Jul 7, 2016

IRA WORKSHEET



DEVELOPING IRA WORKSHEETS

Every sales person aims at customer savings through different ways.
Each area of savings can be calculated.

Thus, it is possible for you to construct an IRA worksheet, similar to those included, that help the customer see the value of your solution. This summarizes many of the areas where your product improves the customer’s economic situation.

COST SAVING AREA
BENEFIT CALCULATION
Reduce leaking fluid cost
Use leak cost calculator
Reduce production floor space
Multiply the number of square feet freed times cost per square feet. Note: Industrial space is usually $5.50 to $10.00 per square feet(present cost may differ)
Eliminate or reduce work area
See #2 above
Eliminate storage space
See #2 above
Reduce inventory
Multiply the total value of inventory saved times 30%. Note: 30% is industry rule of thumb for the cost of carrying inventory, & includes cost of theft, obsolescence, insurance etc.
Reduce cost of waste disposal
Multiply the number of waste barrels times the cost per barrel pickup. Note: Hazardous waste pick up rates range from $600 to 900 per barrel (present cost may differ).
Eliminate hazardous chemicals
Multiply the number of pounds eliminated times $15 to 30 a pound. This is an industry rule of thumb for the cost of handing hazardous chemicals and includes labor, insurance etc. For pickup savings and inventory savings, see #2 n #6 above.
Reduce downtime
Multiply the number of hour of downtime times the customers internal cost. Note: One hour of downtime ranges in cost by industry, but $50,000 to 200,000 an hour is common (present cost may differ).
Improved end product
Get customer to estimate potential increases in unit sales. Multiply number of unit’s time’s gross margin dollars per unit.
Speed up production
Divide new hourly production volume into company’s internal cost per hour rate. Show per part differential.
Reduce labor(eliminating mixing, assembly people etc)
Multiply man hours or man years times company’s estimated labor rate
Reduce operator complaints
Ask customer what the value of reduced hassles is worth.
Reduce reject rate and re work
Multiply number of rejects times cost of repair.
Reduce scrap and disposal
Value of scarp avoided plus disposal savings.
Reduce warranty claims

Multiply number of claims times company’s rated cost of claim. Note: Many company’s understand that a percentage of claimants switch to competitors regardless of how claim is handled.
This is often a huge cost. Call on marketing for this cost.
Reduce material waste
Calculate all costs: Product handling, dispensing, Inventory.
Reduce maintenance
Multiply number of hours saved times company’s internal labor rate.
Energy savings
The local utility can help estimate the savings.
Reduced capital cost
If a company avoids buying a new system or can improve its assembly productivity & avoid new conveyors, etc it saves capital. Multiply the capital money saved times the company’s annual cost of capital (use only 10 to 15 %.) This analyzes the savings.

Reduce manufacturing cost (e.g.
eliminating drilling)
There are a number of production procedures that can be eliminated with your technology.
The above is just a sample of cost saving Fluid Test and it may differ from application and customer.



The above instance is based on a particular industry where I have worked and also my experiences. The cost structure may apparently differ from United States to UK or India to France or China to Japan. The IRA Worksheets differ on the basis of different applications, type of assembly and Industrial segments.

USING THE IRA ON A SALES CALL

The key to effective selling is asking questions and listening. Such interactive selling gets the customer involved. It gives him ownership of the purchase decision and ownership of the purchase rationale. All sales calls require pre- call home work. This is particularly true for an IRA sales call. Try to find out prior to the call the dimension of the customer’s problem.

Let’s use the leaking seal application as an example. The effective sales person simply asks questions, and uses the customer’s answers in the calculations. If the customer does not know the answer gives him help. The IRA technique can be used to close a sale, or as post sale endorsement.

This is an example of a ‘Continuous Yes’ Close, and follows a series of meetings with the customer where the facts were obtained using high involvement questions. The sales person was closing, and used closed ended questions to get the commitment.

Salesperson: Mr. David, would you agree the leaking is causing problems?

Mr. David: ‘Yes’

Salesperson: ‘Would you also agree, after all our engineering, that our design will solve the problem.

Mr. David: ‘It looks like it’

Salesperson: ‘ I know you people are interested in costs, but are you also interested in the total savings you will get when you use our design’.

Mr. David: ‘I guess so’.

Salesperson: ‘Great. Let’s figure out the savings. Let me ask a few questions. Let’s see, you are experiencing 2-3% warranty claims, correct?

Mr. David: ‘Yes’.

Salesperson: ‘And on 100,000 cars a year that’s 2000 claims, right?

Mr. David: ‘That’s right.’

Salesperson: ‘And the repair cost is $100 per repair?

Mr. David: ‘Yes’.

Salesperson: ‘So, your warranty costs are around $200,000 per year, aren’t they?

Mr. David: ‘I guess so’

The salesperson continuous in that manner until the IRA is completed. Often, the customer will not believe the total savings. At that point, the salesperson can ask to go over the numbers again, or to redo the arithmetic. In short order, the customer will agree to some total value. Note: the higher the value the better the customer will look because it is his decision to buy.

If the customer does not know the correct numbers, or hedges, (for example, he doesn’t know or won’t tell you the warranty claim percentage) then suggest a number. He can later plug in the correct numbers.

After getting the customers agreement have the calculation turned into an internal customer memo. You do this by asking the customer, “Let’s get this economic analysis typed up on your stationery. Would you like me to do it, or will you have it done here?” Note: This is an alternate choice close. After he chooses, you close on your sales call objective. You say, “Great. Can we get moving on the product test?”

Once the product test result is approved by the customer, it has to receive first trial order in the first level and must follow up with the customer to proceed further for second order. It must happen on a regular basis.
































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