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Category : Achieving Sales Goals

What To Do About Requests for Most-Favored Customer Clauses?

More and more customer purchase agreements include Most-Favored Customer (MFC) clauses. The customer’s goal here is to ensure that they get the very best price—as low as, or lower than, you offer to any other customer under any circumstances.

These MFC clauses are typically accompanied by additional clauses that give the customer the right to look at your costs in detail, including receipts for material purchases and labor costs.

Unfortunately, the customers who insist upon these clauses are usually the large, must-have customers that can make or break your business (because you wouldn’t agree to the MFC clause otherwise, right?). You have to find a way to give them what they want while also protecting your interests.

You might be tempted to push back on the MFC clause and refuse to include it, but I think there’s a better way to handle the situation:

  1. Let them know that you define “equipment” as hardware only
  2. Let them know that you define “products” as hardware plus the benefits and results the customer receives, which include:
  • Performance specifications (what the product is intended to do right away)
  • Payment terms
  • Delivery timing
  • Warranty
  • Field support
  • Problem solving
  • Performance improvement (what the product could do in the future)
  1. Let them know that the product they’re buying from you is unlike any other product you sell to other customers. Therefore, there is no real basis of comparison.
  2. Let them know you’ll agree to their clause as it relates to products. In other words, you agree that you won’t sell the same product—including all of the associated benefits and results, as explained above—to any other customer for less money.
  3. If the customer insists on auditing your costs, tell them you agree, but that you won’t be able to share any confidential information regarding other customers—such as costs, specs, delivery, terms, hardware, or anything else. This assures the customer that you’ll protect their confidential information as well.

That should do it.

The Value of Versioning

Customers like having choices. That’s why manufacturers of cars, computers, phones, and just about everything else offer multiple versions of products, at different prices, with different levels of value. This works because not all customers perceive value the same way, nor are they willing to pay the same price.

There are three basic kinds of buyers:

  1. Price buyers: Price is always their #1 decision criteria.
  2. Value buyers: They are openly willing to pay more for more value.
  3. Poker players: They are willing to pay for value but won’t admit it. (Most customers are poker players.)

To attract all three types of buyers, many businesses offer three well-defined and profitable versions of a product at different prices, with more bells and whistles added at each price point. This ensures that customers get what they’re willing to pay for, but not too much more. If they want more, they can move up to the next version.

The beauty of versions is that they guide the customer toward the product he or she is willing to pay for. This makes everything that follows easier because you’ve addressed price and specs up front, at the beginning of the sales process. (By the end of the sales process, you’ve invested too much time, money, and emotion to walk away, even if it’s in your best interest to do so.)

It’s human nature to want the best version at the lowest price, so it’s the salesperson’s job to figure out what is most important to the customer and steer the customer toward the best fit. Price, performance, payment terms, credit, warranty, field support, product and process improvement, and delivery can all be versioned.

You might be thinking, “Versions wouldn’t work for us because our customers give us the spec they want us to meet, and we respond to that spec.” While that may be true to some extent, remember that a spec is usually a wish list, not a list of must-haves. Again, it’s up to the salesperson to figure out which specs matter and which don’t, and to negotiate and quote the appropriate price.

I’ve used versions to ensure that customers like Intel, Micron, Texas Instruments, and TSMC get what they’re willing to pay for, so I know it can be done. I once used versions to negotiate a $50M service contract with Intel that included a 20% price increase over the previous year.

It’s important to remember that no sales strategy or tactic works in all circumstances all the time. What I’m suggesting is that you try versioning a few times and see what happens. If you do it right and stick with it, your profit will improve. And isn’t that why we’re all in business in the first place?

Training for New Salespeople That Actually Works

Once you’ve made a job offer that has been accepted, it’s time to get your new salesperson up to speed as quickly as possible—meaning, as profitable as possible ASAP.

Unfortunately, much of what passes for sales training is really product training, designed to show salespeople how products work. Or it’s generic, with the material being too broad to be of much real use.

You get only one chance to write on the “blank slate” of a new salesperson at your company, so it’s important not to waste the opportunity with training that doesn’t make a real difference.

Sales training delivers the best results when it’s designed specifically for the people being trained, the situations those people regularly face, and the problems your company seeks to solve for its customers.

I suggest designing your sales training around the following questions. If you go into them in depth with your new salespeople, they will come away with an excellent understanding of both your company and their role in it:

  1. What value do we offer customers that they can’t get from our competitors?
  2. What specific problems do our products and services solve, in what situations, and for which customers?
  3. How much do those problems cost our customers? How do we know? How much are they willing to spend to make those problems go away?
  4. What do good and bad business look like, from our company’s perspective?
  5. What types of customers and prospects aren’t good for our business? Those who:
    • Always buy from whichever supplier provides the lowest price
    • Steal our intellectual property
    • Share our confidential information with our competitors
    • Require too much time or hand-holding
    • Are excessively difficult, rude, or demanding
    • Actually cost us money, when all is said and done
    • Ask for endless estimates and proposals but never close the deal
    • (Your reason(s) here)
  6. How do you recognize and turn away bad business?
  7. How and when should you address price and money with customers?
  8. What method do we use to price our products and services?
  9. Why do those prices make sense relative to what customers get in return?
  10. What business case can we make to justify our prices?
  11. Do we have customer testimonials, data, and ROI calculators that support our claims of value?
  12. When customers or prospects tell us they’re not interested or don’t have problems, what information, results, and proof can we use to get their attention and paint the picture of a “better future”?
  13. Which prospects should you approach first, and why?
  14. What questions and objections should you expect, and how do you respond to them?

You get the idea. Train them for the real world—not the world as you’d like it to be—with practical specifics and strategies rather than vague mission statements and models.

Next time, I’ll talk about the mechanics of training new salespeople—including scheduling, slide design, and delivery.

15 Revealing Sales Interview Questions

As hiring managers, we conduct interviews for two basic reasons:

  • To determine if a candidate can deliver the results we need, provide new ideas and better ways of doing things, fit in with our organization’s culture and people, and potentially be promoted in the future.
  • To share information with the candidate that enables the person to make an informed decision about whether or not to join our company, should an offer be extended.

I firmly believe that a lot of employee underperformance and turnover could be prevented by better interviewing. Too often, the wrong people come aboard because the interviewer has both failed to ask the right questions and failed to share relevant information that could discourage candidates from joining the company. Today, we’ll look at the first part of the equation.

Almost every interviewer will ask questions like “Tell me about yourself” and “What are your strengths and weaknesses?” And almost every candidate will have well-rehearsed answers to these questions—which means you’re not gathering any valuable information.

As an interviewer, you need to find out if the person you’re interviewing is really any good, or merely the beneficiary of a strong company, market, or product. You need to know how the candidate thinks, what the candidate does, and the underlying rationale behind his or her actions.

The following questions should help you obtain that information:

  1. How do you sell? Specifically, what do you say and do when customers call you for a quote or proposal, or you target and engage with customers who aren’t familiar with your company or products? Give me some examples.
  2. What is unique about the products and services you’ve marketed and sold? Why do customers buy them? How are they unique relative to what your competitors offer? Is there is a “good enough” product or process already in place for most of your customers? If so, how do you get customers to change and adopt your products?
  3. How do you choose which customers to target and engage with in the first place? What criteria do you use? How would you rank those criteria? Give me some examples of how you’ve done this.
  4. What problems do you have when selling? What stops you from selling more products faster? Rank the problems you have, and explain why you ranked them that way. Give examples and tell me about the results you achieved.
  5. How do you ensure that the revenue you’re responsible for delivering is profitable? How profitable are your customers in terms of gross margin? How do you measure profitability? What other costs do you and your company incur in selling to your customers? Give examples.
  6. Regarding selling, what have you changed your mind about during the last year or so, and why did you change it? What do you feel strongly about and why? What ideas do you have for improving results in your field? Have you implemented any of them, and if so, how did you do it and what were the results?
  7. What do you do on a regular basis to improve your skills and performance? Who and what do you read and listen to?
  8. How do you sell services? Please describe the steps involved. What do you say to prospects to get their attention regarding your services?
  9. What risks do customers perceive in buying your products or from your company? How do you address those risks with them?
  10. What return on investment can a typical customer expect from your products, and how is that ROI better than what your competitors offer?
  11. When and how do you talk about price with customers? How do you defend your prices when customers tell you your prices are too high?
  12. How do you add value to your organization? Relative to what you’re paid, how much money does your employer earn in return and where does that money/return come from?
  13. How do you spend your time in a typical week? How much time do you spend selling and supporting customers vs. internal company activities? How do balance your time between servicing your existing customers and pursuing new ones?
  14. How do you help and support other salespeople in your company? What questions do they come to you with, and how do you answer those questions? Give me an example.
  15. What do you measure your performance relative to? How have you outperformed “the market”? In other words, have you grown your business/territory faster than your industry and competitors have grown? If so, by how much?

Next time, I’ll give you my thoughts on the information you should share with candidates—and how you should share that information.

Building a Successful Sales Team: The Three Sales Roles

Once you’ve decided what you want your sales team to accomplish, the next step is to build your team. In order to do this, you need to determine what sales roles need to be filled to meet your objectives.

To my mind, sales roles fall into one of three general categories: Creating, Building and Maintaining:

Creating is about generating business from scratch and/or capturing business where very little exists. This is the hardest job in sales—it requires the creativity of an artist, the passion of an evangelist, and nerves of steel. It’s even harder when your product is new or unknown to customers. And it’s not for the faint of heart because creators typically function on their own, sometimes with very little assistance from their employers.

Building is about account development—taking an existing but underserved customer and growing that business. This role requires a high degree of sales ability coupled with strong project management skills. As you may have already discovered, these skills don’t often coexist in the same person!

Maintaining is just what it sounds like—keeping existing business and market share. This role is all about sustaining customer satisfaction and playing defense in the sense of fending off challengers.

Confusing or ignoring these roles is a common mistake, as is slotting a strong salesperson into the wrong role. I’ve seen previously successful creators struggle in maintainer roles, for example. And putting an experienced maintainer into a creator role nearly always ends in failure.

Additionally, even if you get the right person in the right role, it’s a common mistake to assume that previous success in sales ensures future success, especially when you introduce changes to products, pricing, or customers.

Success in sales is highly situation-specific. While previous success can certainly be a proxy for future success, careful interviewing is vital to ensure the new fit you’re considering is a good one in all important aspects.

Are you a good interviewer? Stay turned for my next installment, when I’ll explain how to ask the right questions to ensure you get the right people in the right roles.

Keys To Designing an Effective Sales Organization

Before you can recruit your sales team, set their objectives, and manage their performance, you’ve got to design the right sales organization for what you’re trying to accomplish—keeping in mind your products, company, customers, and resources.

Here are some questions to ask yourself:

  • What are the right objectives for us given our current competitors, customers, people, products, and other resources and challenges (such as compensation, training, travel, etc.)?
  • Why are these the right objectives?
  • What objectives could we achieve with additional investments in people, products, and training?
  • How much additional investment would it require, and when, to achieve slightly better objectives? What about much better objectives?
  • What is the ROI on those additional investments, and how and when would that ROI be realized?
  • Going forward, how much of our business will come from current customers/products, and how much will come from new customers/products?
  • Is it reasonable to expect that our current customers will buy more from us? Why? If so, how much? What will we do if they don’t?
  • Are our products and services well-known and accepted (easy to sell), or are we trying to create demand from scratch (harder to sell)?
  • Do our products solve expensive, widely known customer problems (easy to sell), or do they create a “better future” for customers who claim they don’t have any problems to solve (harder to sell)?
  • How well do the customers we’re targeting know our company, products, and capabilities?
  • Who or what is our main competition? Is it an entrenched competitor, or a well-known process that customers are not interested in changing? Either of these situations may be more difficult to overcome than you think.

These questions are not complicated, but many managers never ask them. This is a huge mistake.

Think of your sales process like an Olympic sport such as diving or gymnastics; there is an inherent degree of difficulty to what you’re trying to do with your sales process. More difficult maneuvers can garner you more points—and, ultimately, more glory—but they are more taxing and time-consuming to hire, train and manage for.

Whether you go easy or go hard is up to you, and there are merits to both approaches, but you need to know at the outset which path you’re on so that you can navigate it correctly.

A Template for Effective Customer Pitches and Presentations

As with many things, a template can be very helpful when it comes to effective customer pitches and presentations. Obviously, some level of customization will always be needed, but a solid template can help you pull together your presentation faster and help you get your key points across more effectively.

Here are a few general points to keep in mind:

  • Rank the points you want to make and start with the most important—this is common-sense advice, but it’s not common practice
  • Try to convey only one idea per slide; use more slides instead of jamming each slide with too much text/information. Text-dense slides are hard to read and psychologically daunting.
  • Use fewer words and graphics, and more white space. If you need to convey a lot of detailed information, write a summary and distribute it AFTER the presentation. Also, tell people upfront that you will be doing so, so that they don’t feel compelled to take a lot of detailed notes.
  • On each slide, get to the point…quickly
  • Remember that customers are distracted, and are frequently called out of pitches and presentations for various emergencies (sometimes, they simply leave because they’re bored). Because a scheduled talk can be interrupted at any time, do your best to convey the most important information within the first 10 minutes—people’s attention is most focused then, too.

Here is a template for your presentations that will help you save time and add some consistency to your presentations (which is very important in branding and marketing):

  1. Introduction: Who you are, why you’re here, what you’re going to talk about, and what you’d like from your audience (the customer) in return
  2. What you know about your audience and their problems: Talk a little about what you believe/understand about the audience’s situation and ask them if they agree. If they bring up anything new, tell them you’ll address it at the end of your presentation—and don’t forget to do so!
  3. Top 3 points: “Here are the most important things we want you to know—and why.” For example:
    • Top point #1: “We’ve developed a new way to process widgets that increases yield 400-fold for X kinds of customers/products.”
    • Top point #2: “These white papers, written in conjunction with our customers, show the data that proves Top point #1.”
    • Top point #3: “Customers who have purchased our product have seen these results and [if true] are ordering more products.”
  4. Discuss the investment (price) range of the product(s) you’re talking about, and why that range is fair and makes sense relative to what the customer gets in return. For example: The product costs between $A and $B depending on delivery, specifications, terms, timing, and so forth. This price range represents between 10 and 20% of the return on investment (ROI) you’ll receive. In other words, for every dollar you spend with us, you’ll get eight to nine dollars in return. You want to discuss price ranges (rather than specific prices) during pitches in order to ensure you and your customers are at least in the same ballpark on pricing. If not, discovering that key fact early on means that neither side wastes any additional time.
  5. Risks to consider and problems that might occur: No solution or product is without risks or potential problems; it’s much better to bring these up and address them before customers do. Doing this sends the message that you are an honest and straightforward company that wants potential customers to have all the info before making a decision.
  6. FAQs: 5 at most. Your objective is to answer common questions BEFORE the customer asks them; this sets minds at ease.
  7. Tell the prospect (in a polite way) what you need from them to continue the process. What’s the next action they need to take (develop specs, get budget approved, place PO, etc.)? Whatever it is, the next action should be clear, and the prospect should own it.
  8. Closing remarks. These may be brief or more extensive, depending on the situation, but they should always include thanking your prospects for their time—sincerely.

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.

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