Sunday, March 30, 2008

Sunday, March 16, 2008

Not All Customers Are Created Equal

Not All Customers Are Created Equal

Not all customers are created equal. When it comes to profits and customers relationships, some customers are much more valuable to you than others are and vice versa, you are more valuable to some customers that you are to others. In order to break out of the commodity price trap, you have to be able to create more value for your customer. But you cannot create value unless you have access to your customer and you won’t get access to your customer unless you have a strong relationship.

The more access you have to your customer, the more information about your customer that you have access to. The more information that you have access to, the better able you will be at crafting a value creating proposal. That’s the good news. The bad news is that some customers are easier to bond with than others. Your ability to pinpoint which customers are willing to develop a relationship with you and which ones are not is your key to higher profitability.
You’ve heard of the 80/20 rule before. The 80/20 rule applies to many situations. For instance, on average, the top twenty percent of the salespeople in this country make about eighty percent of the sales. Another example is that twenty percent of your customers account for eighty percent of your profits. Using the 80/20 rule as a guide can help you decide which accounts to focus your resources of time, energy and effort.

Company culture is your window into your customers thought processes, their purchasing processes and also their relationship processes. Company culture, for those unfamiliar with the term, is the overall psychological profile that a company has manifested through its employees by virtue of the management profile of the company leadership. In other words, whatever characteristics the leadership of the company emphasizes to its employees will be the same profile exhibited by those employees to its vendors. If top leadership emphasizes and rewards an open and accessible leadership style, then those traits tend to be inherited by the employees that work under them. If the top leadership emphasizes closed thinking and protective politics, then the company culture will generally follow suit. Sometimes by design, but mostly by accident, a company passes down their culture to their employees, simply by rewarding specific behaviors or sometimes by failure to reward other behaviors.

It can sometimes be easy to spot a company culture that isn’t very open to forging relationships. The typical signs are low employee morale, lots of office politics and a self-centered psychology focused on individual goals rather than on corporate goals. This type of company culture results into low profitability, low quality output and a commodity pricing mentality for their own produc offerings. It should go without saying that if a company has a commodity pricing mentality for their products and services, then their purchasing processes will also focus on commodity pricing mentality as well. By recognizing your customers company culture, you can make better decisions on how much you want to allocate your time, energy and efforts. The quicker you learn to recognize the culture of a commodity pricing mentality, the quicker you can decide to get out of the selling process before you’ve invested too many resources on a little or no profit account. This frees you up to better focus your resources on the twenty percent of clients that understand that you have more value to offer then other than just the lowest price.

This is not to say that you shouldn’t ever go after any business with companies that are focused on commodity pricing. This is just a way of helping you identify what type of purchasing thought processes that you are dealing with so that you can make the appropriate selling strategy. Remember, according to the 20/80 rule, you will always have some portion of your clients that are transactional focused, meaning that they are only interested in price. But by thinking about company cultures and how they affect your access into their business, you begin to recognize your ability to provide value creation solutions and you can re-allocate your time appropriately. Ideally, you will probably want to spend eighty percent of your time with twenty percent of your customers.

Saturday, March 15, 2008

Customer Relationships and Value Propositions

Customer Relationships and Value Propositions

I’ve written a lot about customer relationships in the past. But a good relationship with a customer or a prospect doesn’t guarantee automatic or continuous success for any new business negotiations. A good relationship is only a doorway that gives you the opportunity to grant you the access that you need in order to probe for information and formulate a value proposition in order to better present your case. The better the relationship, the better the information that you will have access to, the better the feedback that you will receive in order to formulate a better value proposition, which should all lead to you being able to present a better, stronger case for your customer to select you, your firm and your offering.

So at this point, there’s no further point in discussing your relationship to your customers anymore. I hope it’s safe to assume that you understand the value of building strong customer relationships. So let’s address how you can best utilize the access that a good relationship with your customers and prospects present.

Selling is all about information. The better your information, the better the chance you have of making the sale. If your information about your customers and prospects is better than your competitor’s information, then it stands to reason that your chances of winning more sales are also better than your competitor’s chances. That is because if you are trying to make a fair profit then you need to be able to justify your price and the way that you justify your pricing is by creating value for your customers. The more that you understand your customers, your customers buying motives, your customers business, your customers markets and your customers competitors, the easier it will be for you to create a value proposition. And you cannot possibly get all of this information without first having a strong relationship with your customers.

Let’s talk briefly about a value proposition and what it means. If you are in sales and you don’t understand what the term “value proposition” means, then I suggest that you do some more research in that area. In fact, if you are involved in any facet of business, from accounting to operations, it’s imperative at some point that you understand a little bit about creating value propositions. But that is fodder for another time.

Anyway, value propositions are ways that you can build up your product and/or services in the eyes of your customers and prospects by other means besides just lowering your price. One example of a value proposition can be that your product has lower long-term maintenance costs than the offering of your competitors, which means a higher Return on Investment for your customer over the lifetime of your product. This has the effect of long-term lower costs and higher savings overall to your customer.

There are lots of other ways of creating value propositions, but that conversation is outside the scope of this discussion. Suffice it to say, that as a salesperson, your job is to provide your customers with optimum business solutions to their problems and to do it in such a way that you can make a reasonable profit for you company. Unless you want to just keep playing the pricing discount game, value propositions are your only other alternatives.

So how do you decide what your value proposition will be? That’s where your relationship comes in. Through that door, a strong customer relationship is the access that you will need in order to gather enough information to formulate a strong value proposition. Most customers won’t just come right out and tell you where their pain is. In fact, without an existing relationship, you might not even get in the door at all. But a strong relationship opens the door for an honest exchange of dialog. The dialog provides information for you to find the customers “points of pain”. Without knowing the points of pain, you cannot formulate a value proposition for your product offering and you are left to assume that only by lowering your price can you bring any value to your prospect and his firm.

Once you find their points of pain, you customize a proposition that emphasizes the value of your product offering by addressing their pains. Your relationship with your customer should also provide you with enough feedback so that you know if your solution does address the correct points of pain. If your feedback is positive, then you are on track to making the sale, if it’s not so positive, then you need to revisit your solution and address the shortcoming by tweaking it some or by scrapping it entirely and starting over. Either way, your relationship needs be strong enough or you won’t get sufficient feedback.

Saturday, March 3, 2007

Listening is the Key to Selling

How well do you listen?
Nobody thinks that they are bad listeners. In fact, most people think that they are great listeners. But most people would be wrong, because in most cases, people tend to over-rate themselves on their listening abilities.
We have six senses (that right, six) and if you aren’t using three of them to listen with, then you aren’t really trying.
“Listen first with your eyes, then with your ears.” If you have wandering eyes, you aren’t really listening. Many people (I included) have the habit of looking beyond the speaker. Have you ever found yourself engaged in conversation with someone, when you are distracted by another person behind them? That’s what I mean by looking beyond the speaker. You should always be making eye contact with the person speaking to you Try not to be distracted by movement or noise. If you want to become a better listener, you need to work on your eye contact. If you break eye contact with your conversational partner, you aren’t really listening.
Hearing isn’t listening. Just because you are hearing the words, that doesn’t mean that you are listening.
Listening is the act of allowing the other person to express their feelings completely, without interuption and without any preconceived notions on your part, with the intent to fully absorb and process what they are saying so that you can appreciate their meaning and understand how they are feeling. As we break down the definition, piece by piece, you’ll see that there is a lot of things going on here.
First is the act of allowing the other person to express their feelings completely. You are NOT listening if you do not allow the other person to express their feelings completely. Depending on the person, sometimes this might take a while and we can get impatient and our attention may wander. Try to be “mindful” and “stay in the moment”. This means, that no matter how much they talk, and no matter how bored you may be, you have to train yourself to be patient and train your mind not to wander off to some other place.
The next part of listening is “without interuption”. This should be a “no-brainer”, but some salespeople still do it. Interupting people in the middle of sentences is about the rudest thing that you can do. Interuption is saying to the other person, “what I have to say is much more important that what you have to say”. Not a good way to gain a customer.
The third part of listening is to listen ”without preconceived notions”. If you think that you already know what the other party is trying to say, then you aren’t really going to listen very well. After all, you already know what they are going to say, right? Wrong. Dead wrong. Sales people are the worst at this. They think that they already know how to sell you, so they don’t listen to what your needs are. This mistake alone can cost you thousands of dollars in lost commisions over the life of a sales career. Learn to listen without preconceived notions because everybodies motiviations are different.
The fourth part of the definition is to listen ”with the intent to fully absorb”… It’s hard to “fully absorb” everything. But at least have the INTENT to “fully absorb” everything. By trying to fully absorb everything, you might absord the most imporatant parts, at least. But if you don’t even have the intention of fully absorbing what someone is saying, you’ll surely miss some of the most important parts.
The fifth part is to “process what they are saying”. This means you have to THINK about it! Assimilate what they told you and run it through your cereberal cortex and try to decipher what they are trying to say. That is the sixth part; “trying to understand their meaning”. Processing what they are saying and trying to understand their meaning are two different steps. One is the process and the other is the output.
The seventh part is to try to understand how they are feeling. Notice I said to try to understand how they are feeling. I didn’t say try to understand what they said. This is where your sixth sense comes in and this is where the rubber meets the road. Some customers might not want to tell you exactly how they feel and others might not be ABLE to tell you how they feel. In selling, there are two kinds of needs, expressed and implied. Although that is a lesson for another time, an example of an expressed need is some one that tells you their car is old and keeps breaking down, so they need to buy a new one. An example of an implied need is if they are looking at a Mercedes Benz, they could have an implied need of buying a car for a status symbol. If you can understand how your customer “feels”, you will make a sale.
In business, motivations for buying can come in many forms. The more you understand how your customer feels, the more sales you will make and the longer you will keep them as a satisfied customer.
There’s one more thing that I want to point out. Nowhere in that definition does it say anything about a response. If you want to respond, that is OK, but just remember, that is not part of the listening process, that is responding.

Tuesday, February 13, 2007

A Long Term Outlook

One of the most common mistakes salespeople make is taking a short-sighted view of their sales strategy. Salespeople and salesmanagers are often more focused on their own immediate goals than they are on the needs of their customers. I know, cause I’ve been there. Where is my next commision coming from? Will I make my quota this month or this quarter? How fast can I close this deal? Don’t tell me that these thoughts don’t run through your mind. The problem with this is that if you don’t think that your customer can sense where your priorities are, you have another think coming. Look, we all have to make a living, but to quote Clint Eastwood, “Dying ain’t much of a living.” When you place your needs before your customer’s needs, you’re killing your chances of making the sale. Whoever started teaching salespeople that you have to be aggressive and manipulative in order to make a sale did our profession a huge disservice. Sales is NOT about being pushy to the point of being obnoxious. Remember that old adage, ”We all like to buy stuff, but we hate to be sold stuff.” As a professional saleman you should be trying to solve your customers problems in an advisory, consulting and/or educational role. And the first thing that you need to come to grips with as a professional saleperson is that you CANNOT possibly be the best solution for every prospect. In my own career for example, I have come to realize that I don’t want to win every deal that I come across. First of all, I can’t possible service them sufficiently, but even more important than that, there are some customers that are just not worth my time. A low margin customer, for instance, just distracts me from providing better service to my higher margin customers. Why not use the time that I would have wasted with a low margin customer to pay more attention to the customers that don’t mind paying for that attention? And here’s something for you to think about. I’ve found in my experience that it’s the low margin customers that are the most demanding and require the highest maintanance. I’m willing to bet that if you think about your own experiences, you’ll find the same to be true in most of your cases. As an example, I used to have a business partner that would routinely beat up our vendors for lower prices and he was also a pain in the neck to deal with. He wanted personal attention, fast service and low prices. And to top it off, he wasn’t even a fun guy to do business with. If anything ever went wrong, even the slightest mistake, he would bark and roar at the top of his lungs to let everyone know that he was the boss. If he was my customer, I would have told him to shove off. Come to think of it, I did tell him to shove off, that’s why he’s not my business partner anymore. But I digress. A long term outlook in sales allows you to think about building your client base over a period of months if not years. It gives you a different perspective about what deals to pursue and what deals to pass on. You begin to realize that you don’t have to close ever single deal, you don’t have to be a pushy salesperson and you don’t have to manipulate your customers. A long term sales strategy will allow you to build a portfolio of high margin accounts, of clients that are fun to work with and worthwhile business relationships.

Saturday, February 10, 2007

Success Built To Last

I am currently reading a wonderful book called Success Built to Last-Creating A Life That Matters by Jerry Porras, Stewart Emery and Mark Thompson http://www.successbuilttolast.com/.
I bought the book this past Wed. and I am halfway through with it. The main message that the authors of the book are trying to get across is to redefine our perception of the word "success" as we now know it. Our culture has been indoctorinated into believing that success is all about wealth, fame and power. The book is trying to change that perception by looking at success in a 20-year spectrum. By taking a long-term viewpoint, Success Built To Last (SBTL) makes a pretty good case that money, fame and power will not make you happy and therefore they cannot be benchmarks for success. One of the more interesting quotes in the book so far was that "despite acquiring material luxuries undreamed of even a few decades ago, there is a rising epidemic of clinical depression and suicide among the wealthiest citizens in American, China and other rapidly growing economies..."
One of the first points that the authors bring up is that unless you can find and pursue a life of meaning, success will prove fruitlessly elusive. "Passion" is a requirement of long term success. Larry Bossidy, author of Execution: The Discipline of Getting Things Done http://www.honeywell.com/execution/toc.html
is quote as saying "Only by loving what you do will you actually do more and do it better than the person sitting next to you." "Passionate people spend twice as much time thinking about what they've accomplished, how doable the task ahead is, and how capable they are of it" said U.S. Army Brigadier General Clara Adams-Ender.
For every person who is half-hearted about their work or relationships, there is someone else who loves what they're half hearted about. This person will work harder and longer. They will outrun you. page 35 from Success Built To Last.
Much of what I've read so far sounds faintly similar to the dogma of Dr. Stephen Covey. As a long time fan of The Seven Habits of Highly Effective People, this is in no way intended as a sleight to the authors, but is in fact a compliment and I also don't infer that the authors weren't original. Nothing could be further from the truth. The books findings were based on actual facts and case studies. The only reason that I mention the similarities is to draw the connection between the two books. Dr. Covey has spent his life espousing values like "passion" and "meaning" and it's nice to have actual case studies that reinforce his work.
As I said, I am currently only half-way through the book, but I will continue my review once I have completed it.