revenue due to Increase in Regular Season Attendance: $523,939 Net Revenue from Extra Home Playoff Game(s): $1,020,000 Yoga and Injury Reduction in the NHL For an investment of just under $7,300, the team receives ~ $1.9 million in cost decreases and revenues increases IRR Year (2006_2007) 0 $(7,267.86) 1 $1,896,140.67 IRR 25989% per annum Value of going to Stanley Cup Finals: priceless ―Heather will pay the Sens ~ $1.89 million to hire her!‖ Doug Cardinal and the Museum of Civilization Architects can‘t use –ve cost selling, can they? Yes, they can Doug Cardinal believes in the sanctity of the client or ‗patron‘ Former PM Pierre Trudeau was Doug‘s patron Public Works nixed curvilinear walls for the new museum– too costly and too risky Doug Cardinal and the Museum of Civilization Doug asked the PM: ―Do you want a treasure or another blah, boxy building for Ottawa?‖ But he also understood NCS, thus: ―If we build it my way, it‘ll cost $20 million more but it will attract 400,000 more visits per year at $10 per head. That‘s $4 million/yr. With a cap rate of 8%, this increases value by $50 million. So the cost of a legacy project for you, Pierre, will be a negative $30 million.‖ Doug Cardinal and the Museum of Civilization The HR Recruiter Previous approach to selling? Beauty contest! Value Proposition = NCS Cost of Service = $30,000 Savings in Management Time = $10,150 x 2 (they have to replace their candidate more frequently) Additional productivity (from superior candidate + he/she remains on the job longer) = $200,000 x2 Cost of HR Services = -$390,300 The HR Recruiter Previous approach to selling? Beauty contest! Value Proposition = NCS Cost of Service = $30,000 Savings in Management Time = $10,150 x 2 (they have to replace their candidate more frequently) Additional productivity (from superior candidate + he/she remains on the job longer) = $200,000 x2 Cost of HR Services = -$390,300 The HR Recruiter GradeATechs.com Value Proposition = NCS Unplug Tower/Take to Computer Store: $19 of your time Quote = Wait one week: $500 Lost Productivity Cost of Repair: $200 Call Grade A: $5 of your time Response time = 24 hours: $100 Lost Productivity Cost of Repair: $125 Cost of Grade A = -$492 IRR = 43% per day GradeATechs.com IRR = 43% per day Time (Day) Cashflow 0 -227 (cost of GAT repair + lost productivity + call to GAT) 1 100 (lost productivity) 2 100 (lost productivity) 3 100 (lost productivity) 4 100 (lost productivity) 5 300 (lost productivity + repair bill) Solve (by iteration): -227 + 100/(1+irr)**1 + 100/(1+irr)**2 + 100/(1+irr)**3 + 100/(1+irr)**4 + 300/(1+irr)**5 = 0 GradeATechs.com Residential Realtor Value Proposition = NCS FSBO sale takes longer FSBO sells at lower price– listing becomes ‗tired‘ FSBO pays commission anyway– to Buyer Agent FSBO pays commission ‗thrice‘– once to Buyer Agent + lower sale price (Buyer reduces offer price since ―there is no commission‖) + they do all the showings/work FSBO higher legal cost and risk of litigation Residential Realtor ―The Lawyer who represents himself has a fool for a client,‖ Anon. Agent: does 100s of transactions/FSBO: 1 or 2 For a home with a FMV of $315,000: For a commission of $15,340 paid to Brokerage, Homeowner receives $38,188. Cost to hire Agent? -$22,754 IRR? Infinite since Agent is not paid until and unless deal completes! (See: http://www.ottawarealestatenews.com/ValuePropositionFSBOVersusAgency.xls) 1964 Tribute Band 1964 Tribute Band Guerrilla Mktg: ―Turn on your phones. Call a friend and let them listen to our next tune.‖ Percentage of Audience who did: 25% New people turned on: 225 Number of shows: 140 per annum New people turned on: 31,500 per annum Cost of directly reaching 31,500 potential new customers—a negative $6 million, since people pay them to show up! Pool.com SnapNames.com recognized leader in backordering deleting domain names Clients were paying $60 USD for each backorder to SnapNames.com Register any domain name for backorder on Pool.com for free Only pay Pool.com if successful Hundreds of 1,000s migrate to Pool.com Pool.com successfully gets > 3,000 deleted names/day from Verisign Registry At $60/name + 2-yr registration fee = tens of millions annually for Pool.com Pool.com Cost to clients? Negative again! E.g., patent and TM law firm Say, registering 40 names for backordering SnapNames.com: $2,400 Pool.com: $0 Cost = -$2,400 for backorder Pro Sports Teams Pitching to: a Mortgage Broker ―Invest in our Season Tickets, please!‖ ―Why?‖ ―Look at our great players!‖ ―How about our beautiful building!‖ ―Did you know you can escape our parking lot in just 25 minutes!‖ ―What a great logo we have and our merchandise, my, my!‖ IT‘S A BEAUTY CONTEST! Pro Sports Teams ―If you don‘t buy a ticket, the team will move!‖ ―What kind of a person are you, don‘t you have any civic pride?‖ INSTEAD USE –VE COST SELLING! By giving two Sens tickets to every Homeowner who sources their mortgage through you, you generate 2 to 5 more mortgages per season! Pro Sports Teams Here‘s how it works: The cost for two tickets to every regular season home game: $55 less a 15% discount 2-year commitment Divert 40% of current marketing budget to Sens Plus add another $2,655 The good news: other clients in this industry are finding that they are generating 2 to 5 or more mortgages per annum Pro Sports Teams For an additional investment of $2,655 in each of the next two years, make an additional $6,695 per year or a total of $13,385 ROI of 152% per annum Cost to buy Sens tickets: negative $8,076.70 Plus Mortgage Broker‘s sales now > Mortgage Alliance minimum to qualify for volume bonuses from. ROI increases further Pro Sports Teams Plus Mortgage Broker‘s sales now > Mortgage Alliance minimum to qualify for volume bonuses from. ROI increases further How about that? ―Just initial here, here and here, sign and date there. Thanks, Bye now.‖ KNOW YOUR CLIENTS BIZ ALMOST AS WELL AS THEY DO Conclusion NCS success rate will move from .200 to .300 or .400 or higher Plus order size and speed to order will increase triple whammy (batting average/mass/velocity) to the bottom line Removes the fear about selling– you know your clients‘ businesses almost as well as they do Conclusion Your projects get green lighted Self-actualized human beings working on projects they initiated with innovations they introduced and products and services that they fearlessly sell, are happier people! Thank you! Questions?
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