For our October Webinar, Michel van den Berge, AVP Marketing at Agilent Technologies, explored the process and technology behind Agilent’s Design to Value initiative that resulted in better decision-making in the stage gate process, a transformed product portfolio, and a double-digit growth in gross margin. After the session, he answered questions from the webinar audience. In this blog, we share his live answers.
How does customer value make it easier to not move forward with a product in development? Is there any way to quantify the impact of better decision-making?
I did. I can’t give you the exact number, but I can say that it was multiple millions.
It’s relatively easy. We know exactly how much we would have spent moving going forward with the product development would have been another few years. And then of course the calculation of what Agilent expects from us in terms of operating margin and growth, et cetera. And then [we calculated] the Delta between that and what we planned in the original project proposal.
We actually found out, when we went through this exercise, that we didn’t have enough value and we couldn’t sell the product at the price we were expecting compared to the cost of the product. So, yeah, you can calculate that. Absolutely.
I’m familiar with the academic literature on the superior price impact on profitability (compared to volume/cost). In practice, how do I convince my colleagues that our customers will tolerate this?
We do that, of course, in our sales trainings. And I can tell you that when we launched this product – let’s say we sell it for around $80,000, plus or minus $10,000 depending on the accessories. There are solutions out there – particularly Chinese manufacturers or others that are half that price. So why would a customer spend twice the amount of money and buy our product?
That’s where the value model comes into place, because we can show them with our proprietary technology that looks through packaging, [and show] how much money they would actually save. So, whether the instrument is $40,000 or $80,000 after two years, it doesn’t matter anymore. Right? They’re really saving a lot of money.
Our sales engineers are very technical. They first will ask you “okay, what is the spectrometer that you have in there and how much light output is there? And it doesn’t matter. What we give them is application notes and show them that this actually works in typical scenarios with customers that we work with in the consortium. And then what’s really powerful is actually have the customer participate in those sales training sessions prior to launch. So that was a really good moment.
Did you or your colleagues ever have an “aha” moment where your value message suddenly made sense to a customer or prospect?
Yeah, I can think of that moment because it’s linked to the previous question. When we selected more enterprise salespeople, and then we had them trained and we launched this product about a year and a half ago (it’s been very successful by the way). I got a call from one of the account managers saying “hey, my customer wants to have access to the (LeveragePoint) tool because she wants to present her business case to her management to invest in this product.” She thought it was perfect to use the LeveragePoint [Value Proposition] for it. If customers are asking me for this then we must be doing something right.
Once I refine a value story/proposition with some of my top salespeople, how would you go about scaling this across the team to maximize impact?
I can only think about my own experience and the mistakes that I have made. First, don’t roll this out globally immediately. My responsibility is global, but I usually start with the Western Europe and the US teams, because I find those sales teams are more used to use to the methodology of selling on value. It’s coming [strong] in other regions as well, but when you start in one place, it’s easier to adopt. You create success, and then you can actually use that success to have to communicate that in all the regions.
One of the mistakes I made initially for some of our products using this tool is it’s a bit too much because so let’s say our sales cycles [for Vaya] are probably between four and eight months, because the customer will look at what they need, have discussions with different suppliers, they’ll probably run some tests, a need to get the investment pre-approved, et cetera.
But there are also solutions that we sell that go [along] a lot faster. And that’s where sometimes you’d think it would be really beneficial, but the sales engineers don’t want to go into that kind of detail with those customers. So pick the right product. The other part is where you have a significantly different price point versus other solutions that are in the market. You have to have something like this [value selling], otherwise it becomes just discounting.
I’ve been doing something like this for a while using spreadsheets. What benefits do you see to using dedicated technology compared to Excel?
There’s only one version of the truth. I think the nice thing [about using LeveragePoint’s technology] is that a manager can change the variables in a discussion with the customer, but he or she cannot change the logic. And we put a lot of effort in there. We know it, it works. So that’s one example or benefit.
The other part is using the tool. I find that even though it’s a web based, we have a lot of discussions like that now, right? Virtual. The tool also allows you to export the data in different formats, whether it’s a summary or a PowerPoint or an Excel spreadsheet, and the value proposition is modified after the discussion to mimic the exact situation [specific for] the customer.
It also gives the customer a tool to have that discussion with their management to defend their request for investment. You won’t get that with an Excel spreadsheet. I think the other advantage I see with the LeveragePoint tool over excel is some of these value drivers are similar between different products. Once you have that logic for one solution, and you have a similar technology that does slightly different things, but you have also similar logic behind it. You don’t have to reinvent the wheel – just copy those value drivers in a new solution. That way, you don’t lose that experience over the years.