Sales Leaders – You Get What You Ask For – Sales eXchange 2372

By Tibor Shanto - tibor.shanto@sellbetter.ca

Money on scale

Price is a ‘big’ subject for all in sales, right from those developing product, to marketing, all in the sales organisation, and as important as any, the customer. We all have an economic and emotional involvement in it, yet it often continues to be a challenge for all in the chain.

I think one reason is the message many sales leaders send their teams, and their peers in the revenue generation process. I think in some terms, it is the mixed messages they send that confuses and leads to undesired results.

One obvious factor and lever is incentive. I keep hearing, as I have heard throughout my sales career, that incentive drives behaviour, if so why do so many companies (senior sales executives), continue to reward sales people on the price they get, rather than the profit that sales person contributes? I used to work with someone who kept insisting that companies go out of business due to lack of sales. He would never accept that in fact businesses go under due to a lack of profits. Even when I showed him that many businesses had their best revenue days when the bankruptcy trustees were holding liquidation sales.

I have fund that companies who incent their sales people based on gross profits are consistently better aligned with their reps, and achieve mutually better results. But many continue to base incentives on top line gross revenues, others on some proxy for revenue or some model of potential residual revenue stream to materialize in the future, even when the incentive is paid out now.

Sellers who are paid on revenues only, are more likely to discount, and advocate for the buyer, rather than drive mutual value. As we all know, a $500 discount on a $10,000 piece of equipment, can have little impact on what the reps gets paid, but could be a huge part of the gross or net margin.

One has to wonder why in today’s economy anyone would pay out based on top line vs. GP. One company I worked with couldn’t really tell you what their margins were, as a result they went with paying on the top line, which only compounded the issue, as they didn’t know if commissions were wiping out the last bit of profit, or… At the end of the quarter they were either profitable or not, but either way not by design. This may be an extreme example, but I don’t think it is rare.

It is not just about the company’s profits, but many who pay on GP, are able to attract and develop better sales people. Sales people who want to and sell at full value, a true win-win-win situation. The same instincts that allow sales people to choose a discount when paid on top line, drive sale reps paid on margin to deliver value for all three key parties. No value for the client, no sale, no commission; no discounts offered, because those come as much out of the seller’s pocket as the company’s. Clients don’t get gouged, because there would be no sales, no commission.

There is no doubt that switching from top line to margin payouts cause reverberations, and push back from sellers. But I am willing to bet that only from those who can’t survive on the crumbs they leave in any given deal. Sometimes you need to shake things up, thin the herd to make room for those who want to feast along with the customers and their employers.

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The 3 Legs of Sales Success0

By Tibor Shanto - tibor.shanto@sellbetter.ca

Stool Success

As you finalise your 2014 sales plans, it is good idea to review and commit to some of the basics. Some of these may not be fashionable, on the other hand nothing is more fashionable in sales than exceeding quota.

As with many endeavours, we sometime focus too much effort on style and take our eyes of the fundamentals. As Michael Jordan once said:

“…You have to monitor your fundamentals constantly because the only thing that changes will be your attention to them”

While the framework for the fundamentals are process and quality of execution, the key fundamentals that we need to continuous focus on regardless of methodology or approach are:

  • Size of Sale (or order)
  • Volume of Sales
  • Price integrity

Size of Sale – Refers to the specific size of the order, specifically in two forms. One is the result of the type of prospects you pursue; if you are selling stuff measured in units, the larger the target company, the more units they will require. Since in most instances, the effort required to sell a $50 million dollar/40 employee company, is often not that different than selling a $100 million/100 employee company, why not focus on the larger end of the scale. A variation on this is a recent example from a company I worked with. They found that of the three batteries they sold, the mid-range one was the best product/value for the price, for both the customers and them, but people tended to opt for the entry level battery. They discontinued offering the bottom end, their unit sales did not decline, and their revenue and margins increased.

It is no different if you are selling services, if you target companies that can ‘consume’ more of what you sell, you will sell more by avoiding those who consume less. Since the time you have to make the sales does not change, why not target those opportunities that can give you size or scale. You can always go down stream once you have sold the ideal size first.

Volume of Sales – this is different than the first point, it goes more to how many sales you get irrespective of size. If right now you are doing four deals a month, and were to increase that to say 4 ½ deals per month, you would move to 54 sales a year, a 12% increase. Even if you have a long cycle, big ticket, say only six sales a year, increase it to 7, may not sound like much, but.

This involves better use of time, primarily through the discipline of disqualifying those opportunities that will not close now, they may close a year from now or even in the summer, just not now. This is where your process gives you the confidence to say no, rather than spending time to try and get a yes where one does not exist. Like the old gold rush 49ers, the quicker they got rid of the sand and stones, the quicker they got to the gold, increasing their daily take. Get rid of the crap in your pipeline, and you’ll work with more gold.

Price Integrity – as straight forward as it gets, the less we concede the more we succeed. Resist the temptation to “give a good price to get in”, because you will never recover.

As you evaluate your opportunities, it is important to consider how any or all of the above can be leveraged to deliver better and consistent results, and how misalignment can be detrimental to success.

With all of the above methodology and improved execution will help you sell more to more of the right people, but merely adopting a methodology without target one of the three elements above is not enough. You may want to start by targeting one, or better yet explore opportunities that allow you to move the dial on all. We use a simple matrix allowing clients to plot opportunities based on these elements with the added element of time. This allows them to visualize and focus on the right number of highest value opportunities sold at full price.

Everything we do in sales should have a positive impact on one or all of those three elements. It is when we take our eyes off these fundamentals, that the level of effort, training, coach or other initiatives, will always be greater than the results. The start of the year, (quarter, month, day) is a good time to refocus.

What’s in Your Pipeline?
Tibor Shanto

Sellers – You Should Cut Costs!2

By Tibor Shanto - tibor.shanto@sellbetter.ca

Saving Dollars

Cost cutting is nothing new, everyone is doing, it including your company, which is why it is hard to understand why sales people are so insulted when their clients do it. Don’t get me wrong, I am not suggesting you should grin and bear it, but it is time to take more proactive and profitable approach to something that is here to stay.

Lower level buyers look at the mandate to cut costs in a somewhat “linear” fashion; they see it as a need to reduce the costs right across all products and services they purchase.  It’s the easiest approach, they need to reduce their spending by 10%, so they proceed to slash all their vendors by 10%.; no one gets insulted, they don’t have to think much, and they get to their goal.  All vendors are treated as equals, even if they are not of equal value to the company.  Sellers get to tell their managers about the great relationship they have with the buyer, “if not for the strength of the relationship it would have been much more than a 10% cut”.  Buyers see the effort in figuring out an alternative as just simply being above their pay scale.

Sellers can bitch and moan but they have only themselves to blame. First because they put too much faith in a one sided relationship. More importantly because they get the “deer in the headlight syndrome” when they hear that the buyer is looking to cut cost. Most of the time buyer does not get a mandate to cut every line item in their budget by 10%, but rather that to reduce their overall spend by 10%. Meaning a motivated seller can take the lead and help the buyer out in a different way.

If there is a real relationship, implying some trust, some reliance on the seller’s expertise, the seller should be in a position to help the buyer cut their total budget in more creative ways.  Looking at the entire eco-system, and helping the buyer find a number of efficiencies that extend beyond their product/service.  For example, there may be opportunities to automate aspects of the buyer’s process, this may eliminate or free up other resources to apply to the company’s core offering.  That is a cost saving, without a cost/spend hit to you.  At times, achieving that may even put you in a position to sell them more “stuff”, they save on the total, and you not only avoid a cut but get more.  Not always possible, but helping them find “other savings” is.

This is where if you view and present yourself as a Subject Matter Expert, that conduit to industry best practices, you earn the right to have and drive that discussion.  But this is something you need to build to right from the first meeting, and at every opportunity.

The value of a real relationship is in how you can avoid being cut with the others, or even grow your revenue; not in how well you faired against the also rans.  So go ahead, help your buyer slash their spend.

vote

What’s in Your Pipeline?
Tibor Shanto

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 

Sales Immersion (#video)0

By Tibor Shantotibor.shanto@sellbetter.ca

Biz TV

We often hear the expression: “Follow the Money”.  Well in sales that pursuit always leads to the buyer and their reality not ours.  To get the most out of sales, you need to immerse yourself in the buyers world, not work on making the opposite happen.

Here is what I mean:

Sales immersion

 

What’s in Your Pipeline?
Tibor Shanto

You Should Lead With Price – Sales eXchange 2072

By Tibor Shantotibor.shanto@sellbetter.ca

change

If sales were presented as a play, the typical flow would seem to be: segment, identify, qualify, engage, discovery, gain commitment, negotiate and close. Somewhere towards the latter part of “gain commitment” and “negotiate”, the issue of price becomes central to the plot, in fact with some sellers “negotiate” is really just a code word for “price haggling”.  This would explain why so many sales these days are won or lost on price, especially when “discovery” is rushed or executed in a cookie-cutter way.

The plan (I guess), is build value (place your methodology here, ours is good too), and align to price. The frustration for many is that they may not know the relative role of price till late in the game, especially when there is a low cost provider in the mix.  Wouldn’t it be better if you could learn if price will be the breaking factor much earlier in the play?

That’s the catch 22 of selling I guess, if you don’t build value you can’t justify or rationalize the price; on the other hand, you could spend time and energy building value and be defeated by price. What’s a seller to do?

Well, why not lead with price?

Counter-intuitive, maybe? Risky? Could be, but most things worth archiving involve a level of risk.  The opportunity and skill is in managing the risk and finding the balance where calculated risk consistently rewards the risk taker.

This is not to say that your meetings should start:

“Hi I am George, with ACME Solutions, the price is $42,000, plus 20% annual maintenance fee, ready to go?”

But there may be merit to putting price front and centre much earlier in the process. There is an element of this accepted, if not always executed, by many sellers in the form of exploring budget; in terms of its existence, availability, control and commitment.   But budget is different than price, how many times have you been able to check all the tick marks around budget but still lose on price?

But what if we did introduce process earlier?  The reality in many instances, the price is based on some formula, be it unit based or other elements, and sellers have a sense of what a deal is worth early in the play.  Before you protest the last statement in an effort to seem above the fray, go look at yours or any other forecast.  So why not put it on the table, and make it a way of introducing, driving and accelerating the value discussion.  After all, if they object to the price at that point you can get to the heart of the matter by asking them what they base their remarks on.  It is a great way to go to the real value discussion.  As both price and value are relative, you can find out what they see as value in their reaction to the price.

You can then use all the tools and techniques you would normally use to build value, but this time it can be much more collaborative.  The key is not think of it as defending the price, but as a mutual and collaborative value definition.  In the course of executing it, you can uncover objectives, separate needs from wants and a range of other things that make for a successful sale.  All without the suspense of the traditional ending.

As with most things in sales, we can stick to the same old, or so called fresh techniques that are the same old in new packaging.  Or you can try something that will not only differentiate you, the way you sell, and most importantly the outcome.

What’s in Your Pipeline?
Tibor Shanto

Handling Price Objections (#video)0

By Tibor Shantotibor.shanto@sellbetter.ca

TV Head

The video below is the third in a series of videos on Objections, and Objection Handling I did for BizTV, this one dealing with price objections.  One of the most common objections sales people face is the price objection, especially late in the sale.  Some buyers use this as tactic, some are genuinely trying to get the best deal they can, either way, the seller needs to be prepared for the objection and how to handle when it comes.  In addition to the video you may also want to read The WOW Approach to Price Negotiations, these other price related pieces.  And don’t forget to download the companion Objection Handling Handbook.

Price objection vid

What’s in Your Pipeline?
Tibor Shanto

Price – A Hard Habit To Kick – Sales eXchange 171100

A couple of weeks ago I lost an opportunity I feel I should have won, and as you have read here in the past, you need to invest the time to understand why deals turn out the way they do. To do that I asked a couple of people I know, also involved in sales training to sit down to conduct the review, in essence to play the role of the manager, and keep me honest.  The goal is to learn if the deal was winnable, if so what could I have done differently.  If not winnable, are there any trends we can glean that we need to incorporate into future sales; or what can we learn that will help us recognize deals that are not going to happen earlier, so we can move on faster.

I was taken aback when the first question one of my peers asked was: “do you think you would have won had you priced it lower?”

Wow, what an uninspiring start.  I guess if I gave it away free I would be busy five days a week, but my kids would starve.  I looked at her hoping she would continue, and asked her why she started there, especially when I had shared with her and the other fellow involved the form/tool I use of our reviews, exploring many factors beyond price.  What worried me even more is that this person was involved in working with sales teams, and this was top of mind here, what is top of mind when they are out in field.

The importance of reviewing both deals you win and lose, is understanding the trends behind the decisions.  Every time a buyer does not buy from you is not a failure on your part, and the reviews will help you delineate between the two.  There are buyers who will not pay for the value of your offering regardless of how well you communicated.  It is important to understand which end of the communication failed.  If it was you, then you need to work to change how you do things, and reviews will help.  But if it was the buyer’s failure to understand/appreciate the value when you did everything you had to, it is better to know that and why, and how to recognize it moving forward.  Communication is two directional, and it could well be that the buyer does not see the value or does not want to pay for it, yes they are cheap.  And none of want cheap customers.  The quicker you can spot one vs. the other, the quicker you can decide who is worth your time and resources, or which opportunities you can abandon early.*

Fine Print – the above is predicated on having a healthy pipeline of real opportunities, it is a lot easier to walk away from a bad thing knowing there are other opportunities to work on, than to walk away from the only thing left in your pipe.

Price is easy, in fact it is addictive; sellers need to be value competitive, not  price competitive.  Much better to get your clients addicted to your value/quality, then you becoming addicted to discounting.  As with anything addictive, you run the risk of not just selling at a lower price, but for the wrong reasons.  At first you figure you hey what’s a 3% discount.  Once that is comfortable, you need a bigger fix.  When you come up to the next resistance, you hesitantly try one more point, then another, and you are at 5%.  You figure on $100,000 deal, say 8% commission, going to $95,000 will only impact you by $400, but could be the margin for your company.  Remember that next time you wonder about investment in product development, marketing, resources, and all the things the $5,000 you gave away could buy.

What’s in Your Pipeline?
Tibor Shanto

Keep Your Success In View!103

As sales professional you work hard to get a sale to a point of proposal, and every day buyers will have you do things that could introduce unnecessary risk to the sale.  Some can be managed, but some are harder, because you feel pressure, real or not, to take actions that you should not take.  Specifically when buyers ask you to ‘send’ them your pricing/proposal/quotes to potential buyers. 

Across a number of industries, sales people tell me that they have submitted pricing/proposals, and are “waiting to hear back”; what’s with this waiting?  Along the same line they tell me that they “sent pricing in and promised that I will follow up on Friday”.  Really, just send in pricing, like tossing the latest community paper on the lawn.

Here is a rule to live by, never send in proposal/pricing without a scheduled time for review!

I know this seems simple and straight forward, but it seems not, people do it every day, look to your left, look to your right, and I’ll bet you saw at least one rep who does this if not more.

If the prospect requests a proposal or pricing, the clear course of action is to set up a time to present and review it together.  Obvious, yes; reality, not always.  If you can’t get the appointment to present, schedule a specific time for a call; if they are hesitant, ask yourself why.  I know it is hard, but you have to believe that a potentially sincere buyer would see that as a good next step, if not, you need to think about why, are they just trying to rationalize a decision they have already made, will they use your proposal to get concessions from a current provider, why not take the time to review it together, is this a game you are willing to play?

There are times where you can schedule the review by offering to send in the proposal in advance.  But again you need to make sure you are on a level playing field.  Send it in too far in advance and it can work against you.  They may love the proposal, and then spend time on how to negotiate further.  You want to be in a position to take in their initial visceral reaction, not once they have had a chance to rationalize with time.

So here is the plan, say you schedule a phone presentation for 2:00 pm Thursday.  Most would send in the document a day or two in advance or even the morning of.  My idea of advance is 1:59, hitting the send button as the ringing begins on the phone.  Again, the goal here is to be able to work with the buyers real reaction, not a tempered contrived reaction.  Of course some of this can be addressed if not eliminated early in the sale, but if you do find yourself in this situation, you can still work on a level playing field.

What’s in Your Pipeline?
Tibor Shanto

Are You Gasoline or Water?53

Every day you hear people griping about the price of gas, spinning conspiracy theories, claiming collusion, just going on and on about the price of the fuel.  In Toronto they actually have a special segment on the radio telling you what the price of a liter of gas will be the next day. Bizarre, not only because many will burn more than they save while their engine idles while they wait to save half a cent on a liter.  For context today’s price at the pump in Toronto is about $1.26 Canadian per liter.

While I understand that the mystery around pricing can be frustrating for many, it is worth remembering that while we have choices in which outlet we purchase our gas at, green vs. blue, in the bigger picture gas stations are the only choice we have, other than buying an electric car or finding other means of transport, but if you chose to drive a conventional car, you are headed to a gas station near you.

The same gas station where many will buy their bottled water, currently about $1.00 Canadian, for less than half a liter, or about twice as much as the liter of gas we complain about.  Now in most places you have numerous alternative for getting your drinking water, not the least of which is a carton of 24 at most retail outlets for less than three bucks.

So what’s the point?

Our choice comes down not to price, but perception and to a lesser degree convenience.  Somewhere along the way, folks have determined that it is acceptable to pay twice as much for a readily available resource, just to quench the thirst brought on by complaining about another resource that in comparison is quite cheap. 

Now I am not here to carry the flag for the gas companies, but there is a lesson for sellers to learn here.  Focus on the perception, mapped to value held by the buyer, and it is possible to sell past price.  In fact, price is not an issue in the water discussion.  Yes, the environmentalist will have their say about bottled water, but even there it is never about price, but environmental impact.

The opportunity for sellers is to position their offering in a way that it is more like water, not gas.  By focusing on the outcome rather than the means, you can get buyers to get past price and see what is in it for them.  This means forget features/benefits, and focus on impact from the buyer’s perspective.

Next time you see an ad for BMW, note how they speak to the “experience” more than anything else.  There are plenty of vehicles that will get you from here to there, but few offer the experience BMW boasts, real or not, it’s the perception of the buyer, and most will pay a premium for that experience.

So what is the impact, outcome, experience your offering will leave the buyer with?  Focus on that from their perspective, and you can soon sell water to fish.

What’s in Your Pipeline?
Tibor Shanto

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