 WHAT
THE CUSTOMER WANTS YOU TO KNOW
How Everybody Needs to Think Differently about Sales
1 The Problem with Sales
The telephone rang. Charlie Baldwin knew he was
about to get the news he had been waiting for since Monday. He had
spent three months working on the sale, and if he got it he would
make quota, get his bonus, and finally be able to take his wife
Michelle on that trip to Europe he had promised her for years.
Charlie had no reason to doubt his good fortune. He
was an experienced salesman for Sturgies Corporation, and had known
Greg Lanterman, the customer’s purchasing agent, for most of a
decade. The two often spent long afternoons on the back nine,
playing golf and sharing stories about their families. Both had two
kids graduating from high school in the fall, and this only
strengthened their bond.
When they had met last Thursday for drinks Greg did
everything but promise Charlie the order—it was in the bag. That’s
why Charlie was stunned when he heard Greg’s voice on the line. From
his tone alone Charlie knew something was terribly wrong.
"Charlie, I did everything I could," explained Greg
sheepishly, "and until about four days ago I was sure that my
recommendation to give you the order was a shoo-in. But the CFO and
the executive vice president of marketing intervened and decided
that the sale should go to Progis Corporation. Your price was
better, but the sales rep at Progis, Mark Logan, showed us how his
approach would increase our cash flow and revenue growth. Mark also
had some good ideas that our executive vice president of marketing
said would help us to differentiate our brand. I’m really
disappointed. In fact, I need to do a reality check on myself: I
can’t help but wonder if I’m losing credibility in the eyes of the
higher-ups," Greg confessed.
Charlie’s mind started to race. He knew Mark Logan.
In fact, he had seen him more than once at the customer’s office
talking with people Charlie had never met. All of Charlie’s contact
was with Greg; he never gave Mark more than a passing thought.
"We had the cutting-edge technology, the lower
price, and better cost savings for Greg’s company," Charlie thought
to himself. "I was sure we would win. But Mark Logan somehow beat me
to the punch."
Charlie felt deeply disappointed, but for the first
time, he also felt anxious. His wife Michelle had come into the
room, and it seemed to her that the telephone call had aged him five
years.
For the past 12 months Charlie has been on the
receiving end of four similarly disappointing telephone calls. And
these calls came from people he relied on the most—people like Greg,
whom he had known and trusted the longest. Suddenly, fear struck him
to his marrow. He doubted himself in a way that he hadn’t for a very
long time. "Have I lost my touch?" he wondered. He knew he had just
lost his quota, his bonus, and would be forced to break his promise
to Michelle about that long-overdue vacation. What he didn’t know
was whether or not he would still have his job this time next year.
Nobody bats a thousand. But when you keep losing
sales despite having great products and services, it’s time to take
a step back. You have to reconsider what you’re trying to accomplish
and how you’re going about doing it. In fact, it might be time to
reinvent the way you sell.
Consider that the traditional sales process hasn’t
changed much for more than a hundred years. Its roots are in a time
some five decades ago when supplies were tight and suppliers held
the cards, when orders had to be booked weeks or even months in
advance and customers, anxious for a steady supply of material and
lacking information about availability, had little room to negotiate
price. Salespeople were basically order takers. That situation might
ring true today in some isolated cases—for critical parts or
commodities like platinum—but those are the exceptions, not the
rule.
As the number of suppliers has increased,
salespeople have evolved from order takers to ambassadors, plying
their social skills to learn what a customer needs and using their
product knowledge to present products and services to match those
needs. Salespeople built long-term relationships with purchasing
agents, cementing those ties with golf games, skybox seats, and
theater outings, and maybe taking the CEO to special events like the
Olympics or the Super Bowl. Those relationships gave the salesperson
an edge, provided he or she could meet the customer’s requirements.
But now the context is completely different. In many
businesses, there is a glut of suppliers and more suppliers entering
the market everyday, and thanks to the Internet, they are easy to
find. Every customer has access to prices and specifications from
suppliers anywhere on earth. The asymmetry, or imbalance, of
information has been corrected. At the same time, customers are
under enormous pressure to deliver value to their clients and their
shareholders. They are compelled to use the newfound power of
transparency and overcapacity to drive down prices, resulting in an
unprecedented degree of commoditization with sometimes devastating
effects on sellers. Customers can play one supplier against the
other in online auctions that force prices so low the seller can’t
make any money.
Under those conditions, long-standing relationships
and good products are not enough. Sellers can have great strategies,
differentiated technologies, faster product development cycle times,
efficient operations, and good friends in the customer’s shop and
still not get the sale, or not at the premium prices they deserve.
Margins are often squeezed, sellers can’t retain customers, and
top-line growth fails to materialize.
But the pressure on customers to perform is actually
a huge opportunity for those suppliers who can help them. To be
sure, customers must meet their financial expectations, but they
also need to succeed in the marketplace. So while they want low
prices, they also want their clients to love their products and
services. They want to win against their competitors and stay ahead
of them. They want to develop their business and improve their
earnings, and they want to keep cash fl owing in. In short, they
want their business to succeed on many dimensions. And although they
may not articulate it, they want suppliers who can help them
accomplish those things by acting as partners, not one-time
transactors.
Your customers want you to know how their business
works, so you, the supplier, can help them make it work better.
Here’s the catch: you won’t be able to do that with your traditional
sales approach. The truth is that the long neglected sales function
is out of synch with current opportunities. Although management
teams try to revive it with new sales incentive systems and new
people, more radical change is needed.
This book is a guide to transforming the selling
process to fit today’s business world. It defines a totally new
approach to selling that is both radical and practical. This new
approach, which has been battle-tested in a number of companies and
in a variety of industries, releases you from the hell of
commoditization and low prices. It differentiates you from the
competition, paving the way to better pricing, better margins, and
higher revenue growth built on winning relationships with customers
that deepen over time.
Turn Selling Around
The heart of the new approach to selling is an
intense focus on the prosperity of your customers. This is a radical
departure from what most salespeople and selling organizations do.
The entire psychological orientation is shifted 180 degrees. No
longer do you measure your own success first. Instead, you measure
success by how well your customers are doing with your help. You’re
not focused on selling a specific product or service; you’re focused
on how your company can help the customer succeed in all the ways
that are important to that customer. By tapping the many resources
you have at your disposal to help customers meet their business
goals and priorities, you are adding value.
This ability to create value for customers will
differentiate you in a crowded marketplace, and you will be paid a
fair price for it—one that is commensurate with the value customers
perceive they are getting and the value you do in fact provide. I
call this new approach value creation selling, or VCS.
Value creation selling is sweepingly different from
how most companies sell today, in these ways:
First, you as a seller and your organization
devote large amounts of time and energy—much more than you do
today—to learning about your customers’ businesses in great detail.
What are your customers’ goals? Which financial measures are they
most keen about? How do they create market value and what are the
key factors that differentiate their product or service from those
of their competitors? Only then do you look for ways to help the
customer in the short, medium, and long term. The greatest
opportunities lie in the medium and long term, where you and your
customer can work together to change the nature of the game in your
customer’s industry based on value you can help provide.
Second, you use capabilities and tools that you’ve never used
before to understand how your customers do business and how you can
help them improve that business. Sales is no longer just for the
sales force: you need to muster the help of people in many parts of
your company to do that. People from many different departments,
including legal, finance, R&D, marketing, and manufacturing, become
intimately familiar with your customer. You compile large amounts of
information about your customer, both facts and impressions, in
useful databases that are shared and used to determine the best
approach for helping your customer win.
This will demand that you build new social networks,
both within your organization and between your organization and the
customer’s shop. Information will have to flow in both directions,
and there will be a need for frequent formal and informal
interaction among people serving different functions within your
company and between your company and the customer’s. For example,
your engineering people will need to meet with the people in your
customer’s shop who define the specifications of your customer’s
products or services.
Third, you’re going to make it your business to
know not only your customers but also your customers’ customers.
It is no longer enough simply to satisfy your customers’ demands.
You also have to know what motivates their customers. In order to
tailor your solutions to your customers’ markets, you have to know
who their customers are, what they want, what their problems and
attitudes are, and what decision-making processes they use. To
devise unique offerings for your customer, your company must use its
capabilities to work backward from the needs of the end consumer to
the needs of your customer. This is the customer value chain.
Fourth, you have to recognize that the execution
of this new approach will require much longer cycle times to produce
an order and generate revenue. It requires patience,
consistency, and a determination on your part to build a high degree
of trust with your customers. This is imperative because in this new
relationship the two-way information exchange is far deeper than
what you have relied on in the past. But once it gets going, the
cycle time can be very fast, because you will have established trust
and credibility.
Finally, top management in your company will have
to reengineer its recognition and reward system to make sure that
the organization as a whole is fostering the behaviors that will
make the new sales approach effective. Hitting quarterly sales
targets is not the only basis for rewarding the sales force under
this approach. Further, other members of the sales team from various
functional areas must be recognized and rewarded proportionately for
their contributions. If after receiving sufficient training and
support the salespeople or other functional executives don’t adopt
the new approach with wholehearted enthusiasm, you will have to
replace some people.
What the Sales Force Will Need to Know
Value creation
selling entails profound changes in the sales force itself.
Salespeople are no longer solo operators. Rather, they are team
leaders, responsible for organizing and directing groups of experts
from such diverse areas as finance, legal, and manufacturing in
their own organization. Your company’s support functions will need
to work in earnest with the sales leaders, synchronizing their
priorities with the needs the sales leader lays out. (See the
illustrations comparing conventional selling with VCS.)
This is a role
salespeople are unaccustomed to, and many will at first be uncertain
about their leadership abilities. But most salespeople have good
interpersonal skills. Many will excel in coordinating their
colleagues’ efforts and will enjoy doing it.
Salespeople will have
to master a new body of knowledge and analytical tools in order to
earn the respect and cooperation of their team members. They will
need the ability to research and understand the customer’s business,
including the customer’s market segments and trends in the
customer’s industry, and most important, how the customer’s business
makes money now and how it will continue to make money in the
future. To gain that knowledge salespeople will frequently call upon
their teammates to engage with people in the customer’s shop. The
teammates will develop their own connections inside the customer’s
company and contribute their insights to help the team develop a
view about future trends and game changing ideas to help the
customer.
Probably most daunting
to salespeople, they will have to become diagnosticians. Using their
own knowledge and all the other capabilities necessary from within
the selling organization, the salesperson must develop a very clear
and specific definition of the customer’s business needs. They must
tap the creativity and expertise of their colleagues to shape some
alternative offerings to satisfy those needs, and test those
alternatives by engaging with people in the customer’s organization,
but the salesperson takes the lead. Finally, he or she must refine
the value proposition and be prepared to demonstrate, especially to
key decision makers, how the customer’s business stands to benefit.
Value creation selling
does not end once the sale is made. Interactions among the various
people of the customer’s organization and the selling organization
must continue after the sale. That is a critical part of building
the trusting relationship necessary to develop future value
propositions, including some with longer time horizons. The
salesperson must ensure not only that the solution actually produces
the promised results, but also that the continuing dialogue with the
customer is forward looking, energizing, and aimed at creating
game-changing ideas.
If you think about the
many ways in which the sales job changes, you’ll realize that
something important happens: the salesperson who can execute this
approach is transformed into a potential general manager, with all
the decision-making, analytical, leadership, and profit and loss (P
& L) responsibilities that are part of that job. The company gains a
source of general management talent that it didn’t have before and
salespeople have a new career track. The more successful among your
salespeople can easily move into a variety of high-level jobs,
particularly as heads of P & L centers or business units, or even
eventually the CEO job.
The Promise of Growth
Value creation selling
is about re-creating the front end of the company with a sense of
urgency and appetite for change that reflect what’s at stake. The
successful execution of VCS will provide your company with significant
benefits, both internally and in the competitive marketplace. If you
are among the first in your industry to adopt it, you will have a
significant competitive advantage. This book can help you get where
you need to go. It provides the tools, the ideas, and the
methodology you need to train and support people in the selling
organization and execute the sweeping corporate changes that will be
required. It provides guidance not just for salespeople and sales
managers but also for the many people throughout your company who
will be active participants in value creation selling. It is
relevant for any business-to-business company, a term that
encompasses nearly every company in one way or another. These
companies must escape the commodity pricing that is part of simple
transactional selling and become sources of value creation for their
customers.
There is no quick fix.
If there were, most people would have made it long ago. But those
leaders who are forward looking, who have the temperament to
implement value creation selling and stay with it, will enable their
companies to win on a consistent basis. Suppliers that create real
value for customers will stand out against the competition and get a
better return on their great strategies, innovations, and talented
people.
Let me give you some
examples of how value creation selling can be used in different
industries. Software is generally sold to a customer’s chief
information officer. The salespeople calling on the CIO generally
base their pitch on the costs it will help the customer reduce.
Think about this: What if they could show a bank how the software
could help that bank retain a client or better tailor its products
or services to its client? The salesperson would be demonstrating
how her company’s product creates value for the customer. Value
creation selling in this context is about increasing revenue, not
just reducing costs.
Communications
companies like Cingular, Verizon, and Vodafone sell their offerings
to large multinational companies such as IBM, American Express,
General Electric, and Siemens. For the most part, those sales take
place based on the price of the offering. If, instead, the vendors
could show their customers that modifications to their
communications networks can increase revenue or cash flow, they
would have a much more powerful case to ask for and get a premium
price rather than a discounted price. They would be creating value.
Many pharmaceutical
companies market their drug products directly to third-party
insurance companies like
United Healthcare, WellPoint, and Aetna. As in so many other
business-to-business transactions, the negotiations are about price.
But as consumers and government regulatory agencies turn up the
pressure to keep a lid on drug costs, the pharmaceutical companies’
sales forces have a role to play in helping their large customers
understand their constituencies. That can help create value. In the
consumer packaged goods arena there are huge producers like P&G,
Colgate, and Unilever and equally large retailers like Wal-Mart,
Target, and Walgreens. In the past the producers and the retailers
battled one another over price. But today they are increasingly
working hand in hand to fi nd ways to bolster revenues, increase
cash flow, and achieve higher turnover per square foot of shelf
space. And while the retailers, especially Wal-Mart, have a fearsome
reputation for extracting the last tenth of a cent from their
suppliers, I have witnessed one producer increase its gross margin
over a 20-year period from 40 to 60 percent while selling through
Wal-Mart and Target. The tight-fisted retailers allowed those
margins because the producer’s managers and sales force demonstrated
that their products would increase the retailers’ revenue and
inventory turns. They were creating value.
In Japan, Tyco
Electronics supplies equipment to Toyota. But the relationship is
far from arm’s length. Instead, Tyco has its people in Toyota’s
factories, where they can ensure the performance of Tyco’s products
while looking for new ideas to improve Toyota’s cars. In a
three-year period Tyco may bring Toyota as many as twenty-five
important new ideas that increase the attractiveness, efficiency, or
reliability of Toyota automobiles around the globe. Tyco is in
reality selling value, not just products, to
Toyota.
Opportunities abound.
But you might have to make some significant changes to your business
if you want to
pursue them.
Copyright © 2008 Ram Charan |
