The New Value Chain

July 2, 2009

How To Determine The Right Performance At The Right Price

As the economy continues to struggle, consumers are hungry for the best deal that they can find, at every price point. Fortunately, a process called “value engineering” can ensure that you build a price/performance solution that fits every budget, every time.

COPYRIGHT CEDIA 2008
COPYRIGHT CEDIA 2008

I recently had breakfast with my friend, Dave Slavitt, principal at Audio Video Solutions in New Jersey. Dave is an ex-Wall Street guy, who is very bright and, like a lot of you reading this, is an expert at handling the high-net-worth, ultrademanding customer. He’s built his career around catering to the ultra-wealthy.

So I was a bit surprised when Dave started chatting about value engineering.

WHAT’S VALUE ENGINEERING?
I know the value-engineering concept well from commercial construction, and I’m seeing it more and more now in the residential space. Value engineering, in other markets, typically is described as “cutbacks” or “major surgery,” depending on your point of view. Essentially, expensive or unnecessary items are “value-engineered” out of the process, the bid, or the installation. Typically, value engineering is what happens before your overall revenues shrink, your costs get jammed, and other uncomfortable maneuvers get started.

LEAD WITH THE VALUE
Dave was suggesting that integrators need to think about value engineering before the job starts, and to build the value on the front end. The real value is proven in the back-of-house systems, the hidden gear and connectivity that makes the system go.

I pressed Dave on this. Why, I asked, would you want to start with a “value” proposal, especially among the wealthy? Aren’t they the ones thriving in every economy? Aren’t we here to make money? Shouldn’t we do everything we can to maximize our revenues? It seems counterintuitive, especially with a well-heeled client, to offer a low-price solution.

Dave’s reply was to the point: “If you don’t lead with value, then you may not end up with a sale at all.”

It must be noted, however, that value engineering doesn’t mean going cheap. It means the right price, the right performance, and the right profit margin for you. Customers now want to see the “price + performance” equation, their thinking being that if you get a lot for a little, then you get a good value. So the value equation is the right performance at the right price, and it starts behind the scenes.

HIGHER DOLLAR ITEMS

Chris Westfall
The back-of-house platform—the gear and connectivity in the “engine room”—needs to be your launch pad for value. Be sure to “right-size” the performance of the system at the rack, because this is the stuff with which the client doesn’t directly interact. Then look at the edge devices, such as touch pads, speakers, and screens, for the higher dollars.

Next, take it one step further to show the customer that you are a true sales pro. Step him or her through a more expensive solution with a similar feature set. This is not a good-better-best conversation; it’s about the features that the client wants for more than the client should pay. Show the more expensive solution, and then show your right-sized solution, and compare them. Go line by line and show the client how you have created value at key points within the right-sized system. The client will see how conscientious you are about delivering value.

In this economy, the most expensive choice is challenging even for the ultra-rich. The “smart buy” rules; no one wants to feel they paid too much for something. Everyone wants to know that they got a good deal, whether it’s on a Bentley or a bicycle. It’s not the exact dollar amount that’s the issue; it’s what you get for your dollar that counts.

Show your client that you have maximized performance and minimized cost right out of the gate. From there, maybe the client will feel comfortable enough to decide to spring for additional features. At the very least, even if the client stands pat with the value-engineered solution, you have gained the client’s trust. You have shown that you have value-engineered their bid, or their system, from the start. You’ve shown that the client could have gone with a more expensive system (i.e., “paid more than he or she should”). You have become the client’s trusted advisor.

Chris Westfall (cwestfall@nuvo technologies.com) is vice president sales USA for NuVo Technologies (www.nuvotechnologies.com), a value-based provider of multi-room audio products in Hebron, Kentucky.

  

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