24.05.2017
powershift
Cost control looms so large for companies operating in the construction sector that most commercial sales and marketing activity inevitably gravitates toward a discussion about price – almost regardless of the product or service you are selling.
Moving the fight to higher ground
Most CEOs and Marketing Directors are trying to move the fight to higher ground – but how to do it without alienating prospects or risking the deal is challenging.
The logical answer is your Value Proposition. When Peter Drucker wrote that ‘Price is what people pay, value is what they get’ he could have been writing it specifically for the construction industry.
With average net margins in major contractors running at around 1.9%† it is no surprise that cost is king. However, by digging beneath the immediate reasons customers are buying products and services, and into the set of desired outcomes, companies can shift the negotiating ground away from comparable price.
How products and services affect outcomes, combined with addressing a customer’s root causes of underlying problems will start to show why you are uniquely placed to solve the real pain your customers are feeling.
Why Value Propositions are essential in construction
The construction industry in the UK tends to segment its problems into definable categories such as project risk, cost control, asset productivity, business insight etc. which gives companies a place to start to evidence their value proposition.
However, promises and positioning can only go so far. A value proposition in construction needs to be evidenced so procurement (particularly pragmatic in this sector) can make a balanced judgement.
This is where the analysis in your Value Proposition requires focus on the underlying problems rather than definable categories and outcomes. In Project Risk for example there are many underlying problems that lead to projects failing: Inaccurate or absent data, timeliness of reporting, joined up data across the project supply chain, supplier performance on site, lack of control over variations and additions etc. And here lies your opportunity to align your products and services squarely with the customer’s real needs.
A good Value Proposition will define in real terms what value your company is delivering to your customer.
A value that can be calculated not just considered.
This value can be tested and measured by the customer, and part of the opportunity Value Propositions present is that you can not only predict the value delivered but return afterwards to analyse successful effects post project.
Value throughout the company
In this way an effective Value Proposition supercharges your sales effort and makes your offering stand out from the competitive noise, and it sets you up as a partner, rather than a supplier.
And importantly, it also helps the valuation of your company. Simplicity in purpose and tangible value delivery is valuable to investors because the potential market size and value is easier to scope.
All companies can have their own, uniquely powerful Value Proposition, but they need uncovering and then retro-fitting into the business. The management team needs to understand the new approach as well as the sales & marketing teams to drive the next stage of growth.
What a value proposition isn’t:
In startup land, creating a powerful value proposition is now considered the most important exercise a company undertake. Investors have mandated it because it is so critical to a company’s competitive advantage and market fit.
Mid-sized businesses are now starting to come under the same pressure from their PE partners to achieve the same the thing – precisely because the clarity a Value Proposition brings ends up being at the core of virtually all critical decision making.
New investors and acquiring companies want a way to easily understand what journey a company is on and how to quantify the value a company is delivering into its customers, not just the value of what it is selling them.
What a Value Proposition is:
In construction more than any other industry where productivity levels are static, margin pressure enormous and project risk creating increasing management pressure, a Value Proposition is an effective way for companies to grow their margins and differentiate themselves.
Or as an old CEO of mine once said:
“When you learn how much your worth, you’ll stop giving people discounts.”
† Source: http://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/beating-the-low-productivity-trap-how-to-transform-construction-operations
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