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					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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