I’ve written about the curse of knowledge before. An important sales implication of the curse is that selling organizations become increasingly committed to the belief that it’s the expertise and knowledge about the solution that separate competitors in buyers’ eyes.
There are two important points that contradict that belief:
Your customers are nowhere near as educated as we’d like to believe they are about their problems, so it’s virtually impossible that they’ll be able to:
- Truly understand your expertise and solutions, and
- Effectively compare the difference – and the value of that difference – between you and your competitors.
- When you’re focused on your expertise or solution you must overcome 2 huge barriers:
- You’re in a what’s it cost conversation, and
- Your competitors have expertise and solutions as well, and they’re probably pretty good too.
As a small, mid-market business, if your goal is to separate yourself from your competition, drive accelerated growth and expand your margins, you cannot do so by focusing on or attempting to differentiate your solutions.
You must – MUST – contribute to defining the problem.
Ask yourself these 3 questions to determine if your sales efforts are setting you apart and making growth effortless:
- How much time do I, or my salespeople, spend talking about our solution vs. digging deeper into the real problem facing my customer?
- In my sales calls with my prospects and customers, how much do they learn about their problem vs. learn about my solution? As a general rule, you want them to learn 3x more about what’s preventing them from achieving their desired objectives than about how your solution will help.
- How much documentation do we use to highlight and quantify the cause and cost of the problem? (Feel free to check out our Core Sales Toolkit if you’re looking for some tools.)
Having witnessed thousands of sales calls, and advised thousands of more, I can state – unequivocally – that the single biggest, most common and most damaging mistake is that selling organizations spend too little time defining the problem, and jump to the solution way too fast.
As I’ve written before, “Brand” and “Branding” are words tossed around in a variety of ways. For small and mid-market companies, the vast majority of what’s thrown around about branding is crap.
I’d like to highlight the portion that isn’t. To begin that journey, I ask: Do you really understand what your brand is, and the power behind it?
I’m always looking for new ways to help owners and executives of growing SME’s understand that, and recently I came across a branding study designed to guage the power of a brand. I’m a big fan of Marty Neumeier, and since his firm was behind the study, I looked at it closely.
The Brand Impact Study highlights four important attributes to determine a brands power. These four attributes are valuable for any executive looking to expand sales, margins or both. They are:
- Do the right people know who you are?
- Do they have a positive, meaningful impression of your business?
- Do they consider your business relevant?
- Do your prospects position you as a problem solver, or merely a solutions provider?
- Do they view you as someone to engage with while they’re figuring things out, or after they’re ready to issue an RFP?
- Does your target audience understand your value proposition?
- Do they acknowledge, understand and value the difference your bring to the market?
- Do your prospects understand your impact ?
- Do they understand, and can they articulate the consequence/cost of not doing business with you?
Strength in these four areas – with the right prospects/customers – is the definition of a powerful brand (even if most people don’t know who you are). Keeping these four components at the top of your mind when developing your marketing and brand strategy will go a long way to accelerating your growth and protecting your margins.
One of my favorite movies is Glengary Glenn Ross (based on David Mamet’s play). In it, the most down-on-his-luck salesman (played by Jack Lemmon) gets up to grab a cup of coffee. The salesman visiting to share his “motivational speech” (played by Alec Baldwin) pounces on him mercilessly, shouting, “Put that coffee down! Coffee’s for closers!”
That one line captures the essence of the sales culture, both as we have come to know it and, too frequently, how we manage it. We still think of “sales” and the star salesperson as the one who “closes the deal,” and gets to “eat what he kills.”
Getting a prospect to get across the finish line by making a decision is important. Creating the environment that enables you to stand out from your competition and influencing your prospect’s decision criteria is critical to increasing win rates and protecting margins.
If you want to enter what I like to call, what’s it worth conversations (as opposed to what’s it cost), you must first change how your prospects thinks about the issues you address. And, this occurs long before you’re in a position to close business. Studies show that if you do a good job with this provocation process, the difficulty associated with closing business virtually disappears.
Provoking effectively requires that your marketing and sales efforts work together in alignment. Your website, collateral and case studies must move beyond the typical brochure type “we-do’s” that make the same types of claims your competitors make. You marketing must engage, challenge and educate.
Your sales efforts must pick up on this teaching point-of-view and move beyond the same old open-ended questions to questions the provoke deeper thought and educates your prospects (and customers) on their business. Your sales team must become businesspeople-who-sell.
It’s not as easy as awarding a Cadillac to your top closers, but you’ll find that it’s a lot more profitable.
Behavioral scientists have studied how people respond to winning and losing. They’ve even gone to the point of giving (spotting) people money to put them in a position where they can’t actually lose to see how they behave. Study after study consistently shows that people do far more to protect themselves from losing. Behavioral finance puts the difference at about 2x – people work twice as hard to avoid losing then they will to pursue winning. In times of distress, chaos or confusion the difference is even bigger.
This is a critical concept for anyone involved in a sales role to understand. Traditional selling teaches that you should focus on the benefits, or the value of someone doing business with you. As a result, salespeople are always focusing on what some will gain from working with them. While this creates a positive feeling, in times like these where budgets are tight, priorities are overwhelming and resources are limited it does not promote action. Often it’s quite the contrary. Selling initiatives and proposals get stuck in committee and review; or, God forbid, get sent to procurement.
Rather than fighting human nature, selling organizations need to embrace it. Salespeople need to spend less time focused on the value of doing business with them, and far, far more time on the cost of not doing business with. Stop now and ask yourself, what’s the cost – the consequence – for that prospect you’re working to close if they fail to do business with you? What happens if they buy from a competitor? What happens if they do nothing, and just maintain the status quo? What would go wrong (or fail to go right)? Why and how does that matter to them?
When the answer to those three questions are clear, you’ll know the focus for your sales approach. It’s not about the product, or even the benefits. Your job is to lead that prospect to understand the consequences.
I still remember when I saw my first FLIP video camera. I was so impressed that I bought one that day, and then bought one for each of my employees for the holidays. When I started using my FLIP people couldn’t help but talk about it. It did the nearly impossible – it was cool and practical.
Then Cisco bought them, in the pursuit of “diversifying” its revenue streams, with consumer oriented products. No wonder that analysts often refer to diversification strategies as deworsification ones.
The acquisition was doomed from the start, as it violates the cardinal rule of focus. You can delight one type of customer, but you can’t delight them all. Cisco was a great company when they focused on their core business.
Then they made a critical mistake that tempts companies of all shapes, sizes and industries. They began to believe they could make anything successful and began focus on what was good for them, rather than focusing on value creation.
I can’t promise that FLIP would have remained successful had they remained independent (and maintained their focus), but I sure would have liked to see them try.
In yesterday’s post I shared a critical designation, and strategic sales decision, that must be made early in the sales process. Are you making a “status quo” sale, or a “change” sale. Now I’d like to share part 2 – the implication of each sale and how to tell the difference.
In many ways, a status quo sale is easier than a change sale. But, as with anything, “ease” has its trade-offs. Status quo sales are far more susceptible to competition, commoditization, and price/margin pressure. It’s very hard to stand out when making a status quo sale, so the sales/marketing focus is much more tactical, with the tactics shifting frequently.
Change sales are harder to make, if for no other reason than change is involved. The upside is that they can have greater impact to the buying organization. Selling organizations that master change sales are able to avoid commoditization by bypassing the competitive environment and becoming a true resource to their prospects/customers – as I’ve written before – they’ve made The Shift from selling to stuff to selling results.
The danger here is that sellers frequently attempt to make change sales to people in the buying organization who worry about the present or past. This is just as damaging as when companies try to sell total value propositions to fundamental value buyers.
In a typical business organization 80-90% of the people are responsible for the present or past. If they’re who you are counting on to drive the sale, then you need to be making a status quo sale.
Only 10 – 20% of people in a company are responsible for managing and allocating resources to address what could be happening. They should be the focus of your sales efforts if you are making a strategic, change sale.
Be careful, while title is an indicator of one’s time frame it is often misleading. So, how can you tell if you’re talking to a future-oriented person or not? Two cues:
- Listen to them. If they spend most of their time talking about what could be, they’re future oriented. If they spend time talking about what is or was, they’re status quo.
- Look at their resource allocation authority. Do they allocate resources to deal with future possibilities or present-day realities?
Going forward spend a little extra time to make sure you are aligning your selling proposition to your buyer’s time frame.
In 2004, I wrote about the need to align your sales proposition with the value definition of your buyer. Over the last seven years, I’ve become increasingly aware of another critical misalignment that occurs in sales efforts every day – timeframes.
Far, far too often, sellers are bringing superior value propositions and promises of better futures to people who do not worry about the future. There are two types of people who work within companies:
- Those who worry about the future.
- Those who worry about the present (and past).
As a seller, you must make a critical decision early in the sales cycle (and in many cases even before the sales cycle begins): Are you making a “status quo” sale, or are you making a “change” sale?
A status quo sale requires very little change in behavior or approach on the part of the buyer. While there are too many possibilities to describe all status quo sales, you are promising an improvement in an area of work where your customer/prospect is already paying for something – be it a key process, a resource or even people. When your new customer makes a status quo purchase from you, they do the same basic things they did with their previous “solution.” The status quo sale is aimed at addressing the issues/problems/worries in the “now.”
A change sale requires the prospect/customer to change their approach is some way to be able to fully take advantage of (and therefore, fully value and pay for) the value proposition. A change sale can address key process or resources, just as a status quo sale can, but the issues/problems/worries it addresses occur in the future.
Tomorrow, I will share the implications of a status quo vs. change sale and how to tell what type of buyer you are dealing with.
Most organizational charts are broken down, and viewed, from the perspective of position and authority. While this can be very helpful in developing sales strategy, an even better way to break it down is by what I refer to as their “time scope.”
For some people, one week is a long-term, while others spend little time thinking about anything happening in less than two years. Here is an example (albeit oversimplified) of how typical levels break down to time scope:
|Senior Executives||Beyond a year|
|Upper Management||6 mos – 1 year|
|Middle Management||3 – 6 mos.|
|Front Line Management||1 month|
|Front Line||1 Day – 1 Week|
When you have a clear picture of your customer’s time scope, you’ll be able to gain insight into what it is they really worry about, where the value you can create lies, and whether the issues you are dealing with are big enough to get them to change their approach.
Looking at your customer from this perspective also aids you when you are selling to smaller companies where individuals (especially owners, CEOs, and other executives) play more than one role. Knowing their natural scope can be a great advantage.
The longer your buyer’s time scope is, the more opportunity there is for you to create value and radically differentiate the results you can provide. Shorter time scopes significantly limit, or even eliminate, any opportunity to differentiate yourself in a meaningful way.
Unless you are selling a pure commodity, your first “sale” is to ensure that you are talking with the person with the proper time scope.
My post on Wednesday focused in on the importance of understanding your customer’s business model to develop a selling proposition that can make you indispensable.
For three years now, I’ve been speaking around the country talking with CEOs and salespeople evangelizing the idea that in a world where discretionary budgets have all but disappeared, the only sustainable strategy for long-term business growth is to become non-discretionary or indispensable. For three years, no one disagreed with me.
Then Wednesday I got a tweet in response to my post from Arié Moyal saying that there was no such thing as indispensable. This led to the conversation you can see on the left.
The conversation got me thinking – is @amoyal right? So I went to dictionary.com and looked up the definition – absolutely necessary, essential, or requisite.
My short answer is a clear “yes.” While indispensability is not a permanent status, nor is it an entitlement, it can be achieved and maintained.
When you make The Shift from selling “stuff” to selling results, you can become absolutely necessary. The nature of competitive markets and changing environments means that you have to work hard – often extremely hard – to maintain that status, but if you continue to practice the rules that got you there, you can stay there.
What do you think? How do you attain indispensable status?
Anyone who has heard me speak knows that I believe business acumen is the most important capability for a successful selling. One of my goals in writing this blog is to support the development of business acumen in the sales process.
I started reading the book Seizing the White Space: Business Model Innovation for Growth and Renewal. I found the title interesting because I often advise executives to “seek the white space.” I’ll provide a more detailed review of the book when I’ve finished reading it. However, regardless of the rest of the book, Chapter 2, The Four-Box Business Model Framework, is must read for everyone.
Mark Johnson provides one of the simplest and powerful descriptions of what a business model is, how to understand it, and how to affect it. Looking briefly at the four elements from the four box business model, they are:
Customer Value Proposition (CVP) – An offering that helps customers more effectively, reliably, conveniently, or affordably solve an important problem (or satisfy a job-to-be-done) at a given price.
Profit Formula – The economic blueprint that defines how the company will create value for itself and its shareholders. It specifies the assets and fixed cost structure, as well as the margins and velocity required to cover them.
Key Resources – The unique people, technology, products, facilities, equipment, funding, and brand required to deliver the value proposition to customers.
Key Processes – The means by which a company delivers on the customer value proposition in a sustainable, repeatable, scalable, and manageable way.
Understanding your customer/prospect’s business model is critical – I repeat CRITICAL – to becoming indispensable. If you don’t understand, you cannot make The Shift to selling results, and you’ll find your company, your offerings, and your sales efforts increasingly marginalized.
When you do understand their business model, you can begin to answer important questions like:
- Which boxes do we impact?
- How do we impact them?
- How will our customers business model improve as a result of our impact?
- What is that worth?
With those answers in place, your customers will be far more interested in talking with you and far more open to sharing their needs with you.
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?
Earlier this week, I wrote that the price you charge for your products and services is the signal that says more about you than anything you can do. I also shared the formula for determining what someone is willing to buy something for. Today, I’d like to go deeper into part of the formula, so that you can get paid more for what you do – even in difficult markets.
So for those of you who haven’t seen this formula, here it is:
Commodity Value + Intelligence/Enterprise Value = Price
Now, take a moment and think about the factors or contributors that your prospects and customers should use to establish the commodity value (or fundamental value) and the intelligence/enterprise value (the factors that you or your company bring to the table). Feel free to download the sheet below to use for this.
In my experience there are only five factors that drive the commodity value:
- Distribution costs
- Need (both the amount and the timing)
- Supply or Access
- What someone else is willing to sell it for
When I was at Merrill Lynch I used to keep a sign above my door that said, “Don’t confuse brains for a bull market.” And don’t get me wrong, I’d much rather be a bad salesperson in a favorable market (i.e. lots of demand, tight supply, and not a lot of competition) than a great salesperson in a bad market (i.e. light demand, lots of supply, and intense competition). But here’s the thing:
We have no control over the left side (commodity) contributors of value!
In my post Monday, I referred to Todd Sattersten’s ebook on pricing. He discusses the choice companies have in setting their price and one of the interesting insights he provides is the difference in price and profit cell phone handset makers Nokia, Blackberry (RIM), and Apple experience.
Why does RIM get 4 times what Nokia gets for their cell phones? Why does Apple get 50% more for the iPhone than RIM gets for the Blackberry?
I can tell you this, the difference lies almost completely on the right side (the Intelligence/Enterprise Value) of the equation. It doesn’t cost Apple 50% more to make an iPhone than it costs to make a Blackberry. And because of that, almost all of the price difference goes right to the bottom line.
Go back and look at the right side contributors for you. What makes you a better choice for your prospects and customers? Why specifically should someone buy from you? Now, answer this question:
What are those contributors worth?
Are they worth 1%? 5%? 15%? 50%? More?
Whatever it’s worth, remember that every dollar you earn from the right side of the equation is highly leveraged for you (it also works against you if you make price concessions).
Your job is to focus all of your go-to-market efforts on supporting the “what’s it worth (right side of the equation)” conversation instead of the “what’s it cost (left side of the equation)” conversation.
It has always amazed me how selling organizations and salespeople deal with the emotional aspects of price. If I were in a room with all the business executives and/or salespeople in the world and I asked the question, “How many of you would like to get more for your products and services?” I’m pretty confident that 100% would raise their hands. Yet, when you watch their behaviors in the market, I’d be surprised if more than 50% of them behaved in accordance with that desire.
In the last couple of months, I’ve written often about price, pricing, and its importance in creating demand. While virtually everyone claims to desire premium margins, I’ve come to realize that most people fall into three camps when it comes to getting a premium price:
- The first group is comfortable and confident pursuing premium pricing and margins. They feel they earn them, they deserve them, and, albeit on the more extreme side, believe they are doing a disservice to their customer base if they are not paid. They believe that these premium margins are what support a superior promise and experience. Companies like Apple, Fedex, BMW, Four Seasons, and McKinsey immediately come to mind when you think about this. In my experience, this group accounts for about 10% of people or companies.
- The second group pursues premium margins, but they view this more as a tactic than a belief. This results in an attitude of “we get a premium because we can,” and it leads to an awful lot of internal conflict and sometimes even guilt. This, ultimately, becomes a major barrier in making such pricing sustainable. In my experience, this accounts for 25 – 50% of people or companies.
- The third group simply doesn’t believe that they deserve premium prices or margins. They may pursue them, but it’s always a struggle, and these people and companies are more likely than not to be the cause of price sensitivity in the client/customer base.
Here’s the thing – price is merely a signal. It’s the tangible component to what is, inherently, an intangible offering (your intelligence value is, by definition, intangible). Charging a higher price is merely making the declaration that you provide a better offering. Pricing is a choice, and buyers will buy a higher price if you back it up with actions. Great companies get that pricing is strategic – not tactical. McKinsey studied pricing in the 90s and found that a 1% increase in price led to an 11% increase in profits.
It is absolutely critical that everybody in a client-facing role understand, truly understand, the importance and rationale about price. Every business executive and salesperson should stop what they are doing right now and download Todd Sattersten’s amazingly simple, engaging and perceptive ebook on pricing. Further you should read it consume it before the day is done. While I’ve read a lot (too much really) about pricing, I’ve not come across anything that puts it in perspective as well as this eBook (it’s also where I learned the tidbit about McKinsey’s study).
It’s your choice – what are you going to do?
Last night, I spoke to the Baltimore chapter of The American Marketing Association. The topic was blogging and its place for businesses. One of the attendees came up to me after the presentation and said what I’ve heard many, many times – “Everything you said was great and I agree with it all (okay, I don’t hear that all the time), but we just don’t have the time to do it.”
Side note: For purposes of this conversation, I will use “blog” and “content” interchangeably. I think a blog is a great way to distribute content and support engagement, but whether you or your company “blog” is less important than do you create meaningful, valuable content for your market on a regular basis.
For those that say you don’t have time, I share three simple responses and a bonus thought.
1. Today there are only two types of companies – which are you?
2. There’s a HUGE conversation taking place…
… are you participating in it?
3. Here’s the difference blogging and content marketing has made for Imagine, you tell me – is it worth it?
If after all this you still can’t bring yourself to make the investment (of time and energy to do it yourself or money to have others do it), then on behalf of all those who are blogging, we say thank you. The more people who don’t take it seriously, the greater our advantage is.
What do you think?
Anyone who has worked with me knows that I’m a maniac for messaging. In today’s world, where good is now nowhere near good enough, a solid message is no longer a valuable bonus – it’s an absolute must have to compete. The foundation of a great message is a well articulated value proposition. The challenge here is that creating a value proposition that resonates is extremely hard (it’s one of the reasons that The INTELLIGENT GROWTH Blueprint process is so valuable).
And, even after you’ve created a powerful message you have to translate that through the words and deeds of your salespeople. It’s no wonder businesses overlook these steps – wouldn’t just be easier to get in the market and sell? If you realize this challenge, I’ve got good news for you.
My friend, consultant, advisor, and author, Kevin Daum, is coming out with a new book Roar! Get Heard in the Sales and Marketing Jungle that will lead you and your salespeople to do this successfully. I’ll provide a full review when we get closer to the release date (and I’m working with Kevin to have him write a guest post or sit down for an interview). Kevin’s a great guy to learn from (I learn from him every time we talk). Kevin gets it – he understands strategy, messaging and the sales process. Most importantly, Kevin understands that theory is nice, but it’s profitable revenue that matters.
Kevin is offering a free preview of his book (and he’s giving away his formula for creating a powerful value proposition – and please know this is must-read stuff). I realize that this sounds like hyperbole, but you’ll note I rarely say something is must-read, Kevin’s take on creating value proposition is. After reading this portion of the book, we refined our process as a result. Kevin’s given me permission to share the preview here, so take advantage and download a copy.