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August 2012

Are You a Discount Leader or Loser?

ChrisJones_100Today's blog post is by Chris Jones, chief sales officer for PROS, a big-data application software provider that gives salespeople the confidence to compete and win by taking control of their deals and directing them to opportunities that will close, products that will sell, and pricing that will win. Jones will present How Big Data Gives Your Team a Competitive Advantage at the Sales & Marketing 2.0 Conference on October 22-23. 

  • A global chemical company increased its revenue by 3 percent last quarter, despite seeing no volume growth.
  • A global heavy-equipment manufacturer increased price realization by more than $300 million in one quarter. 
  • A software company reduced discounting by 6 percent, on its way to drive 22 percent bookings growth.

What do the winning sales vice presidents at these companies realize about selling that others don’t? They know that mining and leveraging their data –- data about their markets, customers, and products – is the ultimate opportunity for improving sales effectiveness.

Consider this: a company with 500,000 products and 1,000 customers sells through direct, indirect, and e-commerce sales channels, with potentially 1.5 BILLION selling and pricing decision points. How are you managing that complexity in your own sales team?

World-class sales leaders realize that the complexity of managing every sale globally – or even regionally – is too great to rely solely on a sales rep’s individual experience. In fact, sales reps rely on imperfect knowledge. There is a wide gulf between what they think they know about their customers and what their customers actually want. The results are lost selling opportunities and over-discounting. In my own experience, I’ve seen variances of 70 percent between the highest and lowest prices that customers actually pay for the same product. By any measure, that’s an extraordinary differential. 

That gulf is bridged by applying data science that provides real-time, actionable insight to each sales channel. Growing sales in this economy comes down to three essential factors: 

  1. Your ability to offer what your customer wants to buy. 
  2. Your ability to match your prices with your customer’s willingness to pay.
  3. Your sales team’s ability to sell value and out-negotiate tough buyers and relentless competitors.

Making the leap from being the market follower to the market leader requires a proactive approach that empowers your frontline sellers with the knowledge to negotiate confidently. With a cutting-edge sales effectiveness solution, you can harness the collective intelligence of your sales force across every transaction, gaining a clear understanding of what customers are willing to pay for your products and services.

This highly lucrative insight can yield critical opportunities to increase margins and sales, even as you increase your customer’s perception of value.

McKinsey & Company research shows you’ll increase your margins by 10 percent with every 1 percent price increase. Meanwhile, Gartner estimates an average 2 to 3 percent revenue lift with price-automation technology.

Regardless of your industry or company size, the revenue potential is staggering. Here are the top four strategies I’ve seen winning organizations use to outperform in their markets and increase revenue:

  1. Create customer buying groups. You need to know what specific customer microsegments are willing to pay for each product, in every market, channel, and region. Armed with these guidelines, you can take your selling effectiveness to the next level.
  2. Align resources against your biggest selling opportunities. Which territories and accounts have the biggest opportunity for revenue growth this year? Do you know?
  3. Eliminate your weakest links. Drill into your big data across every disparate system to truly understand your gross and net margins. You may be surprised at what you find. Stack rank your sales reps, and lose the bottom dwellers. Arrange your customers in order of profitability, and cut unprofitable accounts. (Yes, you probably have them.)
  4. Build margin awareness into your commission structure. Most companies don’t want to expose margin information to frontline sales reps, nor do they often have the capability to do so. But clear, simple negotiation guidelines give them a fighting chance with buyers who are more informed than ever before. It’s their cheat sheet to winning.

When you understand why your customers buy, you can also turn on a multiplier effect that jolts revenue in a way you’ve never seen before.

To win in a tough market, selling must become a science, in addition to being an art. Winning organizations invest in better technology to complement their investments in the art of the negotiation, so their salespeople gain the confidence they need to win more deals at greater profit – and with greater commission. 

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Where Can Salespeople and Sales Managers Get Advice That Works?

Cut portraitToday's blog post is by Christian Maurer, a consultant for B2B sales leaders wanting to improve the productivity of their organization with solutions based on modern philosophies.


There have never been more sales-information resources available than there are today. Seen from a quantitative aspect, this is certainly true to the point that we have to fear information overload. Considering the quality aspect, however, the picture is quite different. Despite all the books, magazines, Websites, blogs, specialized social media, and discussion groups in general social media, it is difficult to identify a commonly accepted body of knowledge about selling. Just pick a discussion group about selling on LinkedIn or browse through Amazon.com at book titles about selling; you will quickly find a lot of contradictory advice. For example, search for “cold call” on Amazon.com. On the first page of results, you will find a book entitled Never Cold Call Again: Achieve Sales Greatness without Cold Calling by Frank J. Rumbauskas Jr. A bit farther down in the list, there is a book called Cold Calling Techniques (That Really Work!) by Stephan Schiffman. If you look a bit closer, you will further notice that there are many texts rehashing the same old principles, just using different words.

How Did We Get Here?

There are three reasons that come to mind:

  1. While there is no doubt that a lot of advice is well meant and might even have led to success in certain circumstances, it is presented without this context. This leads to useless arguments among experts based on their own experience and observations trying to prove each other wrong.  I remember a discussion in a LinkedIn group on the topic of lead management. You would not believe the tone one contributor used trying to prove another one wrong.  Calling the other person “old fashioned” was one of the kindest descriptors I could find.

  2. Many self-declared experts confuse frequently observed practices with best practices.  The fact that a misconception is believed by many people does not make it true. Consider the myth that the win probability of an opportunity can be associated with a sales stage: nothing is further from the truth, but you would be surprised to see how often this association is still implemented in CRM systems.

    A best practice is a codified behavior that, statistically, produces better results than other behaviors. In other words, there is a positive correlation between a codified behavior and a desired outcome. But even people who understand this fall into the next trap: confusing correlation and causality. A positive correlation does not mean that one has found the reason why the behavior produces the outcome. The best illustration of this fact is the observation that sometimes behavior in total contradiction to the best practice delivers the same or even a better outcome. Again, different contexts often cause this phenomenon. 

    Consider, for example, the BANT (Budget, Authority, Need, Timeframe) qualification criteria.  You will find plenty of studies trying to prove that having good BANT qualification increases the win rate. To qualify an opportunity, you will ask the customer if she or he has a budget.   Yet this very same question can kill a deal. Imagine that you have adopted a provocative sales style, helping potential customers identify a burning problem. What would happen if you ask this question? The answer, logically, can be only no. In order not to lose credibility with the potential customer, you will avoid this question. Yet you still should have a very high close rate, but for a different cause: helping the customer early on in the buying cycle creates loyalty, which is an important competitive advantage when the customer makes the vendor selection.

  3. Most texts, in whatever media, are not written with the general intent to contribute to the body of sales knowledge. The authors want to grab attention in a cacophony of sales advice; therefore, the focus is on differentiation for marketing purposes. Have you ever noticed the many terms such as “sales enablement” or “total revenue management” or “revenue cycle management” in sales literature? Or the many new sales job titles, such as chief revenue officer, customer success manager, or customer experience manager?

What Can Be Done About It?

  1. Do not take the abundance of available information as reason to reduce training and coaching efforts.
  2. Create your own mastermind peer group, selecting trusted advisors from academia and sales research experts (CSO Insights, Forrester, Gartner, etc.). Join new collaboration sites, such as www.salesopshop.com
  3. When selecting blogs, consider whether or not there is an editorial control for comments. This usually is an indicator of quality.
  4. Turn your organization into a learning laboratory. Get your peers to submit ideas on an ongoing basis so you get a set of useful resources (books, blogs, collaboration sites, and social media groups).

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Selling Starts with Understanding the Buying Process

Cut portraitToday's blog post is by Christian Maurer, a consultant for B2B sales leaders wanting to improve the productivity of their organization with solutions based on modern philosophies.

 

Sales processes usually are linear representations of a sequence of activities a salesperson has to follow in order to be successful. While the sales process might provide guidance to the salesperson, it’s inadequate for monitoring the progress of a potential deal. In the end, it does not matter what the salesperson has done; buying happens when the customer has reached a certain state of mind.

So we have to take the customer’s buying process into consideration. Most descriptions of buying processes focus on activities from the customer’s point of view. Understanding what the customer is thinking with respect to a potential purchase is what really matters. Considering the buying process as a type of change-management process has inspired the following simple, cyclical, four-stage model.

The Four-Stage Buying Cycle

The model is cyclical to respect the trend that selling is no longer considered to be about closing deals, but opening relationships. In my mind, this means that selling can be represented only by a closed-loop model. Focusing primarily on the transition between the four stages (which represent shifts in a customer’s thinking) is a way to consider the buyer’s point of view.

A cyclical process does not have a start or end. To discuss the principle, it is helpful to start by regarding the customer as maintaining the status quo. The customer will leave this state only by acknowledging that a certain frustration is no longer tolerable.

This realization will trigger the next phase, when the customer tries to define a vision to remedy the frustration. In this phase, three things can happen: First, the customer, after further consideration, decides to maintain the status quo and live with the frustration or, second, an internal remedy is found. Only the third option, however, will trigger a continuation of the buying cycle: the customer decides that purchasing a remedy is preferable. 

This second phase allows for the elimination of do-nothing opportunities. According to CSO Insights, about 20 percent of forecasted opportunities end up in this stage. So this allows for a huge improvement of forecast accuracy.

Now that the customer knows that remedies can be purchased, the next phase is to evaluate from whom to buy. The actual buying decision is at the end of this consideration. For many selling organizations, evaluating suppliers is the start of the actual selling process. Studies show that at least 80 percent of customers who reach this point will stay with the supplier that has helped them envision the remedy for their frustration. At the beginning of this phase in the buying cycle, requests for quotation (RFQs) are issued. For a seller entering the buying cycle at this stage – by answering the RFQ – the success rate is about 10 percent. This is further evidence that successful selling requires an earlier involvement in the buying cycle.

The loop is then closed at the fourth phase, when customers put the purchased remedy into use. While the seller considers the selling finished when the buying decision is made, the customer is finished buying only when he or she can actually verify whether the perceived value meets expectations. That is the fourth phase leading, then, back to a new status quo.

How I Use This Model

Monitoring the progress of a potential deal can be based on customer evidence. For this, one has to find a set of observable customer behaviors or statements associated with each transition from one phase to the other. The positive impact on forecast accuracy has already been mentioned.

This model also allows discussion about the type of messaging needed to help the customer come to the next stage of thinking. By using appropriate messaging, a salesperson becomes more relevant to the customer.

Discussions on marketing and sales alignment become more objective. The question now becomes, how do the two functions together help the customer make the transition to the next phase, instead of fight for supremacy over each other?

Finally, this model also helps when dealing with complex sales situations in which buying centers are involved. Salespeople can distinguish between the mind-shift of the individual members of the buying center and the institutional mind-shift, which occurs when the buying center members have come to a collective decision. This, again, impacts forecast accuracy.

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