I got an email today from a marketing consultant cautioning everyone to be careful not use customer satisfaction surveys when double blind market research is more appropriate. The consultant warns, in surveys, “customers often rate everything as important.”
While I certainly agree with the assessment of how surveys provide less than reliable data, I couldn’t resist commenting on the idea that double blind studies “make the information you get more actionable.”
Maybe if your Proctor and Gamble, Microsoft or Coca-Cola market research may really matter (though it’s interesting that even Proctor and Gamble, the father of modern market research has turned away from traditional research).
However, if you’re a small or mid-sized business, and you feel you need to do formal market research, then you should be treated as the commodity that you are. The problem with market research is that it creates a feeling of certainty where there is none.
There is only one type of research you should consider doing: spending time with customers, learning absolutely everything you can about them. Watch what they do, listen to their goals and what’s frustrating them, etc. What are they saying, and more importantly, what aren’t they saying. Understand them better than they understand themselves.
Then take that knowledge, connect to your expertise, and you’ll have actionable research that actually drives sales and margins.
Wouldn’t it be nice if we could go into a sales situation clearly knowing who is going to make the decision and how they’re going to make it? Even better, what if we could come up with that perfect question that elicits the ideal response that positions us for the proverbial “layup?”
Okay, now WAKE UP!
Selling can best be characterized as living life in the “ambiguity zone.” When I’m asked about the attributes that enable a salesperson to excel in today’s world, I liken it to the life of an investigative reporter. I think you’ll agree that their lives have an awful lot in common:
- They never have all of the information needed.
- No one tells the truth, partially because no one knows the truth.
- They’re always – ALWAYS – one question away from “the truth.”
- The ability to listen and ask great questions based upon what they are hearing and what they aren’t hearing is critical.
- They often make the people they are dealing with uncomfortable with their probing questions, but despite that they have an innate ability to get people to like and trust them.
- They spend their days taking all of the information they have and use that information to put together puzzles.
- A natural danger of their job is they may begin chasing the wrong scent, so to become successful, they learn how to switch gears and directions instantaneously.
I could go on, but I think you get the point.
It’s the nature of the world we live in today. To be successful, salespeople (and selling organizations) need to develop the abilities that enable them to create certainty and act with certainty in inherently ambiguous situations.
Wouldn’t it be great if the first thing a potential customer said to you was that they were in the process of looking for exactly what you do? The reality is that it wouldn’t.
Outside of the high probability of commoditization that exists in this scenario, the bigger risk is that you will be overtaken by the biggest competitor of all: inertia; the dreaded status quo.
According to a recent sales survey, more than 40% of buying processes are ending with a “no decision.” That’s right – more than 40% of the time (and growing) buyers, despite the impetus to buy something and the costs associated with the buying process, are simply deciding to do nothing.
This is horrible (though not surprising) news for sellers. “No decisions” incur all of the costs associated with a successful sale with absolutely none of the benefit. Further, it bogs down available sales and operations resources, making business even less predictable.
It is for this reason that sellers must not miss the very first, and most important, “sale:” the decision that the status quo is unacceptable, that change must occur.
Unfortunately, very few sellers pay any attention to determining the cost of the status quo. With solutions in hand, they focus on demonstrating the value/benefit of buying from the seller.
The only way to break free from the status quo is to develop and implement a diagnostically-based sales approach. Rather than providing expertise on solutions, sellers must provide deep expertise on the problems their customers face, and utilize that expertise to:
- Help their customers understand the status quo and the problems associated with it,
- Quantify the cost of the problem, and
- Get customers to agree that the status quo is no longer a viable option.
Only then should a seller begin to focus on their solutions.
I have a simple question for you: What do you sell? But wait. Before you answer it, realize that your underlying rationale will determine just how much you sell and how profitable your sales are.
Last year, I asked if you were a pest, a peddler or a Demand Creator. That post generated a lot of conversation. Over the last six months, I’ve had the opportunity to observe many people trying to make the transition from a peddler to a Demand Creator. I’ve learned that there are some distinct shifts that are made by those who manage this transformation successfully, that those who fail don’t make.
The Starting Point
Virtually every salesperson starts with a focus on their “stuff.” While many salespeople (and selling organizations) think they’re focused on their customer’s issues, the reality is that more than 80% never get beyond a focus on their products and services.
The First Shift
The first shift is to understanding and believing that your “stuff” is actually really different. The focus of the sales conversation moves away from the commodity towards the total value that is being offered.
The Second Shift
Next, as you become more comfortable that you are, in fact, different, the realization that that difference really matters to sets in. That when “stuff,” even “differentiated stuff” stops mattering to the person selling. You realize that you don’t sell stuff, you sell a unique advantage. The focus of the sales conversation moves away from the commodity and the company to the advantage the customer is striving for and the obstacles to achieving the desired advantage. It is in the second shift where right side value begins taking center stage.
The Third Shift
The next shift occurs when the salesperson or selling organization realizes that the advantage they create through their products, services, experience, and wisdom is actually a conduit to the critical results their customers are striving for. This is when the focus on selling ends and helping begins. The conversations sound much less like a sales conversation and much more like a business conversation. An outsider, eavesdropping on the sales conversation, would not be able to clearly determine just what product or service the salesperson is representing because the issues being discussed are much broader than that. The fact that you don’t sound like a salesperson is no barrier to success. It is in The Third Shift where you start seeing rewards far, far greater than the effort being exerted.
The Final Shift
The final shift occurs when you realize that no one wants to buy your “stuff,” your differences, your experience, your wisdom, or your advantages. You realize that everybody, in every business, wants the same thing – results. Sure, sometimes those results are clear and defined, and other times, they’re ambiguous. Regardless, the desire is results and you start selling them. Your focus shifts exclusively to understanding the results your customer desires – better, faster and deeper than anyone else. You transform your sales approach from a solutions focus to a diagnostic focus. Your conversation with customers are all about results and the barriers your customers face to achieving them.
You are no longer a salesperson. You’re a business person who sells. Because of this, you become the trusted resource that customers seek out. Your sales approach becomes your unbeatable, sustainable competitive advantage. You competitors become increasingly confused and frustrated; crying out, “We don’t get it! Our stuff is just as good as theirs. No, it’s better! Why do we keep losing business to them when they charge high prices?!”
Making these shifts is not easy. Each shift requires a new way of thinking, new approaches and new skills. The shifts feel risky because they require you to leave your comfort zone and potentially struggle with the new skills. The rewards for making the shift, however, are outrageous. You’ll feel good about what you sell, how you sell, and you’ll sell far more and make far more money than ever before.
The key to creating demand, as I’ve written often, is to solve the problems that people don’t know they have. I’ve come to realize that many people mistakenly believe that that means solving problems so far beneath the surface that it would take the proverbial team of archeologists to uncover.
Certainly, there are times when that type of expertise may be needed. Far more often, however, the problems “that people don’t know they have,” are the ones staring them in the face. They’re the obvious problem, and it’s your outsider’s viewpoint combined with your expertise that is able to highlight and solve them. More than 80% of the time, this is what creating demand is all about.
I was struck, this weekend, by Dyson’s new commercial (I’ve embedded a slightly older one below) where James Dyson explains the evolution of his vacuum cleaners and closes by stating Dyson’s mission: To solve the obvious problems others ignore. Now, that sounds like the basis for a sustainably profitable and fast-growth business.
As many of you know, one reason that my company exists is because we want to end bad selling. For six years we’ve been developing innovative ways that enable companies to break free from their competition and drive more sales, faster and more profitably. Everyone at Imagine is very proud of what we’ve accomplished in this area.
But (you knew there was a but coming, didn’t you), I’ve always felt like we’re missing something. By some estimates more than 25% of adults in North America are involved in selling, which would mean that there are somewhere around 100 million salespeople, just in North America. In our own small way, we’ve been making progress on our mission, but there is no way we can have the impact we need to have by working only with salespeople who work for the companies that hire us.
For the last two years I’ve been playing with a variety of ways to bring our ideas, approach, processes, tools and support to a wider audience. For one reason or another, I’ve always hit roadblocks that have prevented us from moving forward. I’m excited to tell you that we have overcome the final roadblock and will be announcing a new program geared directly to people involved in a direct selling role. I’m not ready to announce the details yet (we’re working through the final details), but I wanted to share this intro to the program that we just recorded. I’d love (really) your feedback on it. I think it’s funny and makes the point, but I’m not our market – you are. So please tell me what you think.
Salespeople are often maligned, with quick associations to schiesters, peddlers, and a number of other less attractive descriptors. The reality, however, is that the world is far better off with salespeople than without them.
While many have written about the economic value of the sales function, I’d like to focus on an attribute that is less observed and of equal or greater value.
Oftentimes it is a salesperson, and only a salesperson, that is in a position to be able to ask an important question. Anyone who knows me knows just how much I value a good question.
Questions are far more powerful than answers. The mind cannot ignore a question ( it can choose to avoid or not answer a question, but it cannot ignore it). Answers, however, can be easily ignored.
Take a moment an think about the major breakthroughs in your life. How many of those breakthroughs were the result of a question you were pondering? In my experience, virtually every breakthrough is the result of pondering, often subconsciously, a question.
While there is no shortage of answers, there is a tremendous need for good, powerful questions. If you want to improve your performance, you must first find better questions to be answering.
It is here where salespeople are indispensable. Good salespeople are conduits to answers. Coming from outside an organization, salespeople are in the unique position to be able to ask questions that virtually no one else could. When a salesperson has am opportunity to ask a powerful question and doesn’t, they are doing a disservice to both their employer and their customer.
So for all the salespeople who read this blog, make sure you never miss an opportunity to ask a meaningful question – [even if it makes your customer uncomfortable]. To all the executives reading this blog, if the salespeople you are dealing with aren’t asking powerful questions (whether you are buying from them or they work for you), find ones that do – you’ll be far better off as a result.
It occurred to me yesterday that I’ve been writing a lot about the dangers of letting price competition damage your positioning and your margins, but I haven’t written much about the mechanics of protecting, and even raising your prices in markets like the one we’re in. So, today I’m going to share with you a specific example of how to enhance your margins.
First, you need to understand that you there are only two sales conversations you can be in:
- The What’s It Cost Conversation or
- The What’s It Worth Conversation
If you’re not sure which conversation you’re having, then you’re having The What’s It Cost Conversation. In my experience, 95% of sales conversations are in the “what’s it cost” category.
When your sales process is focused on your solution, it is difficult to impossible to escape “what’s it cost.” The reason for this is:
- The focus quickly goes to product/service features, attributes, and benefits; which naturally connect to costs.
- This focus naturally sets you up to be compared to other “solutions.”
- Further, because the focus is solutions oriented instead of diagnostically oriented, you must deal with a misunderstood or not fully understood problem. This often makes the comparison unfair and further commoditizes you.
- When this happens, you fall into the deadly specs/price trap. Think about what you want when you’re searching for solutions. We all want the solution that is good enough at the lowest price possible
It is far more effective, and profitable, to get into the “what’s it worth” conversation. To do this, you must change the focus of your efforts from a solutions focus to digging deeper on problems. As you begin to probe the problem and dig deeper, you can begin to monetize the value of your solution. In essence, I’m asking you to begin pricing the problem – not the solution.
Let me share a real life example to illustrate my point. At Imagine, we solve sales problems. We could easily be compared to a variety of training “solutions,” but a) what we do isn’t really training, and b) that would badly commoditize us.
Instead, we help our prospects and clients first understand their problem and understand the cost of the problem. In our business, like many of yours, we face a challenge that the difference between our approach and our competitors is not huge. We’re all saying many of the same things. These little differences, however, are huge when in comes to the results companies can enjoy.
So, to gain the price advantage that our results create, we must enable our clients to uncover just what the value difference is. That’s precisely what “pricing problems” and monetizing value does. Here’s how we do it:
Let’s say that your sales team produces the following:
- They average 40 proposals
- They average a 40% close rate
- So they’re closing 16 new opportunities on average
- The average sale was $30,000
- Average gross margin of 22%
This means that each salesperson is producing (on average) $480,000 in sales and $105,000 in gross profit.
The Little Difference
Let’s say that as a result of working with us you improve your results by just 5%. Now keep in mind, that a 5% difference is virtually imperceptible. But, this virtually imperceptible difference can lead to extraordinarily valuable results this 5% difference means:
- Instead of 40 proposals you average 42
- Instead of a a 40% close rate, you average 42%
- Instead of average $30,000 per sale, you average $31,500
- Your margins would go from 22% to 26%
- Total sales would be $555,000, up from $480,000
- Most powerfully, your gross profit you go from $105,000 to more than $142,000 – a 35% difference.
Now, if you maintained this performance improvement, you’d grow faster. So instead of growing at say 10% per year you’d grow 12.5% per year. That difference over a 10 year period of time would result in an increased gross profit of just under $1 million.
I ask you, what would that be worth?
With the problem fully understood and, more importantly, the cost of the problem clear, the proper context has been created to enable you to effectively discuss the appropriate solution (yours) and to have the solution properly valued.
My be is that your business and your approach create such value for your customers/clients. However, if you don’t build out your business case to enable customers to understand the value of your difference, it can’t be valued and your profits will suffer as a result.
Wow! It’s hard to believe that we’re already into the second quarter. The first quarter was crazy at Imagine. It’s exciting to see companies and executives putting growth and expanding their margins back at the top of their agendas. While there are certainly struggles and challenges that lie ahead, more of you are realizing the wise words I learned long ago (sorry I can’t remember from whom).
The future holds opportunity, mixed with difficulty. The greater the difficulty, the greater the opportunity.
Imagine Business Development is growing to support companies in these efforts. I’m excited to tell you about two people who’ve saddled up in the battle to End Bad Selling!
David Fletcher has joined us a our newest Sales Coach. Fletch has worked in the sales and marketing field for over 15 years, doing everything from field sales to executive management. Like everyone at Imagine, he’s worked in a variety of fields such as software, technology, and commercial and residential construction. He’s also worked quite a bit in sports management. A former professional baseball player, Fletch is the Assistant Head Coach for Anne Arundel Community College and the Head Coach for the 11U Maryland Orioles where his oldest son, Connor, plays (you can guess which team he is more proud of).
Anyone who’s played baseball will quickly realize that Fletch played catcher and has a catcher’s mindset. He’s got a tremendous ability to size up a situation and see the most effective action to take. His coaching (and playing) background mixed with his sales experience makes him perfect for providing leadership, guidance, and a sounding board to help the salespeople we work with multiply their best results. Fletch lives in Pasadena, MD with his wife and four sons – the aforementioned Connor as well as Max, Jacob, and Jackson. Fletch is new to social media, so we’re still working on getting him on Twitter.
Vaneska Adams joins Imagine in the newly created position of Marketing Development Director. Vaneska has been charged increasing the spread of Imagine’s message, approach, and programs, as well as supporting our clients in the development and execution of our their marketing efforts. She brings a fresh marketing perspective to us, having spent several years working with direct marketing and consumer brands. She’s worked with (and within) small and large companies (and small companies that became large). Having grown up with parents who started their own business, Vaneska understands the unique challenges and opportunities of running a business provides. Vaneska lives in Crofton, MD with her husband and three children. When she’s not helping companies communicate their message more effectively, you’ll find her watching her kids play, painting, or cycling. You can follow and engage with Vaneska on Twitter @Vaneska_Imagine.
Feel free to send them an email, give them a shout out and otherwise engage with them. Please know that we are all here committed to helping you make 2010 and beyond the best years ever!
There’s an interesting post on my friend Gini Dietrich’s blog, SPIN Sucks. I found it and one of the comments both interesting and insightful. It actually created a bit of a visceral response from me (you can read my comment here).
Writing about The New York Times’ plans to start charging for its digital subscriptions through Kindle (which it already does and plans on raising), and the iPad (which, apparently, it’s going to start to do); guest blogger, Nick Harrison, and a commenter put forth an idea that is commonly accepted, and inherently wrong.
The idea is that you cannot charge for information on the web. Mr. Harrison, says, “My first reaction at the time was, if you are already losing subscriptions and advertising dollars, is actually charging for content the best strategy?” My answer – Yes!
The commenter added: “This is an example of a company not understanding that they have to change with the times. The Internet has made nearly everything free, and people aren’t willing to go back from that.” Outside of the fact that this isn’t true (The Wall Street Journal has been charging for content online since it started providing it), it doesn’t address the ability of a company to create a new experience worth charging for.
The reason I share this is because these thoughts are symptomatic of what is silently killing really good businesses – the idea that you cannot charge for what others are doing for free, or for less than you.
One of the first business lessons I learned (ironically from running a lemonade stand for a couple of days) was that if you charge less than it costs you to produce your products and services, you cannot make it up in volume. If raising your prices means selling less volume, than so be it, because if you’re not making money – WHO CARES?!
The fundamental job of marketing is to create enough value so that people would be willing to pay more for something. If all The New York Times does is charge for the same information and experience that other newspapers are giving away for free, then the author is right – it’s a bad strategy.
However, if you’ve had the opportunity to sample The New York Times’ iPad application (which I have) it will take you less than a second to realize that this is not the same experience as others. Would I pay for it? Yes I would.
Would everybody who reads The New York Times online pay for it? Of course not, but who cares! Would everybody pay for a phone that costs $600? Hell no, but Apple made more than $1.5 billion doing it!
As I’ve been writing a lot lately, the newspaper or the information in the newspaper is the commodity. The Internet has placed the value of that commodity (what I call the left side value) at zero. The Intelligence or Enterprise Value (what I call the right side value), however, is unlimited.
The New York Times was one of the first partners to jump in with Apple to develop meaningful applications for the new iPad, so much so that they were one of the few content providers highlighted in Steve Jobs’ announcement of the device. I give The Times a tremendous amount of credit for their willingness to innovate and experiment. I give them even more credit for asking people to pay for it.
Agree or disagree with The New York Times editorial slant, you cannot deny that they provide superior content and their new app provides a superior experience. My only fear is that they won’t have the guts to stick with the plan. Sure, maybe they’ll be smaller as a result, but I’d rather be smaller and profitable than larger and broke!
What’s the lesson for fast growth businesses? Stop focusing on The Left Side (commodity) Value of your business and start building The Right Side Value. If you don’t reinvent your business, some upstart in a garage will.
What do you think of The New York Times Strategy?
For more than twenty years I’ve talked about the effects of commoditization and working with small and mid-market companies to grow revenues and margins despite commoditization.
Last month, I wrote about the two sales that take place in any non-commoditized sale:
- The Account Sale – where you establish the value that you and your company bring
- The Transaction Sale – where the focus is on the sale of the commodity
As we’ve been rolling these ideas out to our clients and to their salespeople, we see a common area of resistance in the belief that, regardless of what you do, customers are going to increase the pressure they place on your price.
In fairness to that argument, I completely agree. No matter what you do, pricing pressure is going to increase. The question is where do you want that pressure – on your core product or service, (the commodity) which has, by definition, less margin or on the account value you bring, which is where you margin premium lies?
When your value proposition is effectively focused on your account value, it serves as a moat protecting the margins of your commodity. In my experience, if a small or mid-market company fails to build that moat, trouble lies ahead.