Power Guarantees
Three years after I got out of college, I was laid off from my job as an engineer. My wife was three months pregnant and planned to quit her job as a legal secretary when she had our new baby. The pressure was on. I scrambled around looking for jobs. I couldn’t find any engineering jobs that were a good fit so I went into sales. I met a great guy named Wally who said, “I think Perry is a sales guy waiting to happen.” I took a job at his rep firm, selling industrial components. Every day I went into the office and started making phone calls. Sales was much harder than I had imagined. For a year and a half I struggled mightily to get traction, living on skinny commission checks, eating baloney sandwiches and ramen soup, roiling in frustration.
A Wisconsin manufacturer we represented assembled custom circuit boards. At that time, “surface mount” technology was fairly new, replacing old-fashioned “through-hole” components. I needed to find customers who wanted to switch from old to new. After months of calling, I finally found a customer who was right on the cusp and had an immediate need—a bleeding neck. One afternoon, Wally called and was very excited. This customer was asking to meet with our manufacturer in Milwaukee and was seriously considering converting their entire product line from through-hole to surface mount. This would generate a significant amount of business for at least two years, generating nearly half a million dollars. If we did a good job, we might keep their business for years. I did the math in my head and instantly knew: This would finally be the thing to move me and Laura from the red to the black. It would also move me from being a liability for Wally to being an asset. Wally and I drove up to Milwaukee, excited. On our way, Wally expressed concern about the recent sale of one of the manufacturer’s divisions. We got there and met with our customer’s head of engineering and director of purchasing. We took a tour of the Milwaukee factory. Mightily impressed, the engineering manager said, “Let’s look at the engineering department where you guys will be redesigning these boards for us.” John, the sales director for the manufacturer, suddenly becomes deferential and says, “It’s on the other side of that door, and that division just got sold to another company yesterday. We have a freelancer who’s going to be doing the conversion. That freelancer is Steve. Here, meet Steve.” The engineering manager got aggressive and began firing questions at Steve. Steve started stammering, withering under the man’s gaze and struggling to respond to his demands with confidence. The manager simply did not believe their pleas to trust them and believe that they were really up to the task. That meeting went downhill fast. The engineering manager and his director of purchasing left in a huff and ever after refused to return my phone calls.
Over a span of almost two years, a half-dozen major projects failed in very similar ways. Over and over again, the companies I represented were unable to guarantee the level of customization or performance that my customers demanded. It was only much later that I fully understood my core problem: My manufacturers wanted to sell only off-the-shelf, commodity items. They sold components, but they didn’t offer complete solutions and they didn’t guarantee results. I learned the hard way: There’s nothing worse than selling for a company that won’t stand behind what you promise. Later, I would also discover: There’s nothing better than selling for the only company who will stand behind you.
The Incredible Magnetism of a Power Guarantee The pharmaceutical industry is about as conservative as conservative gets. It resists change. Why? Because if contaminated medicine is injected into a patient’s veins and the person dies, the pharmaceutical company gets hit with a multimillion-dollar lawsuit, regulatory fines, and potential closure of the business. The pharmaceutical guys don’t change anything just for the fun of it. Ever. Especially their manufacturing equipment. So when my friend and colleague Tom Hoobyar founded a startup in Silicon Valley that made pharmaceutical tank valves, he had to completely eliminate the risk of anything going wrong for his customer. So he made an enormously ballsy guarantee. See Tom’s guarantee on page 104. Tom’s valves cost $4,000. If anyone invoked his guarantee and demanded that ASEPCO replace the customer’s valve with a competitive unit, the total cost of parts and labor added up to about $40,000. That’ll sink your ship real fast if you’re not on top of your game. So Tom’s guarantee forced everything that happened before the customer got his product to be right. It placed demands on purchasing, receiving, inventory, quality control, shipping, and sales. Everything from beginning to end had to be a tight ship.
ASEPCO’s Unique Tank Valve Guarantees Lifetime Free Replacement of Any Broken ASEPCO Tank Valve—No Matter Who Broke It! Top-Quality Product, Or It’s Free! On-Time Delivery, Or It’s Free! Performance As Promised, Or We Pay You!
We do more than make promises. We live up to them. All ASEPCO employees are company shareholders, so we agonize over the quality of everything we ship. The only way we can prosper is by helping you succeed.
Top-Quality Product or It’s Free!
If your ASEPCO valve contains a manufacturing defect, we will FIX OR REPLACE YOUR VALVE—AND WE WILL NOT BILL YOU!
On-Time Delivery or It’s Free!
If you give us written notice at the time of your order that a valve delivery is time-critical and we make a written commitment to that date, IF WE ARE EVEN ONE MINUTE LATE YOUR VALVE WILL BE FREE!
Performance as Promised or We Pay You!
If it is proven that a properly assembled ASEPCO valve is not CIP/SIP in use,
a) We will buy back our valve for a full refund.
b) We will buy you the replacement valve of your choice.
c) AND we will pay the documented cost of replacing it in your ASME tank!
Lifetime Free Replacement of Any Asepco Tank Valve, No Matter Who Breaks It!
Sometimes a tank is dropped—sometimes a valve gets hit by a forklift. No matter how a valve is broken or who’s at fault, we will replace it free! No arguments. No excuses. Just a free replacement valve as fast as we can make it.
You can depend on ASEPCO products. And you can depend on us.
Tom had an average of about four of these claims per year, so he had to budget $160,000 into his annual marketing budget for guarantee payouts. This was a marketing expense. And, of course, every time there was a claim, he had to examine his entire company from stem to stern and fix whatever process was broken. This is how ASEPCO achieved 90 percent market share in 15 years in one of the world’s most conservative industries, going toe-to-toe with solidly established $100-million companies. Most B2B marketers are terrified of making Power Guarantees. Power Guarantees are rare as hen’s teeth. Why? Because making a guarantee this bold terrifies everyone in the company. If it doesn’t make your stomach churn, it’s probably not an awesome guarantee. Think about it for a minute: When a customer buys ASEPCO’s valve, somebody is taking a risk. When somebody buys a $50,000 software package, someone is taking the risk. When somebody buys a $200,000 printing press, somebody is taking the risk. The question is: Who is taking the risk? And . . . If YOU won’t take the risk, why should your customer? Your ability to take this risk has everything to do with disqualifying customers who do not fit. Remember the Five Power Disqualifiers? If you’re going to make a guarantee, some of the disqualifiers are: • Is the customer willing to follow all the steps necessary to use or install your product? • Do they obey instructions? Do they cooperate with you and your staff? • Do you have a definite process for determining whether they did the right steps or not? • Are all the right steps laid out? Is it simple and clear and black and white? • Do you have a way of determining whether the customer really is a fit before any money changes hands? That’s disqualification. In the Five Power Disqualifiers, it’s a not-soobvious aspect of “Do they have the ability to say yes.” A company willing
to write a check but not do their part to install or implement your solution and then blame you for it isn’t saying yes. This actually makes it easier for you to sell, because this is what you’re saying to the customer: “IF you pay us $4,000 and IF you install our [widget] correctly and IF you follow all the steps and IF your system is up to spec, THEN I guarantee you that our [widget] will be [sterile and operate perfectly and yada yada] OR ELSE I’ll pay to have the [widget] ripped out and install the competitor’s [widget] instead. “Oh, and nobody else makes a guarantee like that. If you qualify and obey the instructions, I guarantee you this will work.” That’s a Power USP.
Master Formula for a Power USP If you are (qualifying type of customer or company) and if you (commit X dollars and follow steps Y and Z), then you will achieve (specific results) or else (penalty to me, your vendor). That Power USP gives you the ability to charge more than everybody else, because you deliver results. Hour for hour, dollar for dollar, even though your product costs more initially, in the end it costs less. Less uncertainty. Less doubt. Less finger-pointing. Less going ‘round in circles. This is far more meaningful than the usual “satisfaction or your money back” guarantee that is so common in business-to-consumer marketing, most people have become blind to it. It’s pretty unusual in B2B. But when you do it, you should phrase it such that nobody can ignore it. This forces the customer to demonstrate his worthiness to be your customer in the first place. It makes them chase you instead of you chasing them. It’s takeaway selling. This also brings you better, smarter customers. Customers who want only the cheapest possible solution right this minute are usually terrible customers. Customers who understand the value of getting the job done right the first time are much more pleasant to work with. You get the best of both worlds: more money and better people.
Pareto
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13 / Power Guarantees 107
80/20 SALES AND MARKETING
One of my favorite sayings, which I stole from the venerable copywriter Herschell Gordon Lewis, is: Sell results, not procedures. Any time you want to figure out how to get more money for what you sell, ask yourself this question: “How do I make what I give my customer more of a finished result and less of a procedure?”
People Pay for Certainty When I was 32, with three young kids, a car payment, and a mortgage, I parachuted out of my Dilbert Cube job and started a consulting firm, my current company. When I left, I didn’t have any clients lined up, so I had to scramble to cover the bills. A company I’d dealt with at my old job called me and wanted me to come to Arkansas and discuss a possible consulting gig. My wife Laura took one look at me and said, “Perry, you have to look the part. Time for you to own a good suit.” She took me to Woodfield Mall near Chicago to buy one. We arrived at the mall on a Sunday afternoon, and we went to J.C. Penney. We spent about five minutes looking around, during which time nobody even appeared to be working the floor. Suddenly she grabbed me by the arm and made a beeline for Nordstrom. I gulped. “Nordstrom? That’s where rich people shop.” Dang. I grew up in Nebraska, for crying out loud. I never imagined buying anything at Nordstrom, ever. Laura walks up to the guy in the men’s department, a very distinguishedlooking gentleman in his late 50s, and says, “My husband is starting a consulting assignment on Tuesday, and he needs a suit.” He calmly and deftly begins asking questions, laying garments over his arm and making recommendations. Within a few minutes I’m trying on a pair of slacks and a mock turtleneck and a sport jacket. Shortly after that he’s measuring me and agreeing to have all my new clothes tailored and ready for pickup by 3 p.m. Monday. $1,200 later, I’m the owner of a brand-new business casual outfit, sharp and perfectly fitting for a young, up-and-coming consultant. Twelve hundred dollars? For clothes??? Doesn’t my wife know I’m a geek? How did this happen?
108 13 / Power Guarantees
80/20 SALES AND MARKETING
Because I knew, and Laura knew, that because we’d gone to Nordstrom, I looked right. When I arrived in Arkansas bidding on my very first gig, I knew I looked right. Keep in mind, I’m one of those guys whose wife picks out his clothes for him, because my own judgment of “what looks right” is shaky at best. By the way, I got the consulting gig: $15,000 for two months of work, which was a very respectable start. What’s the difference between a $500 outfit from J.C. Penney and a $1,200 outfit at Nordstrom? Confidence. How much is that worth? I came home with agreement in hand, working from my basement office. I escaped the Dilbert Cube. I got my first paying gig. My bills are paid, and I’m on my way up. And I’m not going back.
————————————————— PARETO SUMMARY —————————————————— p The essence of getting more money for what you sell is: “Sell results, not procedures.” p If you want to command higher prices than anyone else, then guarantee better results than anyone else. p If you’re selling for a company that lacks the will or ability to guarantee results, get yourself a different job. p Master formula for a Power USP: “If you are (qualifying type of customer or company) and if you (commit X dollars and follow steps Y and Z), then you will achieve (specific results) or else (penalty to me, your vendor).” p A Power USP makes every high-end sale a takeaway sale, which means customers are chasing you—you’re not chasing them.
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