Gaining An Edge Through Economic Advantage Selling by Jack Harms
Gaining an Edge through Economic Advantage Selling
To begin the seminar, Harms has the members write down the answers to a number of questions listed on the worksheet. The answers are essential to understanding how to move from the traditional selling process to an initiated selling process.
- What do customers buy from you?
- Why do they buy from you instead of the competition?
- When you don’t make the sale, why do they buy from someone else?
- Why should customers buy from you instead of the competition?
- Where else can customers go in the marketplace to get those benefits?
Many companies have difficulty communicating the value of theft products or services to the customer. This occurs primarily because their selling process is reactive, meaning their salespeople contact customers at the customer’s request. Any time you respond to a customer’s inquiry about you or your product, your chances of selling the product at something resembling a premium price go down.
New business is the key to the continued growth and success of any business. New business is also the responsibility of salespeople. Therefore, sales should be defined as the generation of new business. Customer service is the management of existing business. Too many companies lump the two together and ask their salespeople to do both. Customer service is important, but it isn’t selling.
The skills and talents of the salesperson are most valuable when he or she gets you a new customer. Once the initial sell has been made, the relationship very quickly moves to one between the company and the customer rather than the salesperson and the customer. As you spend more time and effort following up and providing service, the customer service function should take over and free up the salesperson to generate new customers.
Ideally, the salesperson and the customer service person should be two separate people. But in many companies, that isn’t practical; the salesperson has to perform both activities. In those cases, it is important to monitor time management to make sure salespeople aren’t spending too much time on one activity and neglecting the other.
As a company grows, the cost of sale as a percent of gross margin should go down. One way to make that possible is to split the sales responsibilities into a customer service function and a new business development function. You don’t have to pay salespeople as much as you do customer people.
When you separate the functions, it requires more management because salespeople need to be organized and managed differently than customer service people. You also need to have different kinds of people because the kind of people who will put themselves on the line to get new business are very different from those who prefer to support existing accounts.
Salespeople have very high ego drives and strong desires to win the game. They will put up with the high level of rejection that comes with sales. It’s so important for them to win that they will keep making calls. They also have a self-confidence that allows them to not internalize the rejection. Most people don’t have such a high level of ego, which is why there are few good salespeople.
Good salespeople also have empathy to temper the ego drive. Empathy is the desire to help others. Good salespeople get real satisfaction from helping people solve problems. They also have high energy levels.
People that fit the customer service profile have very high levels of empathy, no ego drives, and very little energy. They like to solve problems, but they aren’t willing to go out and find the problems to solve. But if people bring problems to them, they are happy to solve them.
The definition of selling is to find a problem and create a solution. Marketing is the activity of figuring out what other benefits you can provide customers through your product or service.
The current trend in selling is relationship selling. Many companies misinterpret this to mean “you like me and I like you, and even if I don’t like you I pretend that I do.” This is selling based on the premise that “I am a wonderful person and you like me.” Most salespeople are very likable, but they fail to understand that they have no control over whether people like them or not. People like them but they don’t really know why. These salespeople are called commercial visitors.
Commercial visitors make their closings on a random basis. Their closing ratio is a percentage of the number of competitors they have in the marketplace. If you want to sell on this basis, you must have a parity (not a competitive) price. If you try to sell at a premium price, this violates the “I like you, you like me” relationship.
The only relationship that works in business is the relationship between the company and what it provides and the customers and what they need from you. The salesperson is just one piece of that.
Sales engineers are those who have been put in sales positions because they are loquacious and can talk better about the product than other people. But there is a mental conflict between the two. It takes entirely different characteristics to be a good engineer than it does to be a good salesperson.
If you are a product specialist, and you believe the reason you are selling successfully is because you understand the product better than the other person, you find people in the company who understand the product so you can talk to them. You end up talking with purchasing agents, engineering types, project managers — people who have specific areas of responsibility. You talk about the various features of your product and the advantages those features provide that the competition doesn’t offer.
Everybody talks about dealing with customer needs, but in reality most companies end up dealing with customer wants. Needs are problems that need to be solved. In the commercial marketplace, there are only three problems you can resolve for the customer:
- Reduce costs
- Improve productivity
- Enhance competitive standing
In the consumer or retail business, the need isn’t a business problem, it’s lifestyle enhancement.
Your goal with initiated selling is to say, “You are going to pay me more, but by doing so, it will cost you less.” Yet, 99% of all salespeople talk to people whose job is to lower the price (not the cost). They don’t know and don’t care about the cost. Their goal is simply to lower the price. You don’t stand a chance of raising the price with those people.
In any organization, only a few people care about lowering cost. These are the decision makers and decision influencers. A decision maker is the person in the organization who can change the way the company does business without asking permission — the owner, the president, or the CEO. Decision influencers are decision makers in training. They are the people the decision maker turns to and asks, “What do you think we ought to do?” These are people at the CEO, VP level. With initiated selling, you always want to be talking either to decision makers or decision influencers.
Needs are problems and wants are solutions. The vast majority of all selling activity occurs at the want level when the customers have already decided what they want to buy: Initiated selling takes place at the need level because you talk only to those people who really understand the need.
Technicians are staff people (lawyers, engineers, HR people, etc.) who are in the position to pass judgment as to whether or not your product or service meets the specs. The goal is to avoid this level, but in reality that isn’t always possible. Salespeople who are experts in the product typically go to technicians. They spend a lot of time talking about features because that’s what technicians are concerned with.
Everybody in the organization who isn’t a decision maker, decision influencer, or technician is an implementer. They operate in a preset group of parameters. Salespeople can get in to see implementers very easily. After the salesperson makes the presentation, the implementer generally sends him or her to the technician.
When the sales process starts at this level, it is very difficult to get it through to the next level. Selling in this manner asks the technicians to change the way they are doing things and to admit they didn’t make the best decisions before. This is very difficult to do.
The best way to get around the technician is to start at the top. People at the top don’t buy products; they buy concepts. Don’t create a product direction or description; instead, create a concept of what the product will be. Tell the decision makers or decision influencers what they are going to gain from doing business with you.
If the CEO takes the product to the technician and says, “We’re interested in buying this product, will it work for us?” the technician is going to look for ways to say yes. If that same question comes from an implementer, the technician is going to look for ways to say no. It is a subtle difference, but it has powerful implications for selling.
IMPLEMENTING INITIATED SELLING
The counselor/salesperson sells on a needs analysis basis. The problem is that most of them still try to sell to the lower levels where people have wants, not needs. To become an effective counselor/salesperson, you have to do certain things in a certain order:
- Target the markets you will deal with: The traditional sales method is to knock on the doors of anybody who ought to buy from you (suspects). Generally this is a waste of time because most of them don’t see any value in what you do. The challenge is to spend your time dealing with people who think you can help them. If people perceive you as being able to help them, they will talk to you. If they don’t, they won’t.
The job of implementors and selectors is to listen to salespeople’s presentations. The issue of whether you can help them or not doesn’t matter; they are going to listen to you anyway. Instead, you have to get to the decision influencers and decision makers. They will know if you can help them or not.
The most effective way to reach decision makers and decision influencers is to write letters to suspects and let them tell you they are interested. Do not use the traditional sales letter, which says how great you and your product are, but one that invites the suspects to tell you that they have problems you might be able to solve.
Send the letter to the decision maker — the president, owner, or CEO. In huge companies, this could be a division manager. By starting out with the president, the worst that can happen is they move you down one level. If you start anyplace else, the worst that can happen is you stay there or get moved down another level, so it makes sense to start at the top.
Instead of an 8½” x 11” standard sheet of paper, print the letter on 7” x 10” (baronial size) and mail it in a monarch envelope. When that size letter hits somebody’s desk, it gets opened. Each letter should be individually typed and signed by the salesperson.
At first, the letter will end up in the hands of the president’s secretary or administrative assistant. They organize things in three piles for the CEO:
- Must read (reports, letters, etc.)
- Magazines, newsletters, etc.
- Direct mail
Because your letter looks different, it not only ends up in the must read pile, it ends up on top because it is smaller.
The letter should start out by saying: “Dear recipient: Our company has been helping companies like yours lower their costs, improve their productivity, and enhance their competitive standings for X number of years.” It then goes on to explain how you will do that for the customer’s business by using certain resources. When reading the letter the customer asks, “Do we have anything around here that is causing us difficulty that somebody with those resources might be able to help us with?” Eight out of ten will answer no and throw away the letter. Two out of ten will end up asking the salesperson for an interview.
Mail about ten letters a week. Follow up with a phone call about a week after you send the letter. This is not a direct mail campaign; it is highly targeted at a specific group of customers. When you call, you’ll probably get the president’s secretary: Say something like, “I sent Mr. Jones some information last week. I said I would follow up; I’m doing that now. Is he there please?”
About six out of ten people remember receiving the letters. About five will say, “Thank you. We appreciate it but we aren’t interested right now.” Two out of ten will agree to an interview. The key to making the phone call is to be timely. If you wait too long, they won’t remember the letter and won’t have any interest.
Be prepared for voice mail. Rather than thinking of it as a roadblock, look at it as a 30-second commercial opportunity. Have a written, rehearsed script ready to read into the voice mail.
If you’re already doing business with the customer, this mailing approach can also work but the letter needs to be a little different. It needs to say, “We have been doing business with you for a long time. We have been helping you lower costs, improve productivity, and enhance your competitive standing. I feel like there is more that we could do, but I don’t know enough about your business to know everything we could do. I’d like to come in and talk to you about the business.’
This changes the relationship. Normally, salespeople go in to talk about their business. This letter sets it up to talk about the customer’s business. If you’re already dealing with the purchasing agent or project engineer, write a version of this letter and send it to the president. The goal is always to get the customers to identify themselves to you. This prevents you from wasting time with people who have no intention of buying.
- Conduct the interview: The object of the interview is to gather information, not to make a presentation. This means you have to approach the meeting very differently. Don’t bring anything with you — no literature at all in the car or the briefcase, nothing about your company at all.
If the decision maker asks to see some literature or asks you to cut to the chase and tell him what you are selling, you need to respond in a very specific manner. Say “I can’t sell you anything now because I don’t know enough about your business yet to know what you need.” Then redirect the conversation back to asking questions about their business.
The traditional method of selling involves trying to sell on a single hit — trying to get the customer to agree that you are good on a presentation. Initiated selling takes at least two calls, maybe more. Your salespeople must be trained to listen and ask insightful, meaningful questions that elicit information from the customers about their businesses and their problems.
There should be absolutely no selling on the first call. Don’t talk about your business at all. The only thing you have to sell is the second appointment. If you do the job right, they will ask you back for the second interview because you are holding out value. You are offering to go away, work on the problem, and come back with an answer to one or more of their business problems.
Start out by asking about the areas you know are of importance. What are their cost issues? What are their productivity issues? What are their competitive issues? At the CEO level, you are talking to the person who can answer these questions. The way they answer these first few relatively generic questions directs the way the rest of the interview goes.
As you get down into the lower echelons of the organization, those people don’t have the answers. You have to ask questions like: “What problems do you have in your business? What makes it hard to be a buyer (or engineer, etc.)?”
It’s permissible to read from a prepared set of questions, but do not read a prepared script. Taking notes is positive as long as it is done by hand. Taking notes on a laptop communicates an impersonal tone. This may change in the future, but for now taking notes on a laptop is not recommended. You may want to ask the person if he or she minds your taking notes. Most will like it because it makes you look more organized; some may object.
Remember that you are not selling a product; you are selling a concept. When you come back for the second interview, you will present that concept to the decision makers or decision influencers. They will then ask the buyers if it is a good deal. If you have real value, the buyers will never throw you out; they will find a way to justify the deal.
Strive to maintain control throughout the process. When you call on buyers, you are not in control. You have no control over the relationship and the best you can do is hope they buy. When you present solutions at the CEO level, you have much more control. The ultimate goal is to be able to show the CEOs why they don’t have much choice but to buy your product or service.
- Present the ROI to the customer: The second appointment is preceded by solution development back at your business. This is the act of positioning your value to the customer. Value is equal to the benefits the customers will receive compared to the prices you charge them. Instead of explaining benefits the old-fashioned way (telling the customer how great you and your product are), lay them out in terms of dollars received and earned. Present an ROT statement to the customer.
In order to do this, you have to get the numbers. One way to get them is to go down into the organization’s accounting department. As you move through this process, you’ll find that people will give you a tremendous amount of information. If people really think you can help them, they will be forthcoming with the information you need. If you can’t get the numbers, estimate.
Show the customers the potential savings based on your numbers and then give them the opportunity to come up with their own. This way it becomes their numbers and not yours and allows you to guide them through the elements you want them to look at. They end up looking at your numbers the way you want them to.
When charging the costs of your product or service, all you have to subtract is the increment that represents the premium (what the customer is paying extra to get the benefits your product provides), not the whole cost. Once you figure the net gain, divide it by the premium you charge. This makes the ROT percentage look larger.
This represents the big difference in the second appointment. With traditional selling, you go back to the customer and talk about features. With initiated selling, you go back and demonstrate cost savings, increased productivity, and enhanced competitiveness in tangible, bottom-line numbers.
Whenever possible, focus on how your product will help the customers increase theft profits, but only at the CEO level. CEOs always like to increase profits; purchasing agents don’t even know what the word means.
- Present the proposal: With this approach, it is required that you present your material different from the standard method, where you try to show how your product is better than the competitor’s and you never get around to talking about benefits. Instead, you reverse the process and use the BAF (benefits, advantages, features) technique instead of the FAB (features, advantages, benefits) technique.
Start out by providing the customers with a needs recap. Say something like, “When I was talking with you last week, we understood you to say you are facing the following problem(s).” Then restate what they told you the problem was. Never say, “This is what you need.” Position yourself to get the customers to agree they do have the problems. If you offer solutions, they can’t say no. All they will ask is how you propose to do it.
Next, present the benefits, specifically how much money you think you can save the customers. Talk about the things you can do for the customers, what advantages they can gain from doing business with you, and your features.
Talk about the product or service. Have a capabilities brochure ready to support your presentation. Then give your ROT explanation and how you reached the numbers you presented. Finally, get the signature.