Why is an analytical, scientific approach to sales management the right one? I have a fundamental belief that the most successful sales, marketing and procurement leaders of the future will be those who know how to successfully transform their organizations to win on value creation--real, quantifiable value. The ability to truly understand how and when real value is created is becoming a defining factor between winners and losers, as intense global competition and increasing buyer sophistication create unprecedented commoditization pressure across most industries. Yet, while executing a true value-based exchange between a supplier and buyer is an easy (and fashionable) thing to say, it is more difficult to do in reality. A disciplined, fact-based, analytical approach can help.
Both sales and procurement organizations want to create value for their companies during the commercial dialogue. In our organization, that means driving an approach where our people are enabled and expected to understand all of the comprehensive ways that we can and do create value for a customer (and we're talking about real economic and program improvement value here, not smoke and mirrors), how much this value is worth relative to the buyer's next-best alternative, how much this value is worth to us and how to keep score throughout the program lifecycle to ensure both parties are getting the value envisioned.
Too often in our industry, participants only think of value in terms of airline network fit and economic discounts. While those are clearly two of the most dominant attributes in the decision-making process, ignoring all of the ways that value can be created causes missed value opportunities for both supplier and buyer.
[PULL_1]Clearly, one size does not fit all with our customers. Using a highly analytical approach, we have conducted research with thousands of corporations and agencies in the marketplace that suggests real segments exist. Buyers want and value different program elements in different ways. As such, program offerings and sales coverage approaches need to be tailored accordingly. Segments exist that value elements beyond simply the lowest price and a standardized level of service, some placing significant value on higher-touch travel management support and programs that improve the efficiency, comfort and productivity of travelers. In fact, we inventoried more than 150 ways that value is and can be created across the segments of buyers throughout our programs, products and services. Enabling our field organization to understand, internalize, communicate and prove these elements of value to the appropriate customer segments in a consistent and systematic way becomes the key next step.
It is incumbent upon our selling organizations to quantifiably prove the value that is being created relative to other options; otherwise, buyers will rightfully view the offering as a commodity. Historically, sellers in this industry have too often fed the slide toward commoditization by relying almost exclusively on relationships, simple product features and price--failing to truly understand and quantify the multitude of other programmatic elements that can and do create real value for customers. While price is clearly dominant and personal relationships are vitally important, they are often insufficient on a standalone basis if someone else comes along with a more provable, better-quantified value proposition. As an example, we have developed and rolled out tools that streamline this value inventory process for our field force.
Equally important, a disciplined analytical approach helps to understand when programs aren't delivering the expected value. The ways we measure and monitor the value of our contracts have grown more sophisticated, transitioning from largely "revenue" metrics to more instructive "profit" metrics. Among many measures, we monitor "incremental contribution," which is a measure of the profit achieved when comparing "no program" share and volume with "installed program" share and volume. Traffic variable costs and passenger displacement costs also are incorporated into the metric. Continual reviews of our account portfolio then allow us to identify and work with accounts that aren't generating the appropriate return on investment, occasionally leading to canceled programs when a sufficiently profit-positive outcome cannot be achieved.
In the end, a disciplined, fact-based, analytical approach will help sales, marketing and procurement leaders of the future successfully win on value creation. Like most, we're certainly not perfect at it today, but we're getting better at it all the time. We've progressed meaningfully and know we still have a long way to go. I strongly believe the best sales and procurement organizations in the world are dissatisfied with their capability and are dedicated to continuous improvement in this area. That's why they're the best.
Jeff Foland is United Airlines senior vice president of worldwide sales