Why it's wrong to assume customers only want the cheapest price

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This article appeared in the September 2017 issue of CRN magazine.

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Why it's wrong to assume customers only want the cheapest price

COMMENT  |  What is the most important thing to consider when pitching for an IT project? If the answer is, “How can I deliver this for the lowest price?” then you are selling yourself short.

One of the best speakers at the recent Oracle Code event in Sydney in July was Peter Laurie, chief executive of software development firm Junta. He had some fantastic advice for programmers about how to find opportunities for new projects with large customers. 

The advice is just as relevant for resellers. In a competitive tender process, most businesses will focus on how to maximise the benefit to the customer by looking for ways to reduce the cost. This follows the logic that the cheapest bid will always win.

We always assume that the customer will consider price above everything else, but that’s just not true. When you shop for a pair of shoes, you don’t just pick the cheapest available.

Likewise, one pitch can appear far more valuable than another, and, therefore, be worth a premium price. 

Laurie’s advice is to look at the proposal and find ways to increase the value. “If the value increases faster than the cost, you should be able to run at full pace, rather than being held back by SOE (standard operating environments),” Laurie says.

One way to deliver more value is to deliver more projects. This can be tricky with enterprise clients, when you’re already delivering all the projects you’re allowed to. “But that’s not quite true,” Laurie says, sketching two axes labelled ‘Effort’ and ‘Value’. 

The projects that definitely get done are the high-value, high-effort projects. An enterprise will be willing to spend $300 million to build a project that worth $500 million. Normally, these large-scale projects are attempted if not fully completed. 

The other obvious candidates are low-effort, high-value projects. “These get done because they can’t stop us from doing it. We can just do it on the weekend,” Laurie says. “Usually it’s something that you have bashed together with code – it’s ugly as sin, but it does the job.” 

The untapped opportunity is in projects of medium effort that are of either medium or high value to the enterprise. These are tactical projects which are often shot down by senior executives because they don’t want any distractions from the high-effort, high-value projects. 

Alarm bells will ring when the executive thinks about the costs, risks, resources and time required for a medium-value project. The argument will follow this logic: “‘There’s no way I’m going to release people I trust touching a system of records to do a tactical app, because it will increase the risk of the high-value projects that we were told to do by our board’,” Laurie says. 

But there is still a way to do these projects. The onus is on the developer (or reseller) to do it efficiently in cost, time and resources. 

How can you do this without spending weeks developing a full brief? After all, medium-value projects can’t afford the same level of planning as a high-value project. 

The answer is to make an idea feasible by learning on the job, applying lessons to the end goal and figuring out what it will require to get there, Laurie says. Make an early start, and then keep redirecting the project based on updated requirements (a process known as ‘dynamic optimisation’). 

Here’s one final piece of advice for Laurie: include analytics in your medium-effort project as soon as possible. “Someone will want to kill the project. When they do give them a report, say, ‘Here are the 800 people who are using this project twice a day to build value for the business. I’m not going to call them to say we’re shutting it down. Why don’t you call them?’”

Data trumps opinion at every point, says Laurie, and it’s the best way to prove the value of your work.  

Sholto Macpherson is a journalist and commentator who covers emerging technology in cloud 

 

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