Negative Cost Selling Presented by Professor Bruce M. Firestone Founder, Ottawa Senators, Executive...

Negative Cost Selling

Presented by Professor Bruce M. Firestone Founder, Ottawa Senators, Executive

Director, Exploriem.org, Entrepreneur-in-Residence, Telfer School of Management, Broker, Partners Advantage GMAC

B. Eng. (Civil) [McGill], M. Eng-Sci. [UNSW], PhD. [ANU]

Helped establish > 70 enterprises incl. Sens

Contents

Do you want to learn how to really make people want to buy from you?

Are you in the solution selling business?

Do you know how to get on the ‘same side of the table’ as your customers and clients?

Do you want to learn negative cost selling?

Do you know how to think in terms of 2-D and 3-D business models so that you can not only take care of your clients but your clients’ clients too?

The Power of the Brand

“People like to buy from people they like and trust,” Prof Bruce, Ottawa, Canada.

“Have you ever bought anything from someone you didn’t like or trust?”

Trust (not love!) is the no. 1 thing in life and business

Marketing Builds Brand Builds Trust Creates Opportunity to Sell


Mutual Life Assurance Co. of Canada Clarica Life Insurance Co.

New sell-line: "Clarity through dialogue“Funny TV ads– Clarica Agent appears on

scene to clear up W/C ambiguityNo call to actionHow many people head for the phone to

buy some insurance?


None! Separate selling process“VP, Marketing and Sales” Doesn’t

know what he/she is doingLiving room pitch: “Take care of your kids!”“Where’re you from again?“Pirate Insurance Company of Kinakuta” or

“Clarica”– which helps you to close the deal?

The Process

(2)Your

Reputation and Brand

build Trust in you

(3)Trust in you creates an

opportunity for you to Sell in a separate

Sales Process

‘TRUST POWERS SALES’

(1)Marketing through a Marketing

Process builds your Reputation and Brand

Ethics

Probably < 1,500 key entrepreneurs in a place like Ottawa

Even NYC < 5,500Protect your reputationMajor Arch firm bids on Urban Design of

new Ottawa Congress Centre with our group

Jumps to winning bidder/takes IP w/out permission

Ethics

Their name is … DIRTNo longer active to any great degree in

OttawaWhat should they have done?Ask for permission and ask winning bidder

to compensate group for their IP– would not even have had to pay it themselves!

‘Intricate’ Your Clients

The late Elliot Richardson, former Attorney General of the United States

US Counsel to BRING BACK THE SENATORS

“Bruce, first we’ll intricate the NHL. Then we’ll get the franchise.”

(To honour Elliot, UrbanDictionary.com: http://www.urbandictionary.com/define.php?term=intricate+)


“To bring people on board or to get them onside with an idea or a proposal or an initiative of some type by getting them 'intricated' into the process bit by bit, almost without their noticing that they are making a commitment.”


How do you do this? Become an indispensable part of your clients’

business ecosystems/if you know your client’s History, you can become indispensable/hard to replace

How not to do it? E.g., typical Ottawa law firm:

Don’t keep clients’ clients tel. #s, email addresses on file Lose client e-documents Don’t know their r.e. client’s Banker, Surveyor, Environmental

Consultant, Insurance Broker, Title Insurer, Mortgage Broker, Appraiser or other suppliers

Wait to be told what to do

Firestone’s Three Laws of Power SellingLaw No. 1: SITTING ON THE SAME

SIDE OF THE TABLE

Law No. 2: SOLUTION SELLING

Law No. 3: NEGATIVE COST SELLING

SITTING ON THE SAME SIDE OF THE TABLE

GradeATechs.comAlt. 1: “We can sell you XYZ virus scan

software from Acme Corp. for 200 bucks. What do you think?”

Alt. 2: “We can get you XYZ from Acme for $200 or MNO from Beta for $150. If you don’t like either, we can get more quotes for you.”

SITTING ON THE SAME SIDE OF THE TABLE

In Alt. 2, GradeA becomes: ‘trusted advisor’

Sits on same side of table as clientXYZ and MNO (+ all other suppliers) are

on the other sideGradeA has changed the equation!

SELLING TO A CLIENT HELPING A CLIENT BUY!

SOLUTION SELLING

In r.e., buying a lot is a problemBuying a home is a solutionNew sub-division with 21 lots to sell

($125,000+) for client in KanataWhat to do?Make a deal with top quality home builder

to offer his homes w/ lots

SOLUTION SELLING

How to sell this to builder? Intricate him!Offer him 6 lots for $500 each!$500 each?Yes!

SOLUTION SELLING

That’s $500 for an 18-month option on those lots

Only pays for lots when sold to Homeowner

Co-brand sub-division with Builder– piggy back on his marketing

SELL SELL SELL

SOLUTION SELLING

Know your client’s History and Biz Ecosystem

Hard to sell a solution when you don’t understand the problem

Ace Promotions– problem wanted to sell Golf Pros promo products

Issue?Most golf pros don’t have much spare

cash

SOLUTION SELLING

But they have something of great value– a client list

Accounting firms and legal firms would like to get access to those clients

Eureka! Golf Pros have lots of time and no moneyAccounting and law firms have lots of

money but no money

SOLUTION SELLING

Let’s solve all three problems (money, time and client access) together

By helping 10 Golf Pros buy 1,000 mouse pads each at $5.00 per item

That’s a $50,000 order for Ace PromotionsEach mouse pad is co-branded: golf pro w/

accounting or law firmLatter put up the dough/former becomes

distribution channel (gives them to each golfer)

MORE SOLUTION SELLING

Ace is also trying to break into the auto dealership biz– SELL SELL SELL

Tom Smith Toyota is looking for more car buyers!

Ace must solve the problem: “How do you give out promo products to people who are not yet your customer?”

Ace comes up with new distribution channel for Smith Toyota!


The humble ice scraper– solves allAce sells 10,000 ice scrapers to Smith

Toyota at $4.00 eachSmith Toyota also pays Ace $6,000.00 to

hire wage slaves (aka students) to go to co-operating: gas stations collision repair places car washes and give them out for free!


Non-traditional outlets!They get the scrapers for free Can use them in their own promotional

efforts too– “Fill up here and get a free ice scraper.”

Car owners who frequent collision repair shops might need a new car some day (soon)


The ice scraper also communicates!“Bring this ice scraper with you to Smith

Toyota < June 30th and we’ll pay you $250.00 to test drive one of our cars!”

Take solution selling one step further– provide your clients with ROI data

By investing (!) in your products or services (the ice scraper), they increase their revenues/lower costs or do both

NEGATIVE COST SELLING

More from UrbanDictionary.com (http://www.urbandictionary.com/define.php?term=negative+cost)

“Negative cost selling is all about understanding your client’s business from their point of view and being able to measure the benefits you create and the cost reductions you cause.”


Anthony owns (snail) mail order houseKnows that CPC/USPS now allow lumpy mail

campaignsVisits with local children’s charityWants to sell them on 3-year campaign at

$15,000 per yearHis pitch? Solve their problems:

How to get folks to open their snail mail? What’s the distribution channel? What’s the ROI?


Includes flat (stone skipping) rocks with each letter

Sends letters to 800 (local) CEOs/Biz Owners

His firm has the names/contact infoEach letter challenges the CEOs (v.

competitive people) to rock skipping contest at Children’s Camp


94% open the envelopes> 50% commit to attending themselves or

sending a rep> 400 attend at $750 each3-year commitmentCan buy extra rocks @$100/throw!Raise > $40,000/yearPlus CEOs on-site see the kids and

become sponsors…and fix stuff


$15,000 investment $40,000+ = ROIMulti-year commitments recurring

revenue + create opportunity to not be a MLB-type player where every year you start with 000 home runs

YOU CAN NOT BUILD A SUCCESSFUL SALES PRACTICE IF YOU HAVE ALL 1-YEAR CONTRACTS


$15,000 investment $40,000+ = ROI

Anthony’s pitch:

“I’ll pay you $25,000.00 per year to hire me!”


Peter Patafie built Patafie’s Moving Supplies Inc. into $16 million/yr operation w/ one crucial sales innovation

His pitch: every moving co. would buy (cardboard boxes, wardrobe boxes, bubble wrap, tape, tape dispensers, wrapping paper) from Patafie’s

But instead of delivering them to the moving co., would deliver them to their clients instead


Saves moving co. warehouse space Increases moving co. revenues because their

salespeople now have more time to sell moves rather than redeliver packing supplies to their clients

Got 98% market share (more than Microsoft)


Peter understood his client’s ecosystem– including the needs of his clients’ clients (2-D Biz Modeling)

Sits on same side of the table as his customer (his customer’s customer becomes his customer– e.g., Peter sells them refurbished boxes and buys them back > move)

Uses ‘solution selling’ (by making his customer’s salespeople more productive)

Sells based on negative cost (since his customer’s customers are paying for the packing and moving supplies and ROI to moving co. ~ infinite!)

Jeff Hunt and the Ottawa 67s

New way of responding to the 500+ charity and community requests

$600 needed for minor hockey tournament Give $600 x $500 or $300,000/yr.?Not affordable for Junior TeamLet them buy 120 game tickets at around

$5 each that they resell for, say, $10

Jeff Hunt and the Ottawa 67s

Cost to 67s? -$600Cost to minor hockey team? -$600Developed new distribution channel: 500

charity requests 60,000 tickets sold/yr. raised $300,000 for 67s raised another $300,000 for charities

“Give a person a fishing rod, not a fish,” Anon.

More from Jeff Hunt and the Ottawa 67s

Cost for naming rights for the Civic Centre $30,000

No takersInstead sold 30 companies @ $1,000 eachDraw winner: Civic Centre Urbandale

Centre for 1-yr termCost of Naming Rights for Urbandale?

-$29,000 -$550,000 (value of PR/earned media) = -$579,000

Satellite Tracking Service

Sell Personal Tracking Devices (PTD) for executives visiting high risk countries

Not much bigger than cell phone Reduces cost of insurance Reduces frequency and cost of lawsuits—duty of

care Reduces losses from kidnapping, injury or death Reduces lost productivity from above and impact

on morale Can demonstrate very high ROI

Crowd Wave Games

In-arena cameras, gesture control and vector aggregation software

~ 7th Inning Stretch with ‘brains’Cleveland Cavaliers– launch client‘Intricates’ sponsors– Section 315 plays

against Section 112 Winners get (say) $10 Verizon Calling

card

Crowd Wave Games

Crowd Wave Games

Reduce sponsor exodusBring new sponsorship dollarsIncrease game-day ticket sales and

reduce season ticket churnCWG demos very high ROI for CavsImprove in-arena experience for

fans/create team play feelings for average citizen/not available at home

Yoga and Injury Reduction in the NHL Heather Moore, at Mountain Goat Yoga Centre in

Kanata More core strength, more flexibility, greater agility, better

balance, faster healing and lower stress levels Perfect fit for NHL Players Heather’s Yoga Fees: $7,267.86 for the season Savings to Team from Reduction in Injury: $352,201.28 Increase in Revenue due to Increase in Regular Season

Attendance: $523,939 Net Revenue from Extra Home Playoff Game(s):

$1,020,000

Yoga and Injury Reduction in the NHL For an investment of just under $7,300, the team receives ~

$1.9 million in cost decreases and revenues increases

IRRYear (2006_2007)0 $(7,267.86)1 $1,896,140.67

IRR 25989% per annum

Value of going to Stanley Cup Finals: priceless “Heather will pay the Sens ~ $1.89 million to hire her!”

Doug Cardinal and the Museum of Civilization

Architects can’t use –ve cost selling, can they?

Yes, they canDoug Cardinal believes in the sanctity of

the client or ‘patron’Former PM Pierre Trudeau was Doug’s

patronPublic Works nixed curvilinear walls for the

new museum– too costly and too risky


Doug asked the PM: “Do you want a treasure or another blah, boxy building for Ottawa?”

But he also understood NCS, thus:“If we build it my way, it’ll cost $20 million

more but it will attract 400,000 more visits per year at $10 per head. That’s $4 million/yr. With a cap rate of 8%, this increases value by $50 million. So the cost of a legacy project for you, Pierre, will be a negative $30 million.”

The HR Recruiter Previous approach to selling? Beauty contest! Value Proposition = NCS Cost of Service = $30,000 Savings in Management Time = $10,150 x 2 (they

have to replace their candidate more frequently) Additional productivity (from superior candidate +

he/she remains on the job longer) = $200,000 x 2 Cost of HR Services = -$390,300

The HR Recruiter

GradeATechs.com Value Proposition = NCS Unplug Tower/Take to Computer Store: $19 of

your time Quote = Wait one week: $500 Lost Productivity Cost of Repair: $200 Call Grade A: $5 of your time Response time = 24 hours: $100 Lost Productivity Cost of Repair: $125 Cost of Grade A = -$492 IRR = 43% per day

GradeATechs.com IRR = 43% per dayTime (Day) Cashflow0 -227 (cost of GAT repair + lost productivity + call to GAT)

1 100 (lost productivity)2 100 (lost productivity)3 100 (lost productivity)4 100 (lost productivity)5 300 (lost productivity + repair bill)

Solve (by iteration):

-227 + 100/(1+irr)**1 + 100/(1+irr)**2 + 100/(1+irr)**3 + 100/(1+irr)**4 + 300/(1+irr)**5 = 0

GradeATechs.com

Residential Realtor Value Proposition = NCS FSBO sale takes longer FSBO sells at lower price– listing becomes ‘tired’ FSBO pays commission anyway– to Buyer

Agent FSBO pays commission ‘thrice’– once to Buyer

Agent + lower sale price (Buyer reduces offer price since “there is no commission”) + they do all the showings/work

FSBO higher legal cost and risk of litigation

Residential Realtor “The Lawyer who represents himself has a fool for a

client,” Anon. Agent: does 100s of transactions/FSBO: 1 or 2 For a home with a FMV of $315,000:

For a commission of $15,340 paid to Brokerage, Homeowner receives $38,188. Cost to hire Agent? -$22,754IRR? Infinite since Agent is not paid until and unless deal completes!

(See: http://www.ottawarealestatenews.com/ValuePropositionFSBOVersusAgency.xls)

1964 Tribute Band

1964 Tribute Band

Guerrilla Mktg: “Turn on your phones. Call a friend and let them listen to our next tune.”

Percentage of Audience who did: 25% New people turned on: 225 Number of shows: 140 per annum New people turned on: 31,500 per annum Cost of directly reaching 31,500 potential new

customers—a negative $6 million, since people pay them to show up!

Pool.com SnapNames.com recognized leader in backordering

deleting domain names Clients were paying $60 USD for each backorder to

SnapNames.com Register any domain name for backorder on Pool.com

for free Only pay Pool.com if successful Hundreds of 1,000s migrate to Pool.com Pool.com successfully gets > 3,000 deleted names/day

from Verisign Registry At $60/name + 2-yr registration fee = tens of millions

annually for Pool.com

Pool.com

Cost to clients? Negative again!E.g., patent and TM law firmSay, registering 40 names for

backordering SnapNames.com: $2,400Pool.com: $0Cost = -$2,400 for backorder

Pro Sports Teams

Pitching to: a Mortgage Broker “Invest in our Season Tickets, please!” “Why?” “Look at our great players!” “How about our beautiful building!” “Did you know you can escape our parking lot in

just 25 minutes!” “What a great logo we have and our

merchandise, my, my!” IT’S A BEAUTY CONTEST!

Pro Sports Teams

“If you don’t buy a ticket, the team will move!”

“What kind of a person are you, don’t you have any civic pride?”

INSTEAD USE –VE COST SELLING! By giving two Sens tickets to every

Homeowner who sources their mortgage through you, you generate 2 to 5 more mortgages per season!

Pro Sports Teams

Here’s how it works: The cost for two tickets to every regular

season home game: $55 less a 15% discount 2-year commitment Divert 40% of current marketing budget to

Sens Plus add another $2,655 The good news: other clients in this industry

are finding that they are generating 2 to 5 or more mortgages per annum

Pro Sports TeamsFor an additional investment of $2,655 in

each of the next two years, make an additional $6,695 per year or a total of $13,385

ROI of 152% per annum Cost to buy Sens tickets: negative $8,076.70 Plus Mortgage Broker’s sales now >

Mortgage Alliance minimum to qualify for volume bonuses from. ROI increases further

Pro Sports TeamsPlus Mortgage Broker’s sales now >

Mortgage Alliance minimum to qualify for volume bonuses from. ROI increases further

How about that?“Just initial here, here and here, sign and

date there. Thanks, Bye now.”

KNOW YOUR CLIENTS BIZ ALMOST AS WELL AS THEY DO

Conclusion

NCS success rate will move from .200 to .300 or .400 or higher

Plus order size and speed to order will increase triple whammy (batting average/mass/velocity) to the bottom line

Removes the fear about selling– you know your clients’ businesses almost as well as they do

Conclusion

Your projects get green lightedSelf-actualized human beings working

on projects they initiated with innovations they introduced and products and services that they fearlessly sell, are happier people!

Thank you! Questions?

Negative Cost Selling Presented by Professor Bruce M. Firestone Founder, Ottawa Senators, Executive...

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