Bottom-Line Selling: The Sales Professional's Guide to Improving Customer Profits [Secure eReader]
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eBook by Jack Malcolm
eBook Category: Business
eBook Description: Bottom-Line Selling gives you the fundamental tools to understand your customers' business issues and to represent yourself credibly as a true consultant who can deliver financially measurable business solutions.
eBook Publisher: McGraw-Hill Companies/McGraw-Hill, Published: 2002
Fictionwise Release Date: September 2002
Selling in Changing Times
May you live in interesting times.
Ancient Chinese curse
Whether or not you consider it a curse or a blessing, the times that we live in are certainly interesting. For about the last dozen years, we have been riding a wave of change that shows no sign of breaking anytime soon. The events since roughly the mid-1980s have been dramatic, sudden, and unexpected. And the pace of change is, if anything, accelerating. Who knows what the next 10 years will bring? As Churchill said, "I never make predictions, especially about the future."
Probably the most dramatic upheaval has occurred in the international political scene, but equally momentous domestic changes have taken place that have translated directly into everyday changes here at home. Our society, our culture, our schools, our economy -- in fact, all of our institutions -- have seen dramatic shifts in the old order. Long-established ways of looking at the world around us and of doing things are yielding to new pressures and imperatives, and quickening change seems to be the only constant.
Our economy and business culture have been affected as dramatically as any other sector of society. Corporate America has undergone wrenching changes over the past decade. The commercial landscape is littered with the names of once proud players who have fallen by the wayside. Names once synonymous with business greatness are remembered only in case studies as examples to be avoided. Millions of middle managers have added sudden unemployment to their midlife burdens and have had to painfully start over either as independents or in unfamiliar new careers.
Two conspicuous trends have converged in the stream of economic history to produce these changes: the unprecedented pace of technological improvement and the globalization of the economy. Technology has made previously undreamed-of improvements in productivity and competitiveness possible; globalization has made them necessary. In some cases the combination of the two has caused revolutionary changes in business practices.
A central characteristic of human know-how is that, unlike a genie, once it has been let out of the bottle, it can't be put back in. Firms raise the ante by introducing new and better ways to do things, only to find that their competitive advantage lasts just as long as it takes their rivals to figure out how to do it better, cheaper, or faster -- and so the cycle continues. Your customers and prospects are playing competitive leapfrog, facing an endless cycle of escalating expectations, in which winning an advantage today earns them only an entry to tomorrow's even tougher game.
For example, the overnight-delivery industry did not even exist 25 years ago. When Federal Express promised to guarantee delivery of packages overnight, the market was skeptical at best. Beginning with the first flight which delivered only three packages, the industry rapidly took off. Competitors quickly joined the contest. Soon it was not good enough just to get the package there overnight with almost perfect success; the package delivery company also had to be able to instantly tell the consumer exactly where the package was when asked. The next step was order fulfillment: the company not only delivers but even assembles customers' products for them. As of this writing, FedEx now supplies software that allows its customers to track packages themselves. Where will it end?
The Federal Express experience points out that competitive advantage is ephemeral: today's dazzling new capabilities are tomorrow's price of admission to the competition. The bar is always being raised for your customers, and their own customers' initial delight at the new level of value quickly becomes "What have you done for me lately?"
Technology has also significantly lowered barriers to entry, expanding the pool of likely competitors. As computing power grows ever cheaper and more accessible, "high tech" is almost a superfluous term: the technology is accessible to anyone.
Information technology is transforming marketing from a mass phenomenon to "mass customization." This phrase, which might have been an oxymoron a few years ago, simply means that information technology gives firms the flexibility to quickly adapt their product to fit individual customer needs, and their customers come to expect it.
The globalization of the economy, caused partly by the new technologies, has in turn stimulated even faster change. National sovereignty, distance, and protected markets are crumbling against the onslaught of computerization and communications, to name just two of the technologies. Manufacturing firms are being exposed to the full force of international competition, and knowledge and services, which are becoming primary in the world economy, are even less affected by borders and geographic barriers.
Gone forever are the comfortable days when businesses in other countries could be relied on to "know their place" and compete only in commodities and low-tech industries. No country has a corner on brains and innovation, so the marketplace is getting ever more crowded. The net effect is that the pool is bigger, and there are some big and swift fish out there competing for the same food supply.
EVOLUTION AND REVOLUTION
Technology often has consequences unintended by its creators. When you combine that factor with intense competitive pressure, surprising things can happen. Driven by human ingenuity and need, technology acquires a momentum of its own, and incremental improvements give way to revolutionary methods and goals. Many companies have invested in technology to automate existing processes, only to find out that technological improvements have permitted radically different ways of doing things. Rather than automating the steps, they have found ways to totally eliminate them.
Although technological improvements can often provide unexpected benefits, sometimes the opposite can happen. Some technologies offer elegant solutions when the public just does not perceive a problem. As of this writing, personal digital assistants and digital cash cards come to mind. The lesson to be learned is that it is more important than ever to understand your customers and their needs.
By now you may have guessed where this is leading: your customers are increasingly embattled and bewildered by escalating demands, and they are passing these pressures on to you. The old ways of selling and doing business just won't cut it anymore.
Raising the Bar
As the bar is being raised for your customers, they are in turn raising it for you as a sales professional. Like billiard balls transferring their momentum to the other balls on the table, they will pass their escalating demands on to you and your competitors. And your competitors, responding to those same pressures, are getting better all the time. The bottom line for the sales professional: the habits, actions, and practices you followed in the past will not necessarily be enough. You cannot expect to enjoy the same level of success you have had in the past by doing the same things. You must continually become better at what you do.
Companies are demanding more and more of their suppliers. The pressure from the marketplace and their customers is passed on to you. They are demanding better service, higher quality, faster response, and lower prices. Your marketplace offers daunting challenges, but these are balanced by magnificent opportunities.
Reduction of Suppliers
Fortunately the relationship is not entirely one-sided. As the environment becomes more challenging, many firms are realizing that their best chances for survival rest on developing cooperative communities of mutual interest. These companies are forging new partnerships with suppliers, promising closer relationships and long-term contracts in exchange for greater demands. They have come to realize that it does not make sense to invest the time and effort to dig through mountains of information and find minute differences between a large selection of highly qualified suppliers every year when the contract comes up for renewal. Far better to spend that energy creating close relationships and real partnerships.
In return for granting longer-term contracts, the customer receives lower transaction costs, steeper learning curves, and preferential pricing, and finds that it is less expensive to manage the relationship over the long term. For example, Chrysler Corporation has slashed the number of suppliers it uses from 2,500 to 300. How would you like to be one of the 2,200 who has been shut out?
The result of the trend to partnerships is simple: it elevates the consequence of success or failure in the sales effort. The winners enjoy the stability of the long-term contract; the losers must wait that much longer to get another chance at the business, if it comes at all.
The new long-term relationships demand far more than mere price-performance comparisons, although they are still critical. If you would forge a true partnership with your customer, you must be able to create value in ways that your competitors can't, or your customers can't do for themselves.
In The Digital Economy, Don Tapscott says, "Middleman functions between producers and consumers are being eliminated through digital networks." As a salesperson, you are in effect a go-between connecting your company's production arm to the customer. The true function of an intermediary is to provide information and lower transaction costs. As information becomes more widely available, and direct communication becomes easier through the Internet and other technologies, intermediaries are needed less and less.
Your customers are "information affluent," with access to a tremendous amount of information about your products and those of your competitors. They have less of a need for you and the information you can provide. Following the simple laws of supply and demand, the more information that is available, the less valuable it is. In fact, the last thing your customers want is more information. They are already drowning in it. And if they do want it, they can usually get it through literature or the Internet. If you are to retain your value to your customer and your own firm, you must find ways to be more than just an intermediary. You must add value to the equation.
So, how do you avoid being squeezed out? You must increase the value of the information you offer to customers, by turning it into knowledge and understanding. As information becomes worth less, knowledge becomes worth more.
My definition of knowledge is that it is information put to good use. In the confusing flood of information, the person who can bring a broad perspective, weaving together data and information from widespread sources to focus on and solve particular business problems, will become more and more valuable. Your customers do not have enough time to do this for every business problem they face. They will come to rely increasingly on those with this unique skill.
Knowledge is not just something that is already "there," ready to be plucked from a book or a computer screen by anybody who comes along. It is being created every day. Every time two or more pieces of information are brought together to provide a fresh perspective on an existing problem, knowledge is created. If this new idea results in a new way of doing things that helps a customer solve a problem or gives a customer the ability to accomplish what was previously out of reach, you have created value. The value is not there until somebody thinks of it. Yesterday's wealth resided in objects, but in today's world the principal source of most value is the creation of knowledge.
When you talk about adding value to your customers, what you are really doing is adding knowledge. You add value by creating knowledge about how to improve the customer's business. Knowledge creation results from the coming together of two major ingredients: intimate knowledge of your customer and expert knowledge of the application of your product or service.
Knowledge of customers means knowing a tremendous amount about how they add value to their customers, how they gain advantage over their competitors, the key drivers and measures of success in their industry, and their business processes. It means seeing the world through their eyes but seeing it in some ways better than they can.
Obviously you will not be an expert in all facets of a customer's business, or have solutions for all the company's problems. If you did, you might as well run the company. But what is possible is understanding a specific aspect of your customers' business operations better than they do, because that's what you specialize in, and as a professional you know more about that class of problems and opportunities than anyone else.
When you achieve this level of knowledge, you have the tools to set yourself apart from the competition. In a marketplace in which everybody is pushing the same thing, your differentiation and your edge will come only from fresh approaches to existing problems.
A Fish Story
To the novice, fishing looks pretty simple. Dip a hook into the water, and either a fish comes along and takes the bait, or it does not. There's not much more than luck involved.
People who know a little about fishing know it's a little more complicated than that. You need the right kind of gear, including rods and reels, the correct weight of line, and of course a complete selection of lures and baits. You also must know how to cast the lure where you want it to go, how to sense when a fish is nibbling, just the right time to set the hook, and how to play the fish so that you don't lose it once it is hooked. They know that skill at fishing does not come cheaply or quickly; there is much more than luck involved, although luck is still very important.
Those who know a lot about fishing, however, know that there is much more to it than just having the right equipment and knowing how to wield it skillfully, if you wish to be consistently successful. They know that beginner's luck sometimes happens, and sometimes even the best get skunked, but that only an elite few consistently find more fish than everybody else. Only an elite few can go out in the morning with the express intention of catching a particular kind of fish, not just anything that comes along, and come back in the afternoon more often than not having completed their mission. These elite fishermen are well respected by their peers, and many of them make a successful living at fishing, either as guides or as anglers themselves.
What makes the elite fishermen different from the rest of us is that they have a complete body of knowledge about the most important element in the fishing equation: the fish. They know what fish like to eat, where they like to go at different times, when they are likely to be biting. They can spot clues that are invisible to most of us but that tell them very clearly if a particular type of fish is in the area.
This range of skill applies equally to salespeople. There are a few who are like the complete novices; they may have a decent product at a reasonable price and be able to succeed for a short period of time, at least until the competitor introduces a better product. Most, however, are in the second category. They have a decent product and work ward at their selling skills, learning how to make presentations, handle objections, cold call successfully, and so on.
For you to be among the elite of sales professionals, the right equipment and skills are essential but not enough in themselves. Customer knowledge is also critical. Of course, you don't take your customers home and mount them on the wall, so that's where the analogy falls apart!
The new sales challenge will create its own winners and losers. The winners will be those who make the changes necessary to adapt, while those who refuse to change will be left behind. If all of this sounds like hard work, it's because it is. That's why the payoff is so great.
The more difficult it is to master, the more valuable will be the elite few who do. You will be a member of a privileged minority. You see a few of them in almost every organization. Their sales seem effortless, because customers are usually calling them. They move easily through the corridors of corporate power. High-level executives take their calls, lower-level influencers call them for information. Their value to the organization matches the Pareto principle, by which the top 20 percent bring in 80 percent of the profits. They are usually well known in the industry, so even if they leave the company, they can easily find work in another organization and pick up with their clients with barely a wobble in the relationship.
Salespeople who can truly understand their customers and consistently help them improve their business processes are still so rare that their customers welcome them, and prospects seek them out. A recent study by the National Association of Purchasing Management revealed that 72 percent of buyers rated salespeople's knowledge of their businesses as low or very low. As one respondent said, "Frankly, salespeople don't have enough information to have intelligent conversations about their customers' businesses."
When you approach the relationship as a partner, your expertise will give you the confidence and ability to gain access to senior-level executives in your prospect and customer organizations and, more important, to know what to say when you get there, so that you will be invited back. While you receive the personal gratification that comes from this, the real payoff is shorter sales cycles and long-term sales partnerships. Higher-level executives can make decisions faster, because the decision-making process does not have to work its way up to them, and they can make money available in the budget where none exists.
Shorter sales cycles are possible because jointly assigning a cost to the existing situation will create a sense of urgency for the decision. Many investment opportunities clamor for attention and budget, but those with real dollars attached to them speak louder and more clearly.
The complexity of many customer solutions today increasingly demands that you and your company team up with other vendors to deliver a complete system. In such a case, the team member who understands the customer best will be in a position to control the customer interface and command the highest profit margins. Additionally, future opportunities with that client will be much more likely to include you as the team's "most valuable player."
When your expertise is prized by your customers, price objections tend to diminish. Certainly your customers will not roll over and play dead for you, but if you have been imaginative enough to create real value for them, you will have done something your competitors have not, and that is value that is worth paying for.
Consistently understanding and fulfilling your customers' needs will help you retain customers longer. As a salesperson, you know how hard it can be to acquire new customers, so it makes sense to hold on to those you have. There are other payoffs for you and your company as well. Studies have shown that longer-term customers generally buy in larger amounts, are less focused on price, bring in new customers, and take less time in the sales cycle for each individual sales opportunity. In fact, these factors mean that reducing customer defections by as little as five percentage points can double profits.
Probably the greatest benefit of selling in this way is that it gives you the power to frame the discussion and create the initiative within an account. Sun Tzu, whose classic The Art of War shaped the thinking of countless business leaders, said: "Knowledge of the problem is the key to the solution." If you can credibly understand your customers' business operations, you can help to define the problems. Often the solution is contained in the way the problem is defined, and if you can bring enough knowledge of your customers' business issues to bear, you can help define the problems that confront them. Be the first to define the problems and present the solutions, and your competitors will be playing catch-up.
As management consultant Kenichi Ohmae aptly put it, "...strategy takes shape in the determination to create value for customers."
Partnering requires a different mind-set from that of selling. Most salespeople look at their customers from the inside out; that is, their view of the sales process begins with themselves. They start with their own needs (to sell something and make money), their products, and the reputation of their company, and then go about looking for a place to fit them. They build their strategies around persuading their customers that their products are better than their competitors'.
As long as you are trying to do something to customers, this kind of thinking is probably enough. But if you intend to start doing things with customers, you must change your perspective.
To be truly successful in winning and keeping customer partnerships, you must start from the outside-in. It's a subtle but powerful shift in mind-set that looks at the sales process from the point of view of the customer first. What are the customer's needs? What keeps him awake at night and is the first thing he thinks about when he gets to work in the morning? What drives and excites your customer?
Your customers are not buyers who go to work in the morning thinking about what they plan to buy that day, or how they are going to spend their company's money. They are people who think about what they want to accomplish, the business and personal problems they face, and the opportunities of which they want to take advantage. Your only hope to forge a true partnership with these people is to first see the world through their eyes, and only then look inward to see what you bring to the table to make their lives easier. Remember, when you go fishing, it's not important which bait looks most appetizing to you.
Customers are your most important asset. Although you won't find them listed on your company's balance sheet, customers are truly your most important asset. They are the reason your company exists and the reason you have a job. These are the people who put food on your table. So, how much do you know about them?
HOW THIS BOOK CAN HELP YOU
The ability to create knowledge for your customers is built on a firm foundation of theoretical and practical business knowledge. This book will show you how to organize your search for information, and where to get it. Starting very generally, it gradually focuses down to specific business operations: how to understand them, improve them, and express the value of your improvements in the measurements your customers consider important. The "Action Points" at the end of each chapter will enable you to turn the concepts to practical use immediately.
Because it is increasingly difficult today to separate products from services, the word "product" is used here to refer both to products and services, except where a distinction must be made. Also, the term "customer" refers to existing customers, potential customers, or prospects.
Copyright © 1999 by Jack Malcolm