Negative Cost Selling
Presented by Professor Bruce M.
Firestone
Founder, Ottawa Senators, Executive
Director, Exploriem.org, Entrepreneur-inResidence, Telfer School of Management,
Broker, Partners Advantage GMAC
B. Eng. (Civil) [McGill], M. Eng-Sci.
[UNSW], PhD. [ANU]
Helped establish > 70 enterprises incl.
Sens
Contents
 Do you want to learn how to really make people want to
buy from you?
 Are you in the solution selling business?
 Do you know how to get on the ‘same side of the table’
as your customers and clients?
 Do you want to learn negative cost selling?
 Do you know how to think in terms of 2-D and 3-D
business models so that you can not only take care of
your clients but your clients’ clients too?
The Power of the Brand
“People like to buy from people they like
and trust,” Prof Bruce, Ottawa, Canada.
“Have you ever bought anything from
someone you didn’t like or trust?”
Trust (not love!) is the no. 1 thing in life
and business
Marketing  Builds Brand  Builds Trust
 Creates Opportunity to Sell
The Power of the Brand
Mutual Life Assurance Co. of Canada 
Clarica Life Insurance Co.
New sell-line: "Clarity through dialogue“
Funny TV ads– Clarica Agent appears on
scene to clear up W/C ambiguity
No call to action
How many people head for the phone to
buy some insurance?
The Power of the Brand
None!
Separate selling process
“VP, Marketing and Sales”  Doesn’t
know what he/she is doing
Living room pitch: “Take care of your kids!”
“Where’re you from again?
“Pirate Insurance Company of Kinakuta” or
“Clarica”– which helps you to close the
deal?
The Process
(1)
Marketing
through a
(2)
Marketing
Process builds
Your Reputation
and Brand
build
Trust in you
your
Reputation and
Brand
(3)
Trust in you creates
an opportunity for
you to Sell in a
separate Sales
Process
‘TRUST POWERS
SALES’
Ethics
Probably < 1,500 key entrepreneurs in a
place like Ottawa
Even NYC < 5,500
Protect your reputation
Major Arch firm bids on Urban Design of
new Ottawa Congress Centre with our
group
Jumps to winning bidder/takes IP w/out
permission
Ethics
Their name is … DIRT
No longer active to any great degree in
Ottawa
What should they have done?
Ask for permission and ask winning bidder
to compensate group for their IP– would
not even have had to pay it themselves!
‘Intricate’ Your Clients
The late Elliot Richardson, former Attorney
General of the United States
US Counsel to BRING BACK THE
SENATORS
“Bruce, first we’ll intricate the NHL. Then
we’ll get the franchise.”
(To honour Elliot, UrbanDictionary.com:
http://www.urbandictionary.com/define.php
?term=intricate+)
‘Intricate’ Your Clients
“To bring people on board or to get them
onside with an idea or a proposal or an
initiative of some type by getting them
'intricated' into the process bit by bit,
almost without their noticing that they are
making a commitment.”
‘Intricate’ Your Clients
 How do you do this?
 Become an indispensable part of your clients’
business ecosystems/if you know your client’s
History, you can become indispensable/hard to
replace
 How not to do it?
 E.g., typical Ottawa law firm:
 Don’t keep clients’ clients tel. #s, email addresses on file
 Lose client e-documents
 Don’t know their r.e. client’s Banker, Surveyor, Environmental
Consultant, Insurance Broker, Title Insurer, Mortgage Broker,
Appraiser or other suppliers
 Wait to be told what to do
Firestone’s Three Laws of Power
Selling
Law No. 1: SITTING ON THE SAME
SIDE OF THE TABLE
Law No. 2: SOLUTION SELLING
Law No. 3: NEGATIVE COST
SELLING
SITTING ON THE SAME SIDE OF THE
TABLE
GradeATechs.com
Alt. 1: “We can sell you XYZ virus scan
software from Acme Corp. for 200 bucks.
What do you think?”
Alt. 2: “We can get you XYZ from Acme for
$200 or MNO from Beta for $150. If you
don’t like either, we can get more quotes
for you.”
SITTING ON THE SAME SIDE OF THE
TABLE
In Alt. 2, GradeA becomes: ‘trusted
advisor’
Sits on same side of table as client
XYZ and MNO (+ all other suppliers) are
on the other side
GradeA has changed the equation!
SELLING TO A CLIENT  HELPING A CLIENT BUY!
SOLUTION SELLING
In r.e., buying a lot is a problem
Buying a home is a solution
New sub-division with 21 lots to sell
($125,000+) for client in Kanata
What to do?
Make a deal with top quality home builder
to offer his homes w/ lots
SOLUTION SELLING
How to sell this to builder?
Intricate him!
Offer him 6 lots for $500 each!
$500 each?
Yes!
SOLUTION SELLING
That’s $500 for an 18-month option on
those lots
Only pays for lots when sold to
Homeowner
Co-brand sub-division with Builder– piggy
back on his marketing
SELL SELL SELL
SOLUTION SELLING
Know your client’s History and Biz
Ecosystem
Hard to sell a solution when you don’t
understand the problem
Ace Promotions– problem wanted to sell
Golf Pros promo products
Issue?
Most golf pros don’t have much spare
cash
SOLUTION SELLING
But they have something of great value– a
client list
Accounting firms and legal firms would like
to get access to those clients
Eureka!
Golf Pros have lots of time and no money
Accounting and law firms have lots of
money but no money
SOLUTION SELLING
Let’s solve all three problems (money, time
and client access) together
By helping 10 Golf Pros buy 1,000 mouse
pads each at $5.00 per item
That’s a $50,000 order for Ace Promotions
Each mouse pad is co-branded: golf pro
w/ accounting or law firm
Latter put up the dough/former becomes
distribution channel (gives them to each
golfer)
MORE SOLUTION SELLING
Ace is also trying to break into the auto
dealership biz– SELL SELL SELL
Tom Smith Toyota is looking for more car
buyers!
Ace must solve the problem: “How do you
give out promo products to people who are
not yet your customer?”
Ace comes up with new distribution
channel for Smith Toyota!
MORE SOLUTION SELLING
The humble ice scraper– solves all
Ace sells 10,000 ice scrapers to Smith
Toyota at $4.00 each
Smith Toyota also pays Ace $6,000.00 to
hire wage slaves (aka students) to go to
co-operating:
gas stations
collision repair places
car washes
and give them out for free!
MORE SOLUTION SELLING
Non-traditional outlets!
They get the scrapers for free
Can use them in their own promotional
efforts too– “Fill up here and get a free ice
scraper.”
Car owners who frequent collision repair
shops might need a new car some day
(soon)
MORE SOLUTION SELLING
The ice scraper also communicates!
“Bring this ice scraper with you to Smith
Toyota < June 30th and we’ll pay you
$250.00 to test drive one of our cars!”
Take solution selling one step further–
provide your clients with ROI data
By investing (!) in your products or
services (the ice scraper), they increase
their revenues/lower costs or do both
NEGATIVE COST SELLING
More from UrbanDictionary.com
(http://www.urbandictionary.com/define.ph
p?term=negative+cost)
“Negative cost selling is all about
understanding your client’s business from
their point of view and being able to
measure the benefits you create and the
cost reductions you cause.”
NEGATIVE COST SELLING
Anthony owns (snail) mail order house
Knows that CPC/USPS now allow lumpy
mail campaigns
Visits with local children’s charity
Wants to sell them on 3-year campaign at
$15,000 per year
His pitch? Solve their problems:
How to get folks to open their snail mail?
What’s the distribution channel?
What’s the ROI?
NEGATIVE COST SELLING
Includes flat (stone skipping) rocks with
each letter
Sends letters to 800 (local) CEOs/Biz
Owners
His firm has the names/contact info
Each letter challenges the CEOs (v.
competitive people) to rock skipping
contest at Children’s Camp
NEGATIVE COST SELLING
94% open the envelopes
> 50% commit to attending themselves or
sending a rep
> 400 attend at $750 each
3-year commitment
Can buy extra rocks @$100/throw!
Raise > $40,000/year
Plus CEOs on-site see the kids and
become sponsors…and fix stuff
NEGATIVE COST SELLING
$15,000 investment  $40,000+ = ROI
Multi-year commitments  recurring
revenue + create opportunity to not be a
MLB-type player where every year you
start with 000 home runs
YOU CAN NOT BUILD A SUCCESSFUL
SALES PRACTICE IF YOU HAVE ALL 1YEAR CONTRACTS
NEGATIVE COST SELLING
$15,000 investment  $40,000+ = ROI
Anthony’s pitch:
“I’ll pay you $25,000.00 per year to hire me!”
NEGATIVE COST SELLING
 Peter Patafie built Patafie’s Moving Supplies Inc.
into $16 million/yr operation w/ one crucial sales
innovation
 His pitch: every moving co. would buy
(cardboard boxes, wardrobe boxes, bubble
wrap, tape, tape dispensers, wrapping paper)
from Patafie’s
 But instead of delivering them to the moving co.,
would deliver them to their clients instead
NEGATIVE COST SELLING
 Saves moving co. warehouse space
 Increases moving co. revenues because their
salespeople now have more time to sell moves
rather than redeliver packing supplies to their
clients
 Got 98% market share (more than Microsoft)
NEGATIVE COST SELLING
 Peter understood his client’s ecosystem–
including the needs of his clients’ clients (2-D Biz
Modeling)
 Sits on same side of the table as his customer (his
customer’s customer becomes his customer– e.g., Peter
sells them refurbished boxes and buys them back >
move)
 Uses ‘solution selling’ (by making his customer’s
salespeople more productive)
 Sells based on negative cost (since his customer’s
customers are paying for the packing and moving
supplies and ROI to moving co. ~ infinite!)
Jeff Hunt and the Ottawa 67s
New way of responding to the 500+ charity
and community requests
$600 needed for minor hockey tournament
Give $600 x $500 or $300,000/yr.?
Not affordable for Junior Team
Let them buy 120 game tickets at around
$5 each that they resell for, say, $10
Jeff Hunt and the Ottawa 67s
Cost to 67s? -$600
Cost to minor hockey team? -$600
Developed new distribution channel: 500
charity requests  60,000 tickets sold/yr.
 raised $300,000 for 67s  raised
another $300,000 for charities
“Give a person a fishing rod, not a fish,”
Anon.
More from Jeff Hunt and the Ottawa
67s
Cost for naming rights for the Civic Centre
$30,000
No takers
Instead sold 30 companies @ $1,000 each
Draw winner: Civic Centre  Urbandale
Centre for 1-yr term
Cost of Naming Rights for Urbandale?
-$29,000 -$550,000 (value of PR/earned
media) = -$579,000
Satellite Tracking Service
 Sell Personal Tracking Devices (PTD) for
executives visiting high risk countries
 Not much bigger than cell phone
 Reduces cost of insurance
 Reduces frequency and cost of lawsuits—duty of
care
 Reduces losses from kidnapping, injury or death
 Reduces lost productivity from above and impact
on morale
 Can demonstrate very high ROI
Crowd Wave Games
In-arena cameras, gesture control and
vector aggregation software
~ 7th Inning Stretch with ‘brains’
Cleveland Cavaliers– launch client
‘Intricates’ sponsors– Section 315 plays
against Section 112
Winners get (say) $10 Verizon Calling card
Crowd Wave Games
Crowd Wave Games
Reduce sponsor exodus
Bring new sponsorship dollars
Increase game-day ticket sales and
reduce season ticket churn
CWG demos very high ROI for Cavs
Improve in-arena experience for
fans/create team play feelings for average
citizen/not available at home
Yoga and Injury Reduction in the NHL
 Heather Moore, at Mountain Goat Yoga Centre in Kanata
 More core strength, more flexibility, greater agility, better
balance, faster healing and lower stress levels
 Perfect fit for NHL Players
 Heather’s Yoga Fees: $7,267.86 for the season
 Savings to Team from Reduction in Injury: $352,201.28
 Increase in Revenue due to Increase in Regular Season
Attendance: $523,939
 Net Revenue from Extra Home Playoff Game(s):
$1,020,000
Yoga and Injury Reduction in the NHL
 For an investment of just under $7,300, the team
receives ~ $1.9 million in cost decreases and revenues
increases
IRR
Year (2006_2007)
0 $(7,267.86)
1 $1,896,140.67
IRR
25989%
per annum
 Value of going to Stanley Cup Finals: priceless
 “Heather will pay the Sens ~ $1.89 million to hire her!”
Doug Cardinal and the Museum of
Civilization
Architects can’t use –ve cost selling, can
they?
Yes, they can
Doug Cardinal believes in the sanctity of
the client or ‘patron’
Former PM Pierre Trudeau was Doug’s
patron
Public Works nixed curvilinear walls for the
new museum– too costly and too risky
Doug Cardinal and the Museum of
Civilization
Doug asked the PM: “Do you want a
treasure or another blah, boxy building for
Ottawa?”
But he also understood NCS, thus:
“If we build it my way, it’ll cost $20 million
more but it will attract 400,000 more visits
per year at $10 per head. That’s $4
million/yr. With a cap rate of 8%, this
increases value by $50 million. So the cost
of a legacy project for you, Pierre, will be a
negative $30 million.”
Doug Cardinal and the Museum of
Civilization
The HR Recruiter
 Previous approach to selling?
 Beauty contest!
 Value Proposition = NCS
 Cost of Service = $30,000
 Savings in Management Time = $10,150 x 2
(they have to replace their candidate more
frequently)
 Additional productivity (from superior candidate
+ he/she remains on the job longer) = $200,000
x2
 Cost of HR Services = -$390,300
The HR Recruiter
 Previous approach to selling?
 Beauty contest!
 Value Proposition = NCS
 Cost of Service = $30,000
 Savings in Management Time = $10,150 x 2
(they have to replace their candidate more
frequently)
 Additional productivity (from superior candidate
+ he/she remains on the job longer) = $200,000
x2
 Cost of HR Services = -$390,300
The HR Recruiter
GradeATechs.com
 Value Proposition = NCS
 Unplug Tower/Take to Computer Store: $19 of
your time
 Quote = Wait one week: $500 Lost Productivity
 Cost of Repair: $200
 Call Grade A: $5 of your time
 Response time = 24 hours: $100 Lost
Productivity
 Cost of Repair: $125
 Cost of Grade A = -$492
 IRR = 43% per day
GradeATechs.com
 IRR = 43% per day
Time (Day)
0
1
2
3
4
5
Cashflow
-227 (cost of GAT repair + lost productivity + call to GAT)
100 (lost productivity)
100 (lost productivity)
100 (lost productivity)
100 (lost productivity)
300 (lost productivity + repair bill)
Solve (by iteration):
-227 + 100/(1+irr)**1 + 100/(1+irr)**2 + 100/(1+irr)**3 +
100/(1+irr)**4 + 300/(1+irr)**5 = 0
GradeATechs.com
Residential Realtor
 Value Proposition = NCS
 FSBO sale takes longer
 FSBO sells at lower price– listing becomes ‘tired’
 FSBO pays commission anyway– to Buyer
Agent
 FSBO pays commission ‘thrice’– once to Buyer
Agent + lower sale price (Buyer reduces offer
price since “there is no commission”) + they do
all the showings/work
 FSBO higher legal cost and risk of litigation
Residential Realtor
 “The Lawyer who represents himself has a fool for
a client,” Anon.
 Agent: does 100s of transactions/FSBO: 1 or 2
 For a home with a FMV of $315,000:
For a commission of $15,340 paid to Brokerage,
Homeowner receives $38,188.
Cost to hire Agent? -$22,754
IRR? Infinite since Agent is not paid until and
unless deal completes!
(See: http://www.ottawarealestatenews.com/ValuePropositionFSBOVersusAgency.xls)
1964 Tribute Band
1964 Tribute Band
 Guerrilla Mktg: “Turn on your phones. Call a
friend and let them listen to our next tune.”
 Percentage of Audience who did: 25%
 New people turned on: 225
 Number of shows: 140 per annum
 New people turned on: 31,500 per annum
 Cost of directly reaching 31,500 potential new
customers—a negative $6 million, since people
pay them to show up!
Pool.com
 SnapNames.com recognized leader in backordering
deleting domain names
 Clients were paying $60 USD for each backorder to
SnapNames.com
 Register any domain name for backorder on Pool.com




for free
Only pay Pool.com if successful
Hundreds of 1,000s migrate to Pool.com
Pool.com successfully gets > 3,000 deleted names/day
from Verisign Registry
At $60/name + 2-yr registration fee = tens of millions
annually for Pool.com
Pool.com
Cost to clients?
Negative again!
E.g., patent and TM law firm
Say, registering 40 names for
backordering
SnapNames.com: $2,400
Pool.com: $0
Cost = -$2,400 for backorder
Pro Sports Teams
 Pitching to: a Mortgage Broker
 “Invest in our Season Tickets, please!”
 “Why?”
 “Look at our great players!”
 “How about our beautiful building!”
 “Did you know you can escape our parking lot in
just 25 minutes!”
 “What a great logo we have and our
merchandise, my, my!”
 IT’S A BEAUTY CONTEST!
Pro Sports Teams
“If you don’t buy a ticket, the team will
move!”
“What kind of a person are you, don’t you
have any civic pride?”
INSTEAD USE –VE COST SELLING!
By giving two Sens tickets to every
Homeowner who sources their mortgage
through you, you generate 2 to 5 more
mortgages per season!
Pro Sports Teams
 Here’s how it works:
The cost for two tickets to every regular
season home game: $55 less a 15% discount
2-year commitment
Divert 40% of current marketing budget to
Sens
Plus add another $2,655
The good news: other clients in this industry
are finding that they are generating 2 to 5 or
more mortgages per annum
Pro Sports Teams
For an additional investment of $2,655 in
each of the next two years, make an
additional $6,695 per year or a total of
$13,385
ROI of 152% per annum
Cost to buy Sens tickets: negative
$8,076.70
Plus Mortgage Broker’s sales now >
Mortgage Alliance minimum to qualify for
volume bonuses from. ROI increases
further
Pro Sports Teams
Plus Mortgage Broker’s sales now >
Mortgage Alliance minimum to qualify for
volume bonuses from. ROI increases
further
How about that?
“Just initial here, here and here, sign and
date there. Thanks, Bye now.”
KNOW YOUR CLIENTS BIZ ALMOST AS
WELL AS THEY DO
Conclusion
NCS  success rate will move from
.200 to .300 or .400 or higher
Plus order size and speed to order
will increase  triple whammy
(batting average/mass/velocity) to the
bottom line
Removes the fear about selling– you
know your clients’ businesses almost
as well as they do
Conclusion
Your projects get green lighted
Self-actualized human beings working
on projects they initiated with
innovations they introduced and
products and services that they
fearlessly sell, are happier people!
Thank you!
Questions?