Creating Value in the Supply Chain, Selling in Freight Forwarding, Logistics and Transportation
Part II: 5 Ways to Create Value for Your Customers
In Part I of the series, ‘Creating Value in the Supply Chain, Selling in Freight Forwarding, Logistics and Transportation’ we looked at the concept of customer value creation and how it is linked to understanding your customer’s business.
We also identified that we need to understand how we can translate our solution offering into the customer value relevant to his or her business by helping the customer to achieve any one or combination of the following results:
- Increase revenue
- Reduce costs
- Solve critical business issues
- Improve service levels
- Contribute to the bottom line
The value proposition provides a summary of HOW the tailored solution offering can create value for the customer relevant to his or her business. Another way to look at it is to ask “how does my solution help my customer achieve their business goals?” If you can successfully answer that question you have created value for your customer.
Consider each of the following five ways to creating value. Can you identify the opportunities from your customer’s perspective?
Increase revenue
Your customers, like you, want to increase their revenue. How can you help them to do this? Will you help them lower their landed cost to increase competitiveness and sell more products? Can you help them better understand and respond to customer demand and sell more products? Are they losing sales as a result of stock-outs or seasonality factors? Is the customer’s ability to fulfill orders timely and provide good service negatively impacting sales activities? Your objective is to understand how what you DO can help your customers to sell more products.
Reduce costs
Cost and price are not the same thing. Ultimately a decrease in rate can positively impact the customer’s cost but in many cases there are much greater opportunities for costs reduction. Typically, companies’ greatest logistics costs are related to inventory and indirect logistics costs. What can you do to help your customer to reduce their overall cost or landed cost? Your rate or selling price is a direct transportation cost which is typically the smallest component of overall logistics costs. Your objective is to understand how what you DO can help your customers to lower overall logistics costs.
Solve critical business issues
What are the customer’s pain areas? What factors impact their business? This is often one of the most ignored but important areas of customer need and value creation. Common pain points for logistics managers and teams are:
- Gaps in information
- Customer service issues
- Management issues
- Warehousing issues
- Costs (freight, product, fixed and variable)
- Production
- Sourcing
Your objective is to understand how what you DO can help your customers to solve critical business issues. Understanding and translating the benefits of what you sell relevant to pain areas is a key component of a successful selling approach.
Improve service levels
The relationship between the customer’s customer service and what you sell is important. Your customer’s customer service will also play a key role in achieving the previous three bullets – the direct relationship with increasing revenue, reducing costs and solving critical business issues. Understand the impact your solution offering and service levels have on the customer’s customer service.
Contribute to the bottom line
Overall, profitability drives your customer’s business just as it drives yours. How can you help your customer improve profitability? Can you help your customer to reduce assets or improve their Return on Assets (ROA)? Can you help them to lower costs resulting in improved profitability? Can you help them to carry less inventory on their books? Outsource facilities? Change sourcing areas? Improve productivity? When you consider your value proposition, don’t forget the link to the customer’s profitability.
Of course, these five potential areas of value are related to each other and achieving value in one area can significantly impact another. The value proposition is the executive summary of the tailored solution offering. It essentially answer’s the customer’s primary question, “Why should I buy from you?”As a seller, your focus should be on understanding value from the customer’s perspective.
Stay tuned for more of this series, ‘Creating Value in the Supply Chain, Selling in the Freight Forwarding, Logistics and Transportation Industry’.
To read Part I: Understanding the Concept of Customer Value , click here
Article Source: RSI, Value Based Selling for Logistics and Transport Professionals
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