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Sales

Forget Core Competence: What is Your Core Contribution?

By Jack Malcolm / 12.2.2013 / 1 Comment

Let me tell you how great I am.

If I had seriously begun this article with that line, would you have kept reading?

Hearing people speak about their core competence is like listening to the boring high school friend who can only talk about how great he was back in the day. No one listens, no one cares, because it is totally irrelevant to their lives in any way.

So, you’re very good at something; so what?

People don’t care what you do; they care what you do for them. The only reason your company even exists to be in position to develop a core competence is to make a contribution to customers in some way. No one cares how good your mousetrap is if they don’t have mice, or if the one they have works well enough.

Remember the old saying that an expert is someone who learns more and more about less and less until finally he knows everything about nothing? Although not as extreme, that’s the risk you run into when you focus exclusively on your competences and not your contributions. Focusing on core competence keeps you looking internally, but needs exist externally.

You have to keep looking externally to stay you grounded in economic reality. For example, Sony still puts out excellent products, but it is a shell of its former self because it has not kept up with what consumers want and how they buy. Contributions keep you relevant, so that people want to hear what you do. If you can talk about that first, they will want to know more about your core competence.

So why not start with that—instead of talking about how great you are, why not talk about how great you can make your customer? Core competence focuses on how you do things, but the why always has to come first. The most important question, as Niraj Dawar reminds us in his book, Tilt: Shifting Your Strategy from Products to Customers, is not “What do you do?”, but, “Why do customers buy from you?” That’s another way of saying that you have to start from the outside-in. The answer to that (external) question will govern where you focus your (internal) efforts.

What do you contribute to your customer’s business or personal bottom line? What do you contribute to improve their personal experience? Do you make them more profitable, do you make them look good, protect them from harm or risk, make their lives easier?

When people ask you what you do, they are just following social conventions, but that’s not really what they want to know. The urge to be polite prevents them from asking what they really want to know: “What can you do for me?”

So, next time someone asks you what you do, save them the trouble and answer the question they wanted to ask.

I had to learn that message myself. For years, when people ask me what I do, I would answer that I am a corporate trainer. Now, I tell them that I make people more persuasive. It definitely makes for longer conversations!

Sales

What Happens When You Lower Your Prices?

By Jack Malcolm / 11.29.2013 / 3 Comments

While it may seem obvious enough that you should always strive to realize the highest possible price for your products, a closer look at the problem quickly shows why it’s absolutely critical to your company and to you as a salesperson.

Economics: In many industries, price discounts of 15-20% are common in order to win business, so a difference in just 1% of the selling price does not seem to be that important. However, let’s take a look at the effect this trivial difference can have on the company’s bottom line. As an example, suppose a company has a net profit before tax of 5% of sales. A 1% difference in the selling price will have a 20% impact on profits!

Let’s apply this analysis to your own company.

1. What is your net profit before tax, as a percentage of revenues?

______________________

2. Divide that number into 100:

______________________

3. That is the multiplier impact that a discount of 1% has on your firm’s profits.

In case you don’t like doing simple math, net profits of 10% means that every percentage of price discount is multiplied ten times. Net profits of 20% means that every percentage is multiplied five times, and so on.

If you follow the logic, then it would seem that companies that regularly discount 15-20% would never make money. The reason that’s not the case is that those discounts are already factored into their profit structure. In that case, you can use the calculations above to see what the positive effect is of getting a premium.

The good news is that in that case, being able to justify a 1% price premium will make a 20% impact to the bottom line.

Besides this immediate, leveraged impact that a price cut has on profitability, proper pricing is also essential for any salesperson looking beyond just this quarter’s quota. A price cut may help close business today, but it only makes future sales even harder, because of the effect it has on your buyer’s behavior:

Reinforcement: It is human nature that behavior which is rewarded is reinforced and repeated. When your buyers ask for price discounts and you oblige, you are reinforcing an escalating series of future discount requests in the future.

Signaling: Secondly, think carefully about the signal that price sends to your customers. In products that are difficult to evaluate before purchasing, prince is one of the most significant cues to the quality. When you lower your prices, what signals are you sending about the quality you offer and your confidence in it?

Trust: Backing off your price demanded at the late stages of the sales cycle may contradict everything you had previously said to the buyer during the sales process. They will not trust your words in future sales.

Relationship: Customers who switch to you because of price will leave because of price. The length of the relationship will be taken out of your control.

In a previous article, If It Was Easy, Anyone Could Do It, we focused on how doing the hard work to justify a higher price can actually make your customer better off. As you can see from following the math, it has a huge impact on your own company as well.

Uncategorized

What I’m Thankful for Today

By Jack Malcolm / 11.28.2013 / No Comment

My wife, my son and my daughter.

Living in a time when persuasion not force is the preferred way to get what you want.

Working with so many people who sincerely strive every day to serve their clients, make themselves better, and learn something useful every day.

My country, even though I’m actually in Italy today on Thanksgiving. The turkey can wait until I get back.

My clients.

My friends.

Having a career which pays me for learning, teaching, and helping others grow.

My “co-opetitors” who share ideas and help promote mine.

Being self-employed so I can take a couple of hours out of the office on the rare days we have surf in Fort Lauderdale.

People who read my blog. Thank you, especially today.

Uncategorized

How to Make Your Presentation Bulletproof: Part 3

By Jack Malcolm / 11.27.2013 / No Comment

In the first two parts of this series we focused on the preparation necessary to anticipate and prepare for possible questions and objections from your audience. In this part we focus on how you answer the questions.

The key point of this article is that if you’re a salesperson, the skills that you have learned for handling objections during a sales call are not the same skills that you use when dealing with Q&A. In fact, what works during a one on one sales call can actually hurt you during a presentation.

Most sales professionals have learned a technique for handling objections that goes something like this:

Listen carefully to the objection or question
Probe further to understand the objection if necessary
Soften, or “cushion” it by saying something like “good question”
Set up your answer by using an analogy, asking a question to redirect, etc.
Answer the objection
Check for agreement

It can be a rather long process, but it’s very effective because it avoids turning things into a debate.

So what’s wrong with using the same process for a presentation? The principal difference between a sales call and a presentation is the number of people in the room, and that changes the dynamic entirely.

When you’re in a call with one or two people, you need to answer questions to their satisfaction in order to move forward in the conversation. That’s why you give them every opportunity to talk and get their objections into the open.

But in a room full of people, your focus is usually not the individual, but the group as a whole. We all have faced audience members who love to ask questions just to get noticed or show how smart they are, and the worst thing you can do is to let them take over.

The standard objection process lets them do just that. Let’s modify the process:

Listen. This does not change; it is tied for the most important part of the process in either case. Don’t start trying to think of your answer while they’re still talking.
Probe. In a presentation, you want to limit this. Assume you’ve heard the question correctly and answer what you’ve heard. A little bit is OK, but probing too much may give them the floor for too long.
Soften. Drop this entirely. If you say good question to someone, you have to say it to everyone so they don’t feel slighted, and then what do you sound like?
Set up. Drop this entirely or at least keep it as short as possible. Not everyone in the room cares as much about your answer as the person who asked, so you want to keep it brief.
Answer. This is as important as listening. The first thing the entire audience is looking for is to see if you’ve answered the question. You may decide to bridge off your answer to reemphasize a point from your presentation, but you first have to earn the right by answering the question—otherwise you come across like an oily politician.
Check for agreement. Drop this, or you run the risk of opening a full can of worms that no one else cares about. Confidently assume that your answer was the right one and move on to the next question.

There is an exception to these principles. When the person asking the questions is the decision maker, for all practical purposes, he or she is the only person in the room at that time.