Welcome to The Pipeline.

Leveraging Price Ratio To Win The Right Deals1

By Tibor Shanto - tibor.shanto@sellbetter.ca

Rpl round

Pricing continues to be a key factor in winning or losing sales opportunities, and while few vendors take pride in being the low cost provider, at times it seems they set out to be just that, or they take few steps to avoid it being forced on them. There are times when companies consciously use price as a temporary strategy to gain market share, or directly impact a competitor. Rarely have I met a VP of Sales who says:

“We’ve decided to be the cheapest on the block, so long as we don’t go broke, I want you to teach my guys how to get to the price discussion quickly, demonstrate just enough value to justify that price, and then let our ops team manage diminished expectations.”

I say rarely, because I have met leaders who seem to work like that, but don’t articulate that way. I have met consultants who suggest “win the business on price, and then keep it on service.” The challenge is that few can recoup the concessions and get the price back up to where it should be and are stuck at that lower price band, and corresponding margins. Of course during the next vendor selection round they may have to lower the cost just to keep the account, or replace it, when someone undercuts them. Either way expectations have been set.

No matter what many will tell you, it is more often about buyer’s perception about the relationship (as in relative to, not relationship as in the soft-sell mantra) between price and expectations, and not price and deliverables. Promise great – but then deliver only good, and you could suffer; promise good and deliver good, you meet expectations. This is why “under promise – over deliver”, still works.

The fact that it is more about expectations rather than deliverables is actually a good thing for those sellers willing to sell value rather than price. In the past I have shared the ”Actionable Definition” of Value; it centers the conversation, the sale, on the buyer’s objectives, which gives one the opportunity to leverage the give and take between price, value and expectations.

One of the first things we need to understand and establish during the Discovery stage of the sale, is the buyer’s specific ratio of value/expectations to price; think of it as their level of conviction. Here is how it works, buyers are looking for maximum price concessions while giving up the least amount of value. If they can get the seller to give up one unit of price, while at the same time they give up less than a unit of value in return, then they perceive themselves to be ahead, and the ratio is less than one. Based on experience, this tends to be the case the majority of time. If the reduction of value is equal to the price reduction then it is one-to-one.

What’s interesting is that it is this same ratio that has led some value driven vendors lose deals they feel they should win against lower cost providers, the ratio works in the lower cost provider’s favour. They are willing to give up “the right little bit” of service for a greater savings. The key for you is to understand not only what those element are, but where they rank for the buyer. This will vary for each buyer, which why focusing on objective is a must, and not taking a cookie cutter “solutions” or the usual consultative approach, which will leave them short and disappointed every time.

If all that wasn’t enough to manage and deal with, you also need to clearly understand your competitors, their offering and cost structure. Incremental improvements in process and technology, can change the landscape, competitors may be in a position to deliver the same level of service as before but a reduced cost, and when that occurs, they can leverage the ratio in a way that creates a win-win with buyer, and a lose-lose for you.
As with most things in sales, once you incorporate this line of thinking into your repertoire, you can also use it to disqualify buyers who are purely price driven and will suck every concession out of you without reciprocating in any way. While everyone is trying to economize, smart companies and worthy partners understand that a weakened supplier is not good for anyone in the long run. Without profits, R&D, innovation and other value elements will suffer and by extension so will the buyer’s business.

The price dance is not going away anytime soon, but understanding core blocks of price, and how it relates to the buyer’s expectations and more importantly their objectives will help you build value based relationships that will last long enough for you to get a good payback on what it cost you to acquire the client, and work with buyers who understand that profits are important throughout the ecosystem.

What’s in Your Pipeline?
Tibor Shanto 

Not Only Is Talk Cheap But Misleading32

Effective communication is crucial to sales success, understanding what the client wants, how they prefer those wants addressed, and understanding what they mean, can tilt things for you or against you.  But communication is way more than the words exchanged between buyer and seller, as we all have been told communication is 60% body language, 30% intonation and tone, and only 10% verbal or words.  Yet many sales people rely too much on strictly words, both in conveying their message, and taking input from potential buyers, almost completely ignoring the other aspects of communication.

This has obvious repercussions when it comes to effective selling, and ensuring you are getting the right message to the listener in the right way.  Borrowing from the work relating to how people learn, because getting someone to change and buy from us is an exercise in educating the buyer; there are three types of learning styles: visual, auditory and kinesthetic (or tactile).   Buyers tend to fall into one of three groups when they take in, understand and absorb your message.  If you do not take steps to ensure you are incorporating all three types, you risk not fully communicating to many buyers even as you speak to them. 

Read On…

What’s in Your Pipeline?
Tibor Shanto

3 Things you Should Not Say on a Cold Call! Part III – Sales eXchange 16199

Before we get into the third installment of this series, I wanted to take a minute to ask you, based on your experience either as cold caller or someone who receives their share of cold calls, what are some specific things you believe should be avoided in cold calls.  Happy to share so we can all make the art better.

So we’ve looked at not being diminutive in stature by the over and wrong use of the word “Just”.  I have also given you permission to be bold and articulate your objective, rather than “Wondering” or “Hoping” with respect to the outcome of the call.  Today we look at eliminating an expression that is insulting to the buyer, shows that you may be lazy, and is costing you money. The expression is “Companies like yours”.

Companies like yours – This one gets used throughout the sales cycle, which is why if you eliminate it right from the start, during prospecting, it will help you get more prospects and sell to them more effectively through the cycle.  This expression bites back in different ways based on size of the company, and the role of the individual you are trying to engage with. 

I often get people calling me, introducing themselves as someone who has “helped companies like yours”, I always ask what they mean, the size of my company, (either by revenue or employees), service based company vs. product, regional or national.  It quickly shows that they are not at all sure what Renbor does, leading me to conclude that they are lazy and ill prepared, and not worth continuing on with.  If in fact they had experience with “companies like mine”, I would expect that they would be able to give specific examples, rather than going generic. 

Further, if you had worked in the same space, you would certainly want to demonstrate that with your statement.  Seems to me a lot more effective for me to introduce into the call how I helped a specific company shorten their sales cycle, increase pipeline activity, improve forecasting accuracy, or any of the other outcomes similar people in similar environments were setting out to achieve.  Doesn’t take much to collate the targets’ objective and your experience into an effective statement that takes no longer to deliver than “I have worked with companies like yours”.

Some will cite confidentiality issues, other clients not wanting to be used in an open way.  It is an important consideration, but not fatal, not all your current clients will want to remain anonymous, you need to make it a point to ask.  The same as each of us is responsible for cultivating testimonial statements and case studies over and above those supplied by your company.

With small and medium enterprise owners you risk overlooking the personal element.  There is great pride of accomplishment in most of these companies and among their owners, and while you could make an argument that there are indeed great similarities, it does not make for a good opening for a cold call.  Again, if you have been there and done that, demonstrate it directly.  Why run the risk of insulting someone who has put a lot into building their company and justifiably does not see his/her company being “like others”.

If you are new, take the time to understand what the objectives of your target group are, take the time to learn how specifically your company has been able to aid and accelerate the path to those objectives.

Business people have no time for generalities, if you can’t be specific, they can’t be bothered.
 
What’s in Your Pipeline?
Tibor Shanto

Prospecting and the Success Multiple110

During the past two weeks I posted a couple of posts that if put in to practice, could help sales people overcome one of the most common challenges faced by sales professionals.  Specifically the emotional and financial stress brought by the ups and downs of selling,  you know all kinds of deals on the board and a fat funnel one day, to sitting around twiddling your thumbs the following week, trying to figure out where you gas money is going to come from.

The two posts were 8 By 8 and 5 After 5, and Your Most Important Sales Appointment, both emphasizing the need for a disciplined approach to prospecting.   A discipline avoided by most when they are busy selling prospects, and the busier they are, the more natural it seems to put off prospecting.  Until they show up one Monday morning, and realize that they have successfully sold all the deals in their pipeline worth selling, leaving them with the dead wood, and not prospects for revenue in sight.

What is counter intuitive for most, is that the more you sell the more you have to prospect, here is why, let’s start with your prospect to close ratio.  Say your conversion rate is 5:1, meaning over time, you close one out of every five prospects you engage; put a different way, for every one buyer that says yes, four will say no.  So if you have 15 real prospects in your funnel, you will close three, and twelve will say no, that is your number.   Like it or not, every time you close one, you will need to engage with five new prospects to get your next sale.  In closing the three of 15 requires that you still go through the sale with all 15 prospects.  Some will die early, which is good, some may die after three meetings, some near the close, and we just don’t know until it happens.  But rather than replacing each prospect as they disappear, most sales people say to themselves,” I still have the other four, I’ll work them, and get the sale”.  And the record shows that they will get one, and if they don’t replace that one, as well as the four they don’t get, they will face a serious drought until they build up their base of opportunities to five or more.

Sure they have options, they can improve the way they sell, and improve their conversion rate to 4:1, which means they still have to get four new opportunities for everyone they win, and even if they get it down to 3:1, the challenge stands.  Sure, you can go for referrals, that’s just the source, it does not change the need for a higher multiple of prospects in the pipe than most want to recognize.  There is always that one “that’s gonna come through, you’ll see!”  And it may, doesn’t change the 3:1 or whatever to 1.

For me, it is much simpler to adopt the discipline of knowing your conversion rates, setting the time aside to do the prospecting, just as you do for selling, and get it out of the way early, so you can harvest the rest of the day.  When it comes to prospecting, you can play around, or play to win.

What’s in Your Pipeline?
Tibor Shanto

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