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Author : Don Maher

How Sales Adds Value

In my last blog post, I wrote about how marketing adds value. This week, we’ll discuss how sales adds value—specifically, your salespeople.

As with marketing, the value doesn’t lie in the obvious. Talented salespeople are focused not merely on closing the sale, but on creating—and conveying—a win-win situation for both seller and buyer alike.

Good salespeople: 

  • See themselves as experts, and the companies they represent as valuable business partners for the right customers. They are not mere vendors or suppliers—and they never think of what they are selling as commodities
  • Possess expertise regarding the details of the customer’s business and ways to improve it, as well as the ability to assess what that improvement is worth to the customer
  • See themselves as more than a means to meeting the customer’s wishes and demands. They are able to filter all opportunities through important real-world criteria:
    • Is this business real?
    • Can I win it?
    • Can I win it profitably?
  • Can have an honest conversation with the customer regarding opportunities, budget, and the chances of winning business. By the same token, they are able to correctly read between the lines when the customer’s words don’t accurately reflect what he or she is really thinking
  • Know what good and bad business look like, and stop bad business before it ever gets in the door. (I can’t emphasize strongly enough how much time and money my clients waste trying to win business that’s unwinnable, or winnable only at a loss.)
  • Are able to provide specific, compelling examples of other customers who have benefited, and how they have benefited. This requires the skill of obtaining customer testimonials that the company can use and getting past the typical “we don’t give testimonials” song-and-dance
  • Price customers based on their profitability and potential
  • Can confidently pitch and present to users, purchasing, and senior executives alike
  • Are willing to say, honestly, “we’re not the best option for you” when a customer’s demands are too high, when a budget is too low, or when the fit is simply not a good one. When I’ve used these words, more often than not, the customer’s response has been “ok, what can you do for us?”
  • Talk about money early and often during the sales process so customers don’t arrive at a negotiation and get (or act) surprised by the price—a big waste of everyone’s time and energy.
  • Manage their company’s resources to ensure they are spent on the best, highest-probability, highest-profit opportunities
  • Know the right questions to ask to determine whether the company can solve the customer’s problem, earn or save the customer more money, or provide (in some tangible, valuable way) a better future for the customer
  • Can determine whether an RFQ is a real opportunity, or just an attempt to get a price to use against the preferred provider.

You’ll notice that I didn’t put “ability to close the sale” anywhere in the above list. While that’s obviously important—nothing else matters much without the deal itself—the best salespeople are able to ensure, using the tactics above, that the business is both profitable and feasible.

Too often, salespeople focus on the close to the exclusion of these crucial points—which leads to a lot of time and effort being spent on “opportunities” that drag your business down rather than building it up.

Launching a New Product or Service? Don’t Make This Common (and Costly) Mistake

I’ve seen this time and time again with my clients, regardless of size or industry. Someone has a “hunch” about a new product or service idea, and they rush in with guns blazing. Resources are allocated, lots of time is consumed, and a brand-new product or service is launched.

And then…crickets.

It seems, alas, that nobody is actually interested in purchasing your new product or service (or maybe you get a handful of takers, but far too few to boost your bottom line).

What went wrong? It’s all well and good to get excited about a new way to serve your customers, but it’s important to temper that enthusiasm with some good old-fashioned research.

And by “research” I don’t mean hopping onto Google. You can do that, but actually talking to prospective customers for this new product or service is a far better bet. And not just one or two (you know, the one or two existing customers who sparked this idea in the first place) but a whole bunch of them.

You’ll know you’re on to something if a lot of folks sound just as excited as you are, or maybe even more so. They’ll say things like:

  • “We would pay anything for that.”
  • “When can you have it ready?”
  • “How do we sign up?”

Don’t be fooled by semi-positive responses like these:

  • “Maybe we’ll look into it when it’s up and running.”
  • “I’ll think about it.”
  • “I suppose that might potentially be something we’re interested in.”

The bottom line is that customers (like the rest of us) would like to have all sorts of things – but you only want to spend your time and efforts on things they are actually willing to pay for.

An even better test, which is possible with certain products and services, is to see if people are willing to pay upfront – a deposit, say, or an early-bird price before development is complete. That way, you not only have some indisputable evidence that they are willing to pay for your idea – because they already have – but also some extra cash to help set it in motion.

Are You Proactive About Qualifying Prospects?

Salespeople tend to get excited about leads—but not all leads are created equal.

If your prospective customer is merely a tire-kicker who has no real intention of ever buying your product—or no budget for it—your sales team can spend a great deal of time and effort on a relationship that will contribute zero profit to your business.

Not only is this a huge waste of time and money (which, incidentally, few companies bother to measure, though they should), but it also creates an opportunity cost. Every minute your salespeople spend working on low- or zero-potential business is a minute they are not working on other business with a higher probability of success.

It may not seem like a big deal to provide a quotation, proposal, demo, or project to a potential customer who requests one, but each of these actions represents an investment of time and money—sometimes a substantial investment—and risk because there is no concomitant investment on the customer’s part.

As with any investment, we as sellers need to weigh the risk and potential return BEFORE making the investment.

One former client of mine, a large contract manufacturer, told me his company sometimes spends up to $50,000 to develop a proposal—but only 10% of these proposals are accepted by a particular customer. “Why don’t you have a frank discussion with the customer about your chances of winning before you develop the proposal?” I asked. “The customer won’t tell us and doesn’t care what we spend” was the response.

Maybe the customer doesn’t care what you spend—but you should. It’s up to us as sellers to ask some basic questions, and get some real answers, upfront.

If I were responsible for spending a company’s money on proposals, demos, or engineering projects, I would want answers to the following questions before expending a dime (in time, effort, or materials):

  1. Does the customer have a real need or problem, or are they just fishing for a quotation they can use to leverage the incumbent’s price? Remember: you are under no obligation to provide a price or proposal simply because the customer asks for one.
  2. What exactly is the problem? How does it manifest itself?
  3. When did the customer first notice the problem? What has the customer already done to try and fix it?
  4. What’s driving the need? Why will the customer buy?
  5. Why is the customer coming to us, and why now? What has changed? What does the customer require that our company is best suited to provide? (Again, the customer is asking us to spend time and money to help them, and we deserve to know why.)
  6. What does the problem cost the customer (per day, week, month, year)? How do they know it costs that much, and how do they measure that?
  7. How much money does the customer have budgeted, today, to solve the problem? If they don’t have money, or haven’t thought about it, it’s unlikely that the problem is urgent or serious.
  8. What criteria will the customer use to make the buying decision?
  9. Who will be involved in the buying decision?
  10. Who are we competing against, and why? What do they offer that we don’t?
  11. What are our chances of winning, and why?
  12. What price is the customer willing to pay for the product if the demo or engineering project is successful? (You don’t want to work on a $20,000 solution if the customer is willing to pay only $5,000. Better to know this at the outset.)

Unfortunately, many salespeople are afraid to ask the customer tough questions. But this is business…and salespeople are (or should be) businesspeople first and foremost.

Speak frankly with customers, and you’ll change the nature of your relationship for the better. And if they won’t answer your questions or answer them honestly, you’re probably better off saying “no” to the so-called opportunity and moving on to one that’s more promising.

“How Much?” Think Carefully Before Answering This Question

How much? What’s your price? How much does it cost? What will this cost? What’s the best price you can give me?

We hear these questions from buyers every day.

Rather than tossing out an off-the-cuff answer, it’s important to take a little time to think about it. You want the stated price to be appropriate not only for the quantity ordered, but for the customer and the situation as well.

The first issue to consider is whether the customer is profitable for you to serve. In other words, how much net profit (not gross margin) do you earn per year working with this customer? And how does this profitability level compare with other similar customers?

You have unprofitable customers. I know this because every single business I’ve ever worked with does.

Ideally, every salesperson should know the profitability of his or her key customers – and take that profitability into account when pricing.

The best way to improve your profitability is to stop offering your products and services at prices that are too low. Now, you might be thinking you’ll lose business by raising your prices – and maybe that’s true. But no-profit and low-profit business is precisely the sort of business you want to be losing!

What Sales Really Needs (But Rarely Gets) From Marketing

Contrary to what you might think, your company is not really selling a product or service.

You’re selling a solution to a problem. Something that will make your customers’ lives easier. Something that will make (or save) them money. Something that will slash time, complexity, or hassle.

If you’re in marketing, your most important job—bar none—is to convey this true value to your sales people so they can sell your offerings effectively.

A good value proposition does three things:

  • Explains how your company, product, or service solves customers’ problems or improves their business results.
  • Details the quantified or qualified benefits your customers receive, such as the amount of money they earn or save, or the value of the risk that is reduced by buying your products or services.
  • Provides a compelling response to the question, “Why should I buy from you and not from your competitors? (Note: Anything along the lines of “Because our competitors are stupid/lazy/untrustworthy” is not the sort of answer we’re looking for here!)

While most of us can exhaustively detail our product specifications until the cows come home, product specs are not where the true value lies—even if your product is amazing.

If you need help developing a compelling value proposition, start by thinking about the following questions:

  1. Why do customers buy our products and services?
  2. What unique value do we provide that others don’t?
  3. Which customers want that value? Why do they want it, and how much will they pay for it?
  4. Are our prices set relative to the value customers receive? (e.g., you give me one dollar and I’ll give you three in return over one, two or three years.)
  5. What are the circumstances under which we can provide the most value?
  6. How do we deliver value?
  7. What do we do differently from our competitors?
  8. Is our value sustainable? In other words, can we continue to deliver it? Can our competitors copy it?
  9. How much money do we help customers earn or save, under what circumstances, and over what periods of time? How do we calculate it?
  10. Do we have sales presentations and tools that clearly demonstrate how we help customers earn and save money?
  11. How much risk do we reduce, and how much is that risk reduction worth to a customer?
  12. Why do we lose business? What are the most common reasons? (It’s almost never price, despite what buyers may tell you.) What can we do about those reasons?
  13. What proof do we have that supports the claims we make? Do we have case studies, customer testimonials or references, data, or repeat business we can point to?
  14. Can we demonstrate our unique value to customers before they buy?
  15. Can we guarantee the results we claim to deliver?
  16. What are the biggest risks (both actual and perceived) customers take when they purchase from us?

If you’re not happy with how your salespeople are selling your product or service, give them a rock-solid value proposition to sell instead—because this is truly what your customers are looking (and, in fact, eager) to buy.

What Professional Buyers are Really Thinking…In Their Own Words

Today, I’m pleased to give you a valuable behind-the-scenes glimpse into the minds of professional buyers.

I recently hired three former professional buyers from Fortune 1000 companies to speak frankly with me about what motivates supply-chain people, and the strategies and tactics they use with suppliers.

Here are some of their insights, along with actual quotes:

1) We’re motivated by money and promotions and we earn them, to a great degree, by getting price reductions.

“How much we can reduce your prices is frequently more important to us than the prices we pay.”

2) There is less competition than you think.

“We use prices from companies we would never buy from as leverage against companies we want to buy from.”

3) Your products aren’t commodities.

“We purposely use the word ‘commodity’ to make you believe that your products are the same as everyone else’s.”

4) We tell every supplier that their prices are too high, even when they’re not.

“I don’t expect to get the highest performance for the lowest price, but I always ask for it because sometimes I actually get it. I’m always surprised when this happens.”

5) We don’t stop asking for lower prices until you stop offering them.

“I wouldn’t feel like I was doing my job if I stopped asking for a lower price.”

6) You need to develop relationships with the users of your products…even when we tell you not to.

“We buy what they tell us to buy.”

7) We know that you base your prices on your costs. That’s why we ask to see your costs.

“We’ll tell you that your costs are too high and ask you to justify them. When you can’t, we’ll tell you to lower them. When that happens, your price comes down.”

8) We determine a target margin for your products before we talk to you about price.

“We look at our own margins, then determine what percentage of those margins we think you deserve.”

9) We have three major concerns when buying: delivery, price, and quality.

“If you can’t deliver to our requirements, we’re not going to buy from you.”

10) If you want a higher price, show us why we should pay it.

“In my opinion, the biggest problem sellers have in negotiations is that they can’t explain how their products are better and why they’re worth more than competitors’ products.”

Interesting stuff. None of the statements made by these ex-buyers surprised me, but it was refreshing to hear them actually say out loud what we’ve all been suspecting.

So, now that you’ve gotten this inside look into the minds of actual buyers, how can you best put this information to use in your negotiations?

  • Don’t assume that buyers are telling you the truth. (If you take away nothing else from this discussion, remember this one fact.)
  • Don’t reveal your costs; it’s none of their business and can only lead to lower prices.
  • Price your products and services on their unique value to customers instead of on your costs.
  • Learn to say no. You’ll save a lot of money by doing so.
  • Don’t “give away the farm” in the face of repeated requests for price reductions. It’s their job to keep asking and try to wear you down.
  • Your products are not commodities, and buyers know that, but it’s your job to highlight what makes them better than the competition.
  • Winning your customers’ loyalty goes a long way toward influencing buyers.

The Management Myth That Can Cost You Millions

There’s a common misconception out there that salespeople are a self-led bunch who need little or no active management from above. Nothing could be further from the truth! These employees, like all others, need to be actively developed and trained in order to achieve their full potential.

Additionally, because these folks are so crucial to your bottom line, how well (or poorly) you manage them has a direct impact on your revenue and profitability.

Well-managed employees are productive, loyal, engaged, and high-achieving. Poorly managed employees, on the other hand, tend to slip through the cracks into mediocrity—and those with true star potential tend to leave for other workplaces (a key competitor of yours, perhaps?) where their talents are better appreciated and nurtured.

You may think you don’t have time to play an active role in the management of these employees, but the truth is that you simply can’t afford not to.

With that in mind, here are 10 things you can do to ensure your sales organization functions at the highest possible level:

  1. Continually look for ways to improve the way work is done, eliminate tasks that shouldn’t be done at all, and prioritize the rest so salespeople know exactly what they should be working on now, and what they can postpone until later. There’s a lot of overwhelm out there, and in the vast majority of cases it’s caused by managers who continue to delegate work to their employees without any guidance regarding what is most crucial to focus on right now. This means that it falls on you to prioritize objectives and tasks—which can be both difficult and time-consuming. Ducking this responsibility, however, will only backfire in the long run.

 

  1. Regularly recruit potential candidates from inside and outside the company, whether a job opening exists or not. The best sales executives don’t need to frantically start recruiting when an employee gives notice or is fired because they already know numerous qualified replacements who are lined up and eager to take the job. You’ve probably heard the acronym ABC—Always Be Closing. Smart managers know they need to ABR, too—Always Be Recruiting.

 

  1. Start grooming one or more successors for your job. This enables your subordinates to assume more responsibility in the company without disrupting their current responsibilities. It’s also a vital part of smart succession planning in the event you are suddenly unable to continue doing your job.

 

  1. Continually solicit feedback from employees on how satisfied they are, and on what you can do to help them. Subjects like compensation, job satisfaction, career growth, and workload should be openly and honestly discussed on a regular basis. Assuming the conversation is respectful, no topic should be out of bounds. Highly involved managers are rarely surprised when an employee resigns, and this type of foresight enables you to wish the departing employee well and let him or her know the door is always open for a possible return someday. Hands-off managers tend to respond to departures with hostility and defensiveness.

 

  1. Regularly review your employees’ workload and priorities. This means calling the shots on hard decisions (such as “work on this, and don’t work on this”) when employees ask for help. Effective managers don’t parrot useless platitudes at employees—like “you have to work smarter” or “you need to manage your time better”—without providing any details on how to actually do these things.

 

  1. Run interference and fight for your people when needed. When employees need help, smart managers don’t make excuses or postpone difficult discussions. They get involved and get things done.

 

  1. Get out in the field, work with employees, talk to customers, and help both with their problems. You’ll know exactly what each salesperson needs to improve and can provide the coaching and training to make it happen.

 

  1. Stand up to belligerent customers who yell at and threaten your salespeople. You don’t remove salespeople from an account simply because the customer wants to deal with a weak salesperson who will offer him lower prices. You know, in the long run, that your loyalties lie with your team. The customer is not always right.

 

  1. Avoid micromanagement. You never want to be in a “Continuous Sampling Loop” with your people, interrupting them every few hours or days to find out what they’re working on so they can show management that they’re “on top of things.” Give them the autonomy and tools to do their jobs well and then stay the heck out of their way.

 

  1. Be just as concerned about the careers of your people as you are about your own career. You should be working on a career path with each employee that helps him or her professionally develop to the fullest. And remember that there’s never any shame in hiring people smarter than you—the very best managers strive to do just that.

To Price Correctly, You Must Also Price the Customer

As I’ve mentioned before, effective pricing involves much more than simply adding up your costs and multiplying by some desired target margin.

Not only does this method fail to account for the value different customers can place on the same products, it also fails to address the level of profitability different customers deliver to your business.

Just as not all products and services are created equal, not all customers are created equal. And, as odd as it may sound, you need to take your customers into account when you set your prices—not just their ability to pay, but the costs involved in doing business with them.

Imagine that your company sells to two customers: A and B.

Customer A buys regularly and in high volumes. Her business is profitable for your company. A also has a partnership mentality and works with you to solve problems when they arise. A always pays on time and is very pleasant to deal with. The time and hassle expended on managing your relationship with A, in other words, is minimal.

Customer B, on the other hand, buys sporadically and in smaller quantities than A. The low prices he gets, along with his demands for high performance and free support, mean that your company earns little or no net profit from him.

B’s mentality is transactional—he is always threatening to jump ship for anyone who offers him a lower price. To make matters even worse, he pays late and has unrealistic performance expectations. You and your team spend a lot of time trying to keep B even moderately happy—to no avail.

This is an extreme example, of course, but you see what I’m getting at. Should these two customers be paying the same price for the same product or service?

Absolutely not!

Since Customer B is a far more expensive customer, B should be paying higher prices.

Ironically, the customers who pay less tend to be a lot more “Type B” than the customers who happily pay a premium to buy from you. The good news is that the better you get at pricing, the more you can afford to ditch Customer B and his ilk altogether.

But that’s a blog post for another day.

Why Group Emails Can Be Your Secret Negotiations Weapon

It’s to your advantage to deal with actual product users rather than professional purchasers, whenever possible. This can be tricky, as purchasing employees try to ensure that all or most communications go through purchasing. But there are ways around this.

I always recommend that my clients use email to document every conversation with purchasing, and then send that email to everyone involved in the negotiation at both the seller and buyer companies.

As a best practice, send a well-written, fact-filled email once a week (or more often, if warranted) to all the key people involved in the negotiation. This can include:

  • customer executives
  • users of your products
  • your own management team

These emails should document any agreements and commitments made by both sides during the previous week and may contain everything from direct quotes from purchasing people to slips in the product delivery schedule (due to negotiations that never seem to end).

You might also include any threats made by purchasing representatives.

Shedding some daylight on the threats, pressure, name-calling, outrageous demands, etc. by purchasing tends to reduce this bad behavior.

If purchasing balks at the idea of these emails (and they will), I tell my clients to respond matter-of-factly that management insists on keeping everyone informed and up to date, with all relevant details fully documented. Doing this will also motivate all parties to behave with civility and honesty, and to keep the rhetoric to a minimum.

Even if you are fortunate enough to be dealing with professional, courteous, well-behaved purchasing people (lucky you!), it’s still very helpful to have this kind of real-time reporting and documentation going on. Written records are your friend.

How To Think About Value

If you’re committed to pricing your products and services at an optimal level, you must be genuinely convinced of the additional value those products and services provide to a customer.

If you are, and if you do a good job of conveying this message, pricing becomes less of an issue to the customer because of what he or she will gain from the purchase. If not, this lack of conviction will be exposed during difficult negotiations. If you don’t “buy” what you’re selling, in other words, your customer won’t, either.

The concept of “value” can be defined in a number of ways. Here are a few to keep in mind:

Financial Advantages (reduced cost, improved performance, ability of the customer to command a higher price)

Experience/Expertise (we have solved similar problems for other people)

Risk Reduction/Assurance (guarantees, case studies)

New Ideas/Ways of Doing Things (the value of being first in a category – e.g., PayPal)

Types of Value

  • Durability
  • Ease of installation
  • Form and fit
  • Process specs
  • Particle performance
  • Throughput
  • Yield
  • Cost to own and operate
  • Field support
  • Delivery speed and consistency
  • Inventory ownership and management
  • Guaranteed pricing over time
  • Payment terms

It’s very important to identify, design, and quantify real, sustainable competitive advantages and differentiators so customers know exactly why they should buy each of your products and services and why they should pay the price you’re asking. This is the cornerstone of smart pricing.

What are your products really worth, to which customers, under what circumstances, and relative to which competitors and substitute products?

Remember: There is no one “perfect” price for anything. The amount you can charge greatly depends not only on the value you provide, but on how effectively you convey this value to your customer.

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