We have all been in the position where we have had to predict some performance or business event. It is a key part of leadership and management whether you are in general business, sales, or any other business discipline. There are those that are good at it and those that “needs improvement” if I may use the ratings jargon that we are all familiar with.
I have found that those that are good at this type of predictive management have the gift of not only assuming others points of view – being able to look at things from where others do, but also have the ability to assume the perspective of others – being able to look at things how others do. It seems that the difference is subtle but the results can change dramatically.
The key here is that when we look at issues from others points of view we still have the tendency to ascribe our preferences and biases to the view. Someone who is risk averse may not see the same opportunity as someone with a higher risk tolerance regardless of the point of view.
It is these perspective mismatches that can then lead to the issues. What may be blatantly obvious to one regardless of where it was viewed, may make no sense at all to another regardless of how it is described.
Successful business and sales requires you to not only look at things from where others are standing, but also to try and look at it through their eyes. You can not ascribe your preferences to others because then you are always expecting others to “see it your way”.
Customers associate value with items that they pay for. If they don’t have to pay for it, then they assume it has no value. I think that this is another of the immutable laws of sales.
We have all heard of and potentially even tried to use the old “try and buy” closing technique. This is when you provide the customer the product for free, and at the end of some period of time they should be so enthusiastic about the product that they can’t help but pay you for it. While this may work for smaller ticket items, I have found that its success rapidly diminishes as the cost and sophistication of the product increases.
The view here is that if the customer believes that the product is free, for whatever period of time, then it has no value at least for that specific period. If the customer has no commitment to the trial process (in the form of committed money for the cost of the product) then there is no commitment from them to actually using the product to fairly ascertain its value. The key point here is that if the seller puts no value on their own product, why should the customer put any value on it.
The solution is to get the customer to put “some skin in the game”. They have to commit something of value – money – to the “trial”. Their time is nice but it is not good enough. The approach should be for them to buy the product for a period of time and if it does not perform to certain specifications, then it can be returned with a minimal restocking fee. Again a restocking fee, or a de-installation fee, etc, is important. As much as we would all like it (customers included) nothing is for free and the customer must understand that there is at least a small risk if the trial is a failure.
By implementing a “buy and try” sales process you can reduce the customers perceived risk and exposure associated with the product purchase while making sure they are committed to its use. It is in effect providing them with a fully paid grace period. If the product is sound, the service good and the relationship strong, it should also provide an effective way to close the deal.
Once I had attained executive level, I was frequently asked to conduct new hire orientation classes. I didn’t know if it was because no other executives wanted to do it or if it was because of the way I had come up through the ranks. Looking back I suspect it was because no one else would do it.
Regardless, I did take the responsibility seriously. At the end of the session, I would always ask for questions. The question I got most frequently was: “How did you become and executive so quickly, and what do we need to do to accomplish the same?” I came up with a two part answer. I think it still applies.
First I would tell people that they needed to spend some time in sales. It is hard to understand just how difficult it is to compete with other sales teams to get customers to give you money (orders) unless you have done it for a while. It will give you a perspective on the market from the inside out.
The second thing I would say is learn the numbers. As you progress up the corporate ladder, more and more of your communication and information revolves around the tabulated financial data. You have to understand how the metrics interrelate and how to affect them.
Doing this won’t guarantee your success in the corporate world, but it will help you to understand why it works and acts the way it does, and that is the first step to success.
Customers like to see the boss. This is pretty much one of the immutable laws of sales.
The leader of the business should also be the lead salesman. Good leaders should want to see their customers as often as possible. Building that relationship and trust is a key to long term customer retention, growth, and profitability. Demand that the sales team take you out to see the customers.
These are some of the most important people in the world. These are the people that give you money. Understand what type of relationship they have with the sales team. Understand how they want to be dealt with by your business. Learn about them. Work directly with them.
Some times the sales team may seem to be a little reticent to take you to see “their” customers. That’s okay. You are an unknown (initially) when it comes to working with their customers. Demand to go anyway. The business will be better and stronger for it.
If you don’t go, your competition’s sales force will probably be bringing their leadership team out to see your customers, and soon they may not be your customers anymore.
Having great technology for your product is a given. The new product needs to be faster-better-cheaper that the competitions. Identifying your target customer set and matching their needs is a requirement. All set, right?
How do you plan to get the product from you to them? Increasingly in the technology market you will probably use some sort of intermediary or distribution arrangement. They can be called distributors, dealers, resellers or retailers, but they will probably be the path of choice to market for a technology based product. Now the question becomes how to target, attract and recruit these channels, and once you have them, how do you retain them and help keep the competition out of them.
The creation of a strong and vital Dealer/Distributor “Advisory Board” can be a solution. Utilize the advisory board to help you solve the issues of problem identification, prioritization and resolution. However expect not only “product” issues, but also “process” issues to be identified. One of the goals for this group should be to help identify how this indirect sales force wants to do business, and be dealt with.As with internal business teams, where you listen to and work with all business disciplines to create a cohesive solution, the advisory board enables you to extend this “teaming” arrangement outward to the indirect sales channel. Their involvement creates ownership and buy-in on issue identification, prioritization and resolution. As the business responds and adapts to their requests and requirements, their commitment to the business should also strengthen and grow, as should their orders on it. It is essential that the appropriate resources and management commitments are provided to see the process through to conclusion. If your sales channels are going to commit their time and resources to work with you they will need to see the same level of commitment from you, or they will look for other suppliers who will provide the commitment they are expecting.
Targeting the proper indirect sales channels can be the most important decision that you can make. There are several factors that need to be taken into consideration:
Who are the products’ target customers and who do they buy them from? Consumers usually buy from retail outlets. Small and Medium Businesses (SMBs) usually buy from a variety of sources (web, small dealers, value added resellers (VARs), etc.). Enterprises and large business usually buy from large distributors and dealers.
What size business are you? Normally equipment providers and distribution channels have a tendency to “peer”. That means larger product providers tend to work with larger dealers and distributors, and smaller product providers work with smaller dealers and VARs.
What is the status and age of the product market? If it is a mature market that is being addressed it will mean competing against existing products for mind share and shelf space with entrenched channels. There will be barriers and expenses associated with displacing the existing product suppliers from the channels. If it is a new or developing market there should be no entrenched products or channels and lower expenses and barriers to channel acquisition.
These are just a few of the topics to consider when looking a selecting specific paths and channels to market. There are obviously many more. What it does point out is that there are relationships between the product and the market that are not related to its technology that will have an effect on its success.
Communicating with customers is a key to their satisfaction and to increasing sales. It is well known that it is almost 5 times easier to sell to existing customers than it is to sell to new customers. This doesn’t mean that you should ignore obtaining new customers. You must continue to add new customers to sustain and grow the business. It means that you need to have a separate focus on each customer set.
In focusing on existing customers, one of the best ways to communicate with, and eventually sell more to them is through the creation of a “Users Group”. Creating a users group enables your customers to communicate their product and service needs, wants and desires directly to you and to other customers. If they are dissatisfied with aspects of the product, you can learn the application and desired solution. This helps build the bond with your customer and strengthens the product by identifying (and hopefully fixing) product gaps. You must be prepared to commit the necessary resources to correct any identified product issues, or this approach will not succeed.
As with internal business teams, where you listen to and work with all business disciplines to create a cohesive solution, the users group enables you to extend this “teaming” arrangement outward to the customer. Their involvement creates ownership and buy-in on issue identification, prioritization and resolution. Their ownership and buy-in can also eventually lead to additional sales of product expansions and systems as well as references and recommendations to new customers that they should purchase your products as well.
Do not expect immediate sales increases and relationship improvements with the creation of a users group. You must be prepared to deal with any and all relationship and product issues, even those you were unaware of. However, once you get started and demonstrate your commitment to the group and their requests and product needs, they should be won over and both your sales and their satisfaction should increase.
It seems too many times we end up asking our finance teams to total up the score for our businesses, after the fact. We make all our plans, execute them and modify them when they come in contact with reality. We move. We react. At the end of the month, the quarter or the year, finance tells us how we did.
This management structure breeds an adversarial relationship with finance, and casts them in the role of being the “money police”. The oversight check-and-balance needs to be there, but it needs to be there at the front end of the process. Finance needs to be an integral part of the planning process, the sales process and execution team from the beginning.
Understanding the financial ramifications of each move before you make it is critical. It will help avoid mistakes and missteps. It also builds finance into the team, instead of casting them in an external watch-dog role.
And the truth be known, finance would like to be involved earlier in the running of the business as well. Invariably finance is also compensated on the performance of the business as well, and they would like to have input into the process. Aligning your resources, either direct report or corporate finance, is key to creating a sound business team, and good business performance.
When we run businesses we all walk in assuming that everyone in the business is on the same page and that everyone is pursuing the same goals – namely the success of the business. My experience has shown me that this is not usually the case.
Here is a quick test to prove my point: Does everyone in the business have the same compensation and incentive structures? Most likely not. Therefore it pays to review each disciplines (Sales, Marketing, Operations, etc.) incentive structure and make sure their goals are aligned.
A case in point: The sales team is normally provided incentives (commissions) based on revenue attainment. This is good. You need to have someone responsible for attaining the business’s the top line. However, this may not be enough. In a volume only incentive plan, price becomes the sales team’s primary differentiator. The sales team will now create friction within the business trying to drive the selling price down to make it easier for them to sell. If you have a sales team that is pressing that prices are too high, you might want to look at their compensation plan as one of the possible causes for this friction. (On the other hand you also need to make sure that you are not overpriced verses the rest of the market, and if you are how you quantify the incremental product value you claim to have. I’ll look at this in later blogs.)
A solution can be to make sure that the sales team has both revenue and gross margin target goals (sales cannot affect other costs of the business as directly as price and hence should have gross margin, not earnings targets) as their objectives. Provide compensation accelerators for business above target margins (this is business that is good for everyone and should be encouraged) and compensation decelerators for business below target margins (just because it is lower margin business doesn’t mean you don’t want it, it just means it is not as valuable to the business – and hence not as valuable to the salesperson, as higher margin business).
Targeting and attaining higher margin business will help exceed earnings targets for a target revenue amount. This is a very good situation and the sales team needs to be rewarded for their part in it. Taking lower margin business means you will need more revenue to meet your earnings dollar commitments. Your sales team needs to participate in this with you as well.