Your ability to help B2B buyers understand the value you provide can make or break the sale. In some cases, as with our client IQS, that means communicating the ways in which the prospect or customer is losing money so that the buyer understands the potential of the solution.
IQS has a 25-year history of providing manufacturers with quality and compliance management solutions, which are components of a Manufacturing Execution System (MES). The company has a strong foundation in multiple target markets, including automotive. We’ve been working with them for the last 10 years and have helped them identify key ways their solution delivers value to their customers.
Cost of the Problem
Because the IQS solution helps solve quality issues, we first had to understand the business cost of poor quality. Industry estimates indicate that five to ten percent of production does not meet specifications for a typical manufacturer. To understand the significance of this, we looked into how an off-spec product would impact a company’s financials:
- Lost sales revenue
- Increased cost of goods sold
- Increased cost of selling
So, if a typical manufacturing company was seeing these profitability impacts on five to ten percent of its production, we were confident that a quality management solution could make a significant bottom line contribution.
We determined that the cost of poor quality impacts manufacturers in these specific ways:
- Forces need to carry extra inventory
- Higher equipment downtime
- Greater scrap and disposal costs
- Extra shipping and expediting costs
- Higher warranty costs
- Increase in product returns and the labor cost required to rework off-spec material
Value Delivered by the Solution
We focused on how IQS could reduce that cost of poor quality. By reducing errors during the manufacturing process, IQS can reduce almost all of these factors. Also, IQS provides traceability into what happened during the manufacture of a particular product so if a problem is identified in the future, it can be traced back to the root cause and quickly corrected.
ROI Selling worked with IQS to build an ROI calculator that quantifies the value that the IQS solution delivers to prospective customers in the following categories:
- Reduced direct material cost
- Reduced scrap material cost
- Reduced production labor cost
- Reduced inspection labor cost
- Reduced non-production labor cost
- Reduced maintenance cost
- Reduced warranty, recalls, and returns
- Increased sales revenue
This tool has helped both IQS and its prospective customers estimate and understand how much financial benefit the IQS Quality and Compliance Management solutions can have on their organization. This helps IQS build the business case for their offerings.
With any customer, you always want to first identify the cost of the problem. It’s important to quantify the problem in terms of numbers. How much is this costing the company? That’s the basis for developing a winning value proposition.
ROI Selling tools can be used to quantify the value of your solution. How do you quantify the business case for your solution? Leave your thoughts in the comments section or email me at firstname.lastname@example.org.