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Negative Cost Selling

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]

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Negative Cost Selling

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  1. 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

  2. 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?

  3. 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

  4. 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?

  5. 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?

  6. The Process

  7. 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

  8. Ethics • Their name is … DIRT • No longer active to any great degree in Ottawa • What should they have done?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!

  9. ‘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+)

  10. ‘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.”

  11. ‘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

  12. 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

  13. 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.”

  14. 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!

  15. 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

  16. SOLUTION SELLING • How to sell this to builder? • Intricate him! • Offer him 6 lots for $500 each! • $500 each? • Yes!

  17. 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

  18. 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

  19. 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

  20. 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)

  21. 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!

  22. 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!

  23. 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)

  24. 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

  25. NEGATIVE COST SELLING • More from UrbanDictionary.com (http://www.urbandictionary.com/define.php?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.”

  26. 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?

  27. 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

  28. 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

  29. 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

  30. NEGATIVE COST SELLING • $15,000 investment  $40,000+ = ROI • Anthony’s pitch: “I’ll pay you $25,000.00 per year to hire me!”

  31. 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

  32. 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)

  33. 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!)

  34. 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

  35. 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.

  36. 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

  37. 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

  38. 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

  39. Crowd Wave Games

  40. 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

  41. 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

  42. 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!”

  43. 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

  44. 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.”

  45. Doug Cardinal and the Museum of Civilization

  46. 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 x 2 • Cost of HR Services = -$390,300

  47. 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 x 2 • Cost of HR Services = -$390,300

  48. The HR Recruiter

  49. 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

  50. 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

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