Communicating Value with Direct Sales

For innovations that involve a large dollar expenditure per purchase, education usually involves a direct sales force trained to evaluate buyers' needs and to explain how the product will satisfy them. The first refrigerators, for example, were sold door-to-door to reluctant buyers who did not yet know they needed such an expensive device. The salesperson's job was to help buyers imagine the benefits that a refrigerator offered, beyond those that an ice chest was already capable of providing. Only then would those first buyers abandon tradition to make a large capital expenditure on new, risky technology. Business buyers are equally skeptical of the value of new innovations. In the 1950s, most potential users of airfreight service thought they had no need for such rapid delivery. American Airlines built the market for this new innovation by offering free logistics consultation. American's sales consultants showed potential buyers how this high-priced innovation in transportation could replace local warehouses, thereby actually saving money. They taught the shippers how to see their distribution problems differently, from a perspective that revealed the previously unrecognized value of rapid delivery by American's planes.

When the innovation is more complicated than refrigeration or airfreight, even a convincing evaluation of buyers' needs may leave them too uncertain about the product's benefits to adopt it. For example, in the early 1990s enterprise software was considered quite a risky purchase because of the high degree of uncertainty about the ability to integrate the software into the company's IT architecture to do the billing, payroll, and production scheduling that the salesperson claimed it could do. SAP, a market leader in enterprise software, increased the business adoption rate of their software by mitigating this source of uncertainty. SAP did so by providing new customers access to successful installations and by partnering with integration firms to ensure successful implementation. The result was that sales of SAP's enterprise software increased ninefold in the mid-nineties.

Neither American Airlines nor SAP priced their products cheaply despite their desire for rapid sales growth. Instead, they educated their markets, showing why their products were worth the price, and they aided buyers' adoption to minimize the risk of failure. They funded these high levels of education and service with the high prices buyers paid for the perceived value of the products. DuPont has employed this same high-price, high-promotion strategy in introducing numerous synthetic fabrics and specialty plastics. Apple employed it in developing the market for personal computers and storable digital music devices and successful innovators in alternative energy are using it today.

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