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| Step 6: Measure and Report Your Value Contributions
An important post-sale component of your value
proposition is a logical system to identify, track, measure, and report
your extended value contributions to customers. By quantifying and
communicating your value in credible terms, you provide your customers
with a valuable business tool for internal planning and performance
improvement efforts. Concurrently, this ongoing activity re-emphasizes
your tangible worth as a high-value supplier. Despite the persuasive
reasons for measuring and communicating their value contributions to
customers, a recent study found that 3 out of 4 distributors don't
do it!
The four basic areas where distributors can financially
impact their customers are shown in the slide below: 
Once
delivered, every distributor value [contribution] impacts one or more of
the customer's financial measures shown above. However, successfully
quantifying the financial impact depends on the availability or estimation
of many types of information variables such as:
|
 | Purchased materials
volumes |
|
| Revenue per production
unit |
|
| Labor-hr costs and
quantities |
|
| Purchased materials
costs |
|
| Overhead and
administrative costs |
|
| Inventory quantity and
value |
|
| Production downtime
costs |
|
| Transaction costs |
|
| Outsourced services
costs |
|
| Inventory/asset carry
cost % |
|
| Maintenance and repair
costs |
|
| Distributor solution
fees |
|
|
This kind of data can be obtained from distributor
records, customer records, industry benchmarks, and through estimates.
Customer input is preferable and most readily accepted in value
calculations, but it is usually more conservative, too. Reasonable
estimates are certainly an alternative if other information resources
fail, but take care to back them up with your assumptions and sources
used. When in doubt about the credibility of any value contribution
calculation, review and confirm your approach and assumptions with your
customer.
Value
Contribution/Measurement Matrix Simplifies Reporting
Once
you have collected the relevant data to quantify your distributor value,
you are ready to perform the appropriate calculations to record and
present your results to your customer. We have developed a matrix relating each potential extended value contribution to
one or more sets of typical measurement options. These calculation methods
may be used to quantify any of the customer impact areas shown in the
slide above. For distributors that are actively involved with measuring
and reporting their extended value services, there are also automated
methods available to simplify the calculation and reporting activity for
customers. |
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| We
have extensive experience in developing systems
for measuring and reporting distributor value contributions. Let us help
you streamline and simplify your value reporting process. Please call us today
at 704-892-4117. |
