You expend much valuable time and company resources developing energy efficiency proposals that don’t get your fair share of yeses.
Why Should I do Business with You?
This may be an important piece of the puzzle. If a prospective client told a member of your sales team “There are many others who do the same thing as you but at a lower price”, how do you think they would respond?
All too often they would cite your product’s features, benefits, quality, customer service and experienced people. And probably add the ever-popular claim that you always exceed customer expectations (whatever they may be).
This is probably what your competitors would say as well.
Many companies serving the energy efficiency business live, die or thrive on the performance of their business proposals. Unfortunately, many suffer from poor conversions, or win-ratios. And projects won often yield unsustainable profit margins. The only thing you can seemingly do is out-price the competition and hope the margins will miraculously improve someday.
If your team can’t explain and defend your value, it’s tough to get a yes to your proposals, especially at reasonable margins. They must be able to succinctly state how your products or services address a customer’s business needs, problems, issues, pains, or opportunities. If they can’t, you’ll be relegated to “pricing purgatory” and your proposal conversions and margins will continually suffer.
This is the first in a series of blogs providing the tools and wherewithal to increase the proposal conversion rates and margins of your energy efficiency upgrades.
How Big of a Deal Is This?
It’s huge. A modest, and easily achievable, increase in a conversion rate and gross margins drives profitability.
Assume you have a conversion rate of 25% and earn an average 30% gross margin. Increasing the conversion rate to only 30% and the gross margins to just 31% results in 24% gross margin dollars increase. And since this modest increase is often achieved with existing organization capabilities and overhead structure, it falls directly to the bottom line.
Here’s another way of looking at this. Based on the initial conversion rate and margins, sales would have to increase by the 24% to achieve the same gross margin dollar benefit.
So How Do You Do It?
It’s All About Value
“Your company probably does something special and valuable for customers and prospects. The problem is, in many cases, you aren’t getting credit for it. Instead, you get pounded on price by buyers who don’t appreciate the value of doing business with your company.” https://marketwerks.com
The key is to identify, communicate, and effectively price the value your products and services provide.
Identifying the Value of Your Products and Services
There are three basic ways your products or services provide customer value:
- Increase revenue
- Decrease costs
- Provide an “emotional” benefit
Increasing revenue and decreasing costs are relatively easy to define. On the other hand, an emotional benefit may be easy to recognize but tough to monetize. A good example is the satisfaction of having a “green” building and knowing you’re being a good environmental steward. Another benefit of being “green” but having a more direct impact on company performance concerns the ability to attract good talent. Today many young prospective employees only want to work for companies that are environmentally conscious.
For many projects, saving energy is not enough to get a yes. Building owners often consider saving energy a low priority compared to operational needs. Some even look at energy as a fixed expense with little ability to influence.
A key component to getting more yeses is to identify the revenue generating non-utility-related benefits resulting from energy efficiency upgrades. In many cases it’s these benefits that sell the project as opposed to reduced energy consumption.
Energy efficiency upgrades-especially HVAC, lighting and window films-often result in more comfortable environment. Here are some revenue-generating examples that will be covered in greater detail in forthcoming blogs:
- Higher occupancy rates
- Higher lease rates
- Increased retail foot traffic
Energy Star-rated buildings also typically have higher occupancy and lease rates, in addition to commanding a price premium when sold.
Differentiators – Gaining a Competitive Advantage
You may be thinking “Ok, these are valid revenue-generating benefits of energy efficiency upgrades. But won’t they accrue regardless of who performs the work”? Yes, they will, although many of your competitors will focus exclusively on reduced energy consumption and not even mention them. But you do have differentiators that are directly related to what you do and how you do it that add customer value. These will be discussed in our next blog along with opportunities to reduce costs.