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Chronicles from a Caribbean Cubicle

10/10/2007

Cost of Problem Analysis, Solution Benefit and Solution Cost

I have recently learned a new approach to thinking about the cost of a client's problem.

It's called Cost of Problem Analysis (CoPA), and in this technique a salesperson guides a client through an honest assessment of the cost of not having the solution in place.

For example, a CoPA based on the installation of a new soda machine, might take into account such costs as:
  • the added maintenance of the old machine
  • the cost of having the janitor open the machine to retrieve lost change
  • the lost sales from not being able to sell crackers and cookies as well as sodas
  • the additional cost of electricity
  • any other costs that might be traced to the old soda machine that would not be incurred by the new
This is broken down to a single dollar figure.

On the other hand, the solution benefit outlines what gains will be made from having the solution put in place. In the case of the new soda machine,
  • it may carry more drinks, while also carrying a larger selection of drinks
  • it may help to sell more drinks by suffering less stock-outs.
  • crackers and cookies may offer a higher price margin,
  • it would create opportunities for people to make more than one purchase at a time
The Solution Cost is merely the selling price of the new machine.

From these numbers, it is easy to determine whether or not the investment is worthwhile.

It may not be, and the good salesperson can help the customer to diagnose the numbers with some honest assistance.

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