Todd Snelgrove is the Senior Director; Value Advisory at SAP. He is a value advisor who helps companies get paid for the value they create.
In this episode, Todd discusses the fundamental importance of value quantification in pricing and emphasizes the need for a structured process to carry it out effectively.
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Why you have to check out today’s podcast:
- Discover the importance of prioritizing value over solely relying on the behavioral economics of pricing when it comes to pricing strategies
- Find out the effectiveness of quantifying value over simply offering discounts
- Learn about what constitutes a value conversation
“Have a structured process to quantify customer value. It’s not as hard as people think. Even if you’re not perfect at it, it’s better than nothing.”
– Todd Snelgrove
Topics Covered:
01:05 – How Todd got into pricing
02:19 – Quantifying value in B2C
04:13 – The subconscious way of quantifying value
05:38 – Why behavioral economics matter less in B2B
08:05 – The decoy effect in pricing and how some tricks used in B2C doesn’t work in B2B
12:16 – Evolving power dynamics in procurement and how salespeople should navigate dealings with procurement in different scenarios
17:31 – Performance guarantee over discount
20:26 – What transpires in a value conversation
22:20 – The telling versus the asking in a value conversation
25:20 – Tod’s one piece of best pricing advice
26:18 – Why not many companies quantify value
27:08 – Todd’s book: Value First Then Price
29:09 – Tying cost and benefits to a value conversation
Key Takeaways:
“When you talk about value, talk about real dollars. It’s okay to list benefits and all these other things. But when you say value, show how that’s going to be more profitable.” – Todd Snelgrove
“I spend a lot of my time getting procurement to realize that 10% value per year is better than a 10% price cut.” – Todd Snelgrove
“Price becomes an issue but only after you’ve discussed value.” – Todd Snelgrove
People /Resources Mentioned:
- Value First then Price by Todd Snelgrove: https://expertsinvalue.com/books
- AstraZeneca: https://www.astrazeneca.com/
Connect with Todd Snelgrove:
- LinkedIn: https://www.linkedin.com/in/toddsnelgrove/
- Email: [email protected]
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Todd Snelgrove
Have a structured process to quantify customer value. And it’s not as hard as people think. Even if you’re not perfect at it, it’s better than nothing.
[Intro]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the direct relationship between them. I’m Mark Stiving, and our guest today is Todd Snelgrove. And here are three things you want to know about Todd before we start. He is the senior managing partner of Experts in Value, and he has been running that for seven years. He was the Director of Value Advisory at SAP, a title I find fascinating, and he spent 23 years at SKF ending up as the global VP of Value and Sales. Welcome, Todd.
Todd Snelgrove
Mark, good to see you.
Mark Stiving
It’s going to be fun. How’d you get into pricing?
Todd Snelgrove
Kind of an indirect route commercial background, and started realizing that we needed to work on value quantification. And then somehow a professor picked it up and wrote a business case, and they said, you found the holy grail. If you can quantify customer value, for us was B2B marketplace, you can find the best measurement to charge for it. And then from that, got to spend a lot of time with different people learning outcome-based, performance-based, value-based pricing strategy.
Mark Stiving
So I have to say in the last several years, I came at it from the opposite direction and I love pricing ever since I was young, but in the last several years, I’ve come to this realization that value is really what’s driving everything. And trying to figure out how to quantify the value and understand the value is so important. So it’s kind of interesting that we come at this from the opposite direction probably with similar concepts. So, let’s ask some hard questions, if you don’t mind. If I’m going to quantify value in a B2B setting, that’s easy. Well, it’s not easy, but it’s relatively easy. As in, I just have to figure out how much more profit this company’s going to make. If I’m going to quantify value in a B2C setting, how do you do that?
Todd Snelgrove
Well, I see there’s two things. The first thing I always say is let’s define what value is. And you just said it’s making a company more profitable. I agree a hundred percent. And you can start putting what are value placeholders on risk and relating like some of these things. But the reason why I say that as some people, when you say value at least from where I live in the states, value, you mean the lower price brand, the value brand at the store. That’s not what I mean. So, the word I got to check. And then there was this old measurement of total cost of ownership, but as you pointed out, I want to be more profitable, cost of only one side of the equation. Maybe I could sell more or upgrade and all these things. So, how do I make you more profitable?
In the B2C world, Tesla has, I’m just trying to give you an example, the electric car companies saying the initial purchase price, but you get these benefits, these, these, these white goods. I mean, so I see a lot of it happening actually in the B2C marketplace. Now even airlines, I’ve got a great example of a legacy airline versus a low-priced airline that might have low cost, but they use it as a low price trying to save, you look through all these different things. So more of the not impulse buys, but where you’re going to spend a little bit of money, white goods, maybe cars, things like that. So you’re seeing it play into the B2C side to some extent.
Mark Stiving
Yeah. So, I’m going to say what I heard you say, and that is, that as consumers, we sometimes make purchases where we’re actually doing financial trade-offs, right? If I want to put solar on my house, how does that compare to my electric bill, right? If I want to buy an electric car, how does that compare to buying gas? If I want to buy a new appliance, how much energy do I save? Right? And so these are real financial decisions that we make. but when I think about what’s the value of a shirt? It’s just really hard. But yet a lot of the tools I use are the same. I just can’t get to the quantification at the end.
Todd Snelgrove
Very much so, and to me, that’s just a subconscious. When I’m looking at two widgets shirts and one’s 25 and one’s 35, I’m probably subconsciously based on experience, feelings, look, what day it is, what mood I’m in, did I get a bone? Whatever, all these things, and saying, is that one worth that price difference more? And it’s a subjective feeling. I probably am not doing ROI analysis, but there’s a famous story, we all time and it, but it’s called the shed lock. You go to Home Depot, you have to buy a lock for your shed. There’s a $10 lock and a $30 lock. You’re not doing it, but you’re subconsciously saying, is it worth it to pay 3X more? What’s in the shed? What’s the probability? You’re doing it very subconsciously. I mean, only some moron like me would sit there with a pen and paper and do a probability analysis, but that’s what makes that decision. And then you will choose based on that. So it’s much more subconscious than ROI tools and things like that.
Mark Stiving
Okay? So, you and I are a hundred percent in agreement. Let’s shift this to the B2B side now, and let’s talk about the hard side of B2B. And that is, I have a lot of friends who love behavioral economics, who love psychological pricing. And I push back a lot. Now, mind you, I know that it works. I know that it matters, but in B2B, it matters so much less.
Todd Snelgrove
That’s funny because I’m going to try to make a long story short, but I was sitting in a pricing class and the professor started talking about behavioral economics. And I honestly said, I don’t have time for this. And then I listened and I went, oh my gosh, we do the things that actually confuse the customer. Let me give you one of my favorite examples that I come from an engineering technical, not me, but the companies that I work with. And it seems when they’re doing an offer for a customer, they believe the more choices they give them, the better it is. And the deeper their spreadsheet is, the smarter they are, and they confuse the…out of the customer. And then you get the procurement person that unbundles, if option C is this and option S is this, the only difference is this. Ergo, you’re charging.
I mean, it’s like, no, and don’t do the two options because a lot of companies have said here’s my normal offering. Sales will say, customers only care about price. Let’s make the cheap option. You bleed as fast as you can believe. And we can go through examples of it, but two doesn’t work. Procurement takes power, that’s good enough. Or I will cherry pick you. I’ll buy the good version for the critical. But the 80/20 rule, 80% might be that’s good enough. And the companies I work for, we can’t live on just selling good enough stuff. There’s not enough margin there. So, you better find a way to make the whole package worth the customers’ or you’ll pay the price difference, the investment.
Mark Stiving
Okay? So I will agree with you that there are some things in behavioral economics that matter a lot, right? So when we think about do we build price list to confuse our customers? Yes. Right? That’s stupid. We need to be able to simplify our price list, simplify our offerings, make it so that our buyers understand it. And so we can think of that in several different ways. Paradox of choice or just the complexity of too many choices or too not being able to configure my own solution to the problem. So these all make sense to me, but when I think of behavioral economics, I often think of things like the decoy effect, or believe it or not, my dissertation was 99 cents and why 99 cents works. And should I have a blue-colored price tag or a red-colored price tag? Yeah. Right? And these things matter in the consumer world. But they really don’t matter in our world, in the B2B world. Would you agree with that or not?
Todd Snelgrove
The only comment there, and I’ve used decoy, if I am correct here, where I’ve got the full monthly offering and then I’ve created a much higher price that includes the world. , we’re going to do this, this, this, and this. And then I throw out a price and they go, I’m making up numbers. You want to know what your $1 million deal was when you did this, this, and this was good enough. We don’t need the, I hate to say the fake $2 million one. That’s everything included. And there’s a neat piece of research from a professor he is now at, I’m going to say NCI, but it’s called From Free to Fee. And the idea of taking things and saying, training’s not free. I’m making this up. The 30-minute training where I come in and say, hi, it’s free. The two-day training is not engineering design, it passes, it fails, free seven-day turnaround engineering design within two days the improvements and diagrams not. So once you start doing that, you’ll get the, oh, I want that, I want that, I want that. And then you throw a huge price and they go, you want to know what? I’ll take a seven-day delivery. I’ll keep cherry picking you taking stuff for free. As long as you’re willing to give it to me when I bundle it all together, maybe my normal offering. It worked with me actually with customers before and maybe again, being lucky.
Mark Stiving
Sometimes. Yeah. Well, and by the way, that’s not the decoy effecting behavioral economics is something different than that. I’m happy to tell you what it is in a second. What you described, I love, right? So I would think of that as good, better, best. And I always teach my clients to throw everything you possibly can into the best category because it shows people here’s what’s possible someday, you’re probably not going to buy it today, but that you can get to this point or that we’re good enough that we could offer this to you. And so it really does have a great impact in our sales to have an expensive best product in our product offering. Right? So I’ll agree with you completely. By the way, the decoy effect is, let’s use small, medium and large popcorn at the movie theater.
Todd Snelgrove
Yep. Okay.
Mark Stiving
Yep. Right. And so the large popcorn is $8, the medium popcorn is $7.50, and the small popcorn is $3. Right? Which one are you going to buy? You’re going to buy the large because it’s only 50 cents more than the medium.
Todd Snelgrove
Yep, right. I’m confused about my high price… Yes. There you go.
Mark Stiving
Yeah, no worries. So these tricks, I don’t feel like they work so well in the B2B world, but I just wanted to, since you live in that world too, I wanted to hear you pontificate on that.
Todd Snelgrove
The only extra comment there, it might depend on who’s making some of the buying decisions? If it’s a very technical buy, the user’s buying, they might, procurement, finance might act differently. I mean, this is where these trade-offs, like how much am I paying for more of that? What’s that? Could I buy that somewhere else? Could I insource it? Could, I mean, they get probably much more financial where the head of the line of business you’re talking to might be a little bit more, look how much more I get? And I’m not going to nickel and dime over this, that and everything else. I mean, again, depends what your KPI is or how close you are to actually using what you’re buying.
Mark Stiving
Yep. So I actually think these behavioral economics things have some role, but they’re just not as powerful as they’re in the B2C world. And we as pricing people, as business people really should be focused on value, right? How much more profit are we going to be making the customer if they buy our product? And I think that makes a huge difference for us. Let’s take a moment and talk about procurement people, because I think you have probably had as many experiences as I have or maybe many more. There’s a difference in procurement when procurement has power and when they don’t have power, right? So they often have power when they’re buying a component that goes into something we’re manufacturing and they buy it over and over and over again, and they don’t have power if we’re buying a piece of capital equipment or big software investment. And it’s a one-time purchase. So talk to me about how we deal with procurement, how salespeople should deal with procurement in those two different situations.
Todd Snelgrove
Well, I think it’s a great question, and what I’ve seen though is that the power of procurement in every industry has increased over time. So if it hasn’t increased in a certain industry, it is increasing, it’ll never happen here. Then I’ve had consulting clients call me back, I can’t believe it. The nuclear subs are now in charge. I mean, I’m using this as an example, but what you never thought it was going to be my old world, big industrial capital equipment procurement. I mean, you’re talking about critical pieces of equipment. They have power though. no matter what, there’s always a, they have part of the power and I’ve got lucky to meet a bunch of procurement people and then say, here’s how I buy, here’s what I do to unbundle you. Here’s what you do incorrectly to give me value for free.
I wouldn’t call them tricks like making you stay up late or keeping the office cold. Like those things you laugh about sometimes. But I’m not here to promote my book, but it actually has five chapters from procurement people saying, what do I value and when will I pay for it? And I do a lot of work with this procurement guy, and he just tells me some funny stories of what salespeople do incorrectly. And let’s give you one example. He says that it was my strategy of stupidity. So he used to buy engineering products, and the more he said to the suppliers, I don’t care, that’s not worth anything. The more they would come in and do free stuff for them to show them how smart they were. So I just never acknowledged it was valuable. They never bothered to pull it away. If they would’ve pulled it away, I would’ve said, wait a minute, you said you didn’t value it, so it cost me to deliver it.
He goes, no, they would just bring more people. They would give me more engineers for free. Because they figured eventually the more they showed the Superman cape of how smart they were, the more I would wake up one day. So it was just kind of counterintuitive. He would also suggest being proactive, if you wait till the end and we’re in the RFP process and then the rules have been set, the waiting’s been set, it’s much tougher to go in and have a value conversation. And whenever you say the word value, they’re going to think that means you took somebody out for lunch, you’re golfing like them, the word value becomes getting in there early and saying, I’m here to have a business conversation about making your company more profitable. I’ve engaged with the business, et cetera.
So those timing’s a big deal. What you find is people try to hide from me. Nothing good happens if you wait to find me at the last minute. But engage, be proactive. And when you talk value, talk real dollars, it’s okay to list benefits and all these other things. But when you say value, show how that’s going to be more profitable. Do your research. Have real numbers? One supplier came to him once and it was something like their business case was going to help him save more than his total cost of the whole department. We’re going to do all this great stuff and we’re going to reduce your costs. And they were doing all this math and he goes, you’re telling me and I’m making up numbers, you’re going to save me a hundred million pounds.
Yeah. The whole department isn’t that. I don’t believe you. And even if these were hard to, I don’t even spend that much to begin with. I mean cashflow is valuable. We can talk about the time value of money, but some people will say, cashflow, I’m going to get you paid earlier. And they say it’s free cash, no, it’s not. I mean, make your business case hard and real. Do some research, do some probability, and then I like it saying, you know what, no, we can even get into performance guarantees because, and that’s what I’ve done a lot of my career with is if you’re able and willing to discount, maybe we should say no discount, but I’m willing to make sure you realize some value and I’ll put the people and processes in place. We just got to agree on what we are measuring, how we are going to measure it and what the process is. I’m not going to decide after I do something if labor savings is a value, we need to know ahead of time and then we’re not going to argue, is it $20 an hour or $40 an hour? Rules of the card game probably should be decided before we play cards, is the analogy I always use.
Mark Stiving
Yeah. I think a performance guarantee makes a lot of sense. Now I’m going to tell you one of my favorite stories. Okay? This is before, this is when I, the last real job I had. So I was working with a company and we were specifying a new pricing system. And by the way, it took me a long time to justify this. I went through tons of work inside the company and honestly I could tell you that the company was about to make a hundred million dollars a year in savings because of the fact that we stopped giving away money to customers. Right? So this was like a no-brainer.
Todd Snelgrove
Yeah.
Mark Stiving
We had this committee, we chose the vendor, we took it to procurement. I had the pleasure of sitting in the very first meeting that procurement had with the vendor, and I am not joking, procurement said to them we’re looking at two other vendors, yours is the most expensive and you need to lower your price if you expect us to do business. I happen to know for a fact that was a lie.
Todd Snelgrove
Yeah, I imagine that. Right?
Mark Stiving
And, that one experience has informed my way of thinking about procurement a lot. And that’s why I say when they don’t have power, because I knew he had no power.
Todd Snelgrove
You created power.
Mark Stiving
But he certainly pretended to.
Todd Snelgrove
And we need to be able to walk away and justify our price and say, my old CEO say when it gets to the point of bad business is bad business, but if you don’t walk away and the procurement people know that, they’re just going to keep pushing it, I might as well keep asking for more free stuff.
Mark Stiving
Exactly.
Todd Snelgrove
Whether that’s price or free implementation. Whatever it is, if you’re going to give it to me and just one quote that I think sums up, it’s one of my favorite quotes from my old CEO, how many ways do you think our sales team has to discount? And we both started laughing, I bet there’s probably 400. There’s the day of the week, there’s the size of the order, there’s the end of the year by, there’s a competition, I mean, we’ve all heard them. How many ways have I said to them, don’t discount, but we’ll guarantee value. That’s the problem. So if your company’s able to give a 10% discount, if the customer buys, why don’t you say, I want 10% guaranteed value. If I don’t deliver it, I will give you a rebate penalty, whatever check. And I spend a lot of my time getting procurement, you realize that 10% value per year is better than a 10% price cut because the 10% price cut’s held for the five years of the contract, I’m going to find 10% value every year. Energy lubrication, inventory production increase, whatever that is. Turns out that I’m 10 percent better and it’s actually helping you get what you want. You’re just hoping that the price cut becomes a savings. But if you don’t have a tool or a process, you’re just, I mean, talking about value in a PowerPoint slide, we all can.
Mark Stiving
Yeah. I want to make sure I understand what you just said. Did you just say, we’re going to give you a performance guarantee and if we don’t hit that guarantee, then we’ll give you a 10% discount?
Todd Snelgrove
Correct. A hundred percent. I signed about 180 of those. And there’s a few takeaways after that is, one, we got paid up front, it wasn’t, that would be a bonus because customers have a tough time finding money for bonuses at the end of the year. I can’t find an extra, will make a million dollars, I’d be fired if I paid you more. Now we’re both on the hook. And then we just had to agree labor doesn’t count or $20 is too high. I mean, sometimes you get the accountants that want to get to the seventh decimal. It’s more important to choose a number that’s reasonable because it’s the delta you’re working off of, between the two. It’s like, go. And it really you’re not doing this for every client, you’re doing it for your bigger ones, strategic accounts, key accounts where you’re engaged in. But once you get that ongoing annual process of having improving programs, continuous improvement, six sigma, whatever it is in your world procurement people are measured on annual productivity improvements. Usually they’ll revert to the price if they can’t find a way. So you’re like, okay, look at it, you save money for years. Oh, they could have a hard number. They were usually on board with it.
Mark Stiving
That’s a great idea. I like that. You said these words that just got me to smile or maybe perk up a little bit. you said the words value conversation. So tell me what you mean when you say those words.
Todd Snelgrove
Well, the usual discussion was, first of all, somebody knowing the customer slash industry. So we would have teams that are experts in, I mean, finance or life insurance or industrial, whatever it is, because again, how do you frame it? What’s important to them? And I’ll tell you a funny story, the exact opposite afterwards because it may make me smile. knowing that, and then customizing our presentation, and it was usually a dual-fold strategy to say, okay, look at, here’s what we think we’re hearing from your team. Then I would have spent time, believe it or not, explaining what we think of value. So not this total cost of ownership. I’ve got this term called total profit added, but , we’re going to help you on the acquisition, the operation, the maintenance and the disposal phase. Here are the 400 drivers we have, here’s where we’ve done it before.
Here’s the opportunities we think with you talking to your smart people, here’s the program we’d like to have in place. And then kind of getting into that type of a discussion of where, when, what, why, and how versus showing up with a generic corporation. Here’s where my head office is. I’ve been here for a hundred years and I’m really big. And then terminology being not relevant to them or anything. So you, or the value pricing person can’t be an expert in every industry. but having at least that person there, I mean, I was talking to railroads, I’ve been on a railroad, but I mean, how that industry operates, who pays who the government is involved? I mean, you better have somebody that knows a little bit about the industry for the credibility aspect. If you’re trying to get the customer to get away from three bids and a buy, it’s comfortable, it’s easy. I have a process. They better look at both the people in the room and say, that person knows our industry can tell me some relevant stories. And this person can measure and understand value.
Mark Stiving
Nice. Nice. I often think of a value conversation as asking the questions instead of presenting the answers.
Todd Snelgrove
And there’s the challenger style, there’s the spin selling. So it’s having both of those types of things. Because what I find with the value side of it depends who you’re talking to. And these, again, I probably got pulled in way too much with procurement because it was the closing. The customer loves us, they want us, but they want us to pay us less. They talk, get in an airplane and fly so that was maybe why mine is, but half the time the customers don’t know their numbers. Again, from my world, they don’t know what best in class is. So it’s funny, this procurement gentleman asked you once, he was, what’s the average life of pumps within your company? And I smiled, I wouldn’t know that. Well, when you asked me those questions, how do you think I would know that? Your job is to know your product or service inside and out?
And there’s this lady that used to run procurement for, I think it was AstraZeneca, and became the head of the Charter Institute of Procurement. And she goes, if you can’t demonstrate to me value using my numbers and my language, don’t expect me to figure out what your value is. I can’t. I buy all this every day. We’ve both been around a long time, but a hundred years ago there was, Mr. Customer, what keeps you up at night? What are your problems? And it turns out problems are relative and they don’t have time for this story. But if you’re used to getting three years out of your pumps, so now you get three and a half years, you’re like, I’m doing great until you say, guess what? The oil and chemical guys are getting 13 years out of the same pump and that’s worth $3 million a year in parts. Well, wait a minute, a pump’s, how, okay. So that’s a little bit of the telling versus the asking, but asking is great, but better have something there to then keep the conversation going. If not, I don’t know, or we hit our target, where’d the target come? It was last year plus 5% or whatever. I mean
Mark Stiving
Yep. No, I agree completely. It’s got to be a conversation and not just an interview. Yes. And I also could see if I’m dealing with procurement, which by the way, I almost never deal with procurement anymore. if I’m dealing with procurement, I could see how it’s all a tell, right? Because they don’t need to know, they don’t know the value of what it is the company’s buying.
Todd Snelgrove
Well, they don’t use it. I mean, the joke is, I’m sitting in an office in downtown Toronto, what’s the value? Well, the person that’s doing the sales or marketing or pricing, this is easier for me to use. I’m getting more benefit out of it. I’m faster too, I mean, that’s your benefit. That’s not what I measured on. I mean, until I have pain, I don’t know what pain is until you live it yourself. And again, always go to the people that are the line of business, the people that are going to be using what you’re trying to offer and get that buy-in. So, I’m saying we need both of that. Yeah. If not, we end up with these deals. I’ve got the order. How many times have we got the order? Then somehow it gets to this procurement committee and we’re stuck there for a year and nothing happens. So
Mark Stiving
Yeah. Todd, this is fascinating. We’re going to have to start wrapping it up. Let me ask the final question. What is one piece of pricing advice you would give our listeners that you think could have a big impact on their business?
Todd Snelgrove
I think having a structured process to quantify customer value, and it’s not as hard as people think. I mean, it really just, even if you’re not perfect at it, it’s better than nothing. Because if you put out a number back to the conversation that’s high, that’s low, it’s a discussion now, but , saying it’s going to be just better, and we think that’s worth this, then the price difference you’re charging becomes an investment. And then we can talk about what’s the probability, what’s the payback, where have you done it before? Well, you put it at risk. Those are all great closing conversations, but value quantification in my opinion is that, I wouldn’t call it the heart, it’s foundational. It’s like so many things are more pricing, but , just assuming the customer client’s going to figure out what your value is, is probably not a long-term strategy. And if you can’t quantify it, they’re just going to try to take it for free.
Mark Stiving
Yeah. It shocks me that so few people do this. So few companies quantify that value.
Todd Snelgrove
More and more are starting to do it. The issue I see is that they’re trying to. It’s a little bit of everybody trying to do something instead of having a structured process, tool, research, et cetera, to do it. So somebody launches a new product and they go off and they create the spreadsheet, then somebody else does something else somewhere. Then the companies that have done well, and I think there’s 12 companies in the vault. I’m not here to push the vault, but I mean, they’ve actually got a structured team and they may even have a committee that says, okay, let’s tie this together. And whether they report into marketing because it’s pricing marketing or is it sales? I mean, yeah, I’ve always been in kind of the group because it floats across all these different functions.
Mark Stiving
Yep. Okay. Do us a favor and push the book. What’s the title of, I didn’t even know you had a book. I didn’t see it on your LinkedIn page.
Todd Snelgrove
Like, real quickly, I’m not here to sell books, but I can’t even do this. Value First Then Price, point being price becomes an issue. But only after you’ve discussed the value, if I say a hundred dollars and then I start talking about a hundred dollars, I don’t have a hundred dollars. This should be, I’m making, this should be worth $300. Okay. And then it’s, this says building value-based pricing strategies. But the first one the subtitle was understanding and buying value from a sales and procurement perspective. And what I like, again, there’s procurement people saying, here’s what salespeople do wrong, and here’s what sales best practices people are saying, here’s what we do. Right? So the one thing in there is just trying to have a structured methodology of quantifying value. And if a customer says, total cost of ownership, that’s great, then you should be able to follow up and say, what do you mean by that?
Because a lot of times customers are talking about landed cost. And I used to say, when I had flexibility in my email signature, I could get the highest price, but the lowest cost. So procurement people would laugh and they would say, Todd, you have no idea how RFPs they send out second year your costs are too high. What are our costs or are we in trouble? Those usual things, what are you going to do? Procurement people would tell me, 99% of salespeople come back with discounts, extend the contract. I’ll give you a discount, buy more. I’ll give you a discount, pay me whatever. I said cost. So then I would come back, well, cost includes the price, we won’t give the sales pitch, but all these other, so having a response to that and being able to push back the customers. Do you want a lower price or lower cost or more profit? Those are three different things. And last time earnings per share was a profit. Yeah. They don’t get them, yeah. But, and then again, you’ve got to have something structured there to be able to go measure it in the like.
Mark Stiving
Yeah. I think the word that you used earlier in the conversation, which was a great word, is business case. Right? If we can always bring it back to the business case, then it’s, yeah, sure, total cost of ownership matters, but so does the return.
Todd Snelgrove
Yes. Yeah. And the believability and the probability and where, I mean, I always say, I could put a business case to you. Mark, if I come to your house and do this and this and this, it’s going to save you this much energy. You’ll probably say, where have you done that? Where did that number come from? I don’t believe that my number’s there. I mean, now we’re having a conversation, but I’ve got to start somewhere versus, what would it be worth to make your home more comfortable? Comfort’s a nice thing to have, but how much am I paying for comfort? Yep. I’m a dollar and cents person.
Mark Stiving
So am I. I’m trying to break out of that though, and trying to branch out a little bit.
Todd Snelgrove
But I mean, but I’m willing to put, and I was just doing some work on less quantifiable things that you can start putting numbers to, and we do it all the time. How much more, okay, this is a pricing thing, depends where you are, where you’re listening to this, but let’s say you’re telephone, your cell phone bill’s a hundred dollars a month and you get 99% coverage and the customer service is 92%, whatever, make up the numbers, would you switch to somebody for $1? So a pricing professor asked me, I said, it’s a commodity. If you’re going to say they’re going to all deliver the exact same service, theoretically you should switch. And he goes, the switching cost, I’m not going to pick up the phone and call model, or whoever it is these days and start changing around. So there is, when you’re the winner of ease of doing business, our engineers used to go to customers and I would have an end user say, somebody’s going to come in and do a discount.
And I said, okay, we’ve been providing value. We measure this value that we bring for you. And I’m making numbers up, but we deliver $1.2 million of value per location per year. Yes. You’ve been doing that every year. Okay. If you leave our team and go to somebody else’s team, how long will it take them to meet your people, walk the facility, learn your problems, understand your KPIs, build the trust, have a team together to prioritize how they’re going to solve this. That sounds like a six month timeframe for me. Okay. That’s half the value. Year one and gone, that’s $600,000 out the door. And we used to get cherry picked because our sales team engineers would be, I hate to say it’s a horrible thing to say, too dumb, because they would give the customer the answers. I’m working on these three projects. So then the customer could take those and give them to your competitors. What we had to say is, look at it, have the bullets in your gun. Don’t show them what they exactly are. So instead of saying, relationship, I’ve got $600,000 of value improvements in play right now. You leave us those stops. Yep. And the other 600,000 aren’t going to happen. So you can start putting numbers on there and storytelling and saying, is it really worth changing for that? Yeah. It doesn’t always work.
Mark Stiving
Todd, thank you for your time today. If anybody wants to contact you, how can they do that?
Todd Snelgrove
LinkedIn, Todd Snelgrove is probably the easiest. Todd Snelgrove Value, or my email address is [email protected].
Mark Stiving
Perfect. And to our listeners, thank you for your time. If you enjoyed this, would you please leave us a rating and a review? And finally, if you have any questions or comments about this podcast or pricing in general, feel free to email me, [email protected]. Now, go make an impact!
