Value Selling Overview
Value selling is a strategy to educate customers about the total cost
of ownership (TCO) savings from services and product features provided
by distributors. Typically distributors help customers reduce
total cost through:
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Revenue enhancements, such as reduced time for equipment change
outs, reduced downtime or increased unit output.
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Process improvements to improve efficiencies and reduce operating
costs, such as integrated supply, preventative maintenance, EDI, bar
coding, summary billing and monthly usage reports. Many
distributors also provide services to help customers reduce maintenance,
repair and operating process costs.
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Expenditure reductions, due to savings from product substitutions,
volume purchasing, tiered purchasing, rebates, price protection or
freight savings.
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Asset improvements, such as reduced inventory investment and
carrying costs through consignment, standardization, or inventory
management.
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Special services, such as training and technical support.
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Other savings that reduce customers’ total operating costs,
such as disposal of used materials, legal issues, warranty work, or
safety and environmental support.
Recommended steps to effectively document cost savings and sell value
include:
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Step 1. Identify a specific value opportunity.
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Step 2. Assess the impact of the opportunity on specific TCO
components. Determine whether the opportunity:
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Improves the customer’s revenue stream.
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Reduces the customer’s process costs.
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Reduces the customer’s expenditures.
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Reduces the customer’s asset base.
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Provides a special service.
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Reduces other customer costs.
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Step 3. Identify needed information and research identified
metrics. Sources of needed information may include:
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Distributor information on customer costs, based on past invoices
and purchase history.
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Industry benchmarks from end-use industry associations, local
chambers of commerce or governmental departments, such as the cost of
money, safety costs per person, pay scales and energy costs.
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Credible estimates from industry experts, associations or other
customers who have gone through re-engineering, such as transaction
processing or inventory carrying costs.
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Customer information drawn from procedure manuals, production logs,
annual reports, product price lists or internal measurements.
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Manufacturer information on product life cycle for similar
applications.
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Step 4. Calculate the value opportunity’s dollar
impact.
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Step 5. Present the results to the customer for account retention
and penetration.
MORE
Typical Services and TCO Categories
Case Study: Product Substitution 
Case Study: Project Management
Worksheets and Terms
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