Promoting the Total Cost of Ownership
Buying a product or service involves several steps. In fact, it’s more of a process than an action. Similarities exist between consumer marketing and business-to-business marketing. However, there are some important differences when marketing B2B. An effective marketing strategy includes explaining the total cost of ownership.
What is a Total Cost of Ownership Marketing Strategy?
The TCO is easy to define, but hard to figure at times. Simply put, the total cost of ownership includes the net cost incurred over the product’s lifetime. Adding the TCO enhances your marketing strategy, but it’s sometimes left out. Why?
It’s that “net” part that trips many people up.
Net costs are the actual expenses minus the overall savings. Unfortunately, some buyers don’t calculate those savings into the equation. Often, the only cost considered is the purchase price, especially in today’s economy. They believe that the only way to cut costs is by buying cheaper products.
Many decision makers consider a lower purchase price as the bottom line. It’s not; the total cost of ownership is. That’s why explaining the TCO is an important marketing strategy; even more so when your product or service is expensive or complex.
Even so, you need to know what your product’s TCO is before you can explain it effectively.
Your sales and marketing materials must explain the total cost of ownership. Don’t make the mistake of thinking your prospects have a full understanding. Make sure that message is crystal clear to them.
What determines the total cost of ownership?
The total cost of ownership involves several factors. Many are easy to determine, but often overlooked. However, the list can be extensive, particularly with complex or highly technical products and service.
Here are just a few for industrial products:
- Of course, the purchase price is important, but it doesn’t necessarily compare apples to apples.
- Knowing the product’s life expectancy or the mean time before failure is necessary. For example, how long does your bearing last? And how long does it last compared to your competitor’s product? Remember that cheaper products cost more when replaced more often.
- Product durability can be important. While this sounds like the life expectancy, there’s a difference. For example, I’ve seen many bearings changed before their time because of rust or corrosion. The bearing was still good, but sanitary requirements cut their life short.
- Ease of use or deployment contributes to the total cost of ownership. How much time is needed to train users? And what is the cost of training? Will the users find it easy to use, and if not, what are the consequences to the purchasing business? A product or service that’s purchased but not used is a liability, not an asset.
- A better warranty, one that you’re willing to honor, is extremely important and may make a difference in a purchasing decision.
These are just five factors in determining your product’s total cost of ownership. Depending on the product itself, there could be several more. For example, how much increased productivity will the business gain by using your product over the competition’s offer?
Features, Benefits and “What’s that mean?”
Most good marketers and copywriters know the difference between features and benefits. Briefly, features are what a product does or has, and benefits are what it does for the customer or client.
Features and benefits are on fairly equal footing in B2B copywriting, more so than copy for normal consumers. Even so, it’s the benefits that will finally seal the deal. Understanding and explaining your TCO effectively tilts the scale in your favor.
List all of your product’s features when beginning a sales campaign. You will be identifying the benefits under each one. Take one feature and ask yourself, “What’s that mean?” Even better, put yourself in your prospect’s shoes and ask, “What’s that mean for me?” Or you can also ask, “So what?”
If you can’t find a significant benefit, the feature is meaningless. Not that it’s a bad feature; just one that’s unnecessary for your current marketing strategy.
Don’t stop at the first benefit. Ask the same question for the next benefit. Keep doing that until you’ve reached the core benefit for that feature. Then, start on the next feature. And the next.
Then look at all your work and determine the one big idea that’s the most important one, not for you, but for your prospect. Remember what you think is a cool feature/benefit might not be what’s important to them.
It’s either time or money . . . or both!
Finally, remember that you have two categories of benefits to offer a business: time or money. It may be a different story with the purchasing agent. We’ll cover that in a different article. But for the business itself, it’s either time or money.
Ideally, you can offer them both.
You will either make or save them money, affecting their financial health. Or, you will be saving them time. You can’t make time; but, you can save it for them.
And since time is money, well . . . You get the picture.
Make sure your marketing strategy includes a clear explanation of your product’s total cost of ownership.
After all . . . that’s the REAL bottom line.
Author: Steve Maurer
Article copyright 2013 – Maurer Copywriting