Undaunted, I’m going ahead with writing the speech and I think I’ll come up with a few useful ideas. I did come up with an interesting idea which I’m going to share here, and I will welcome any feedback or suggestions for improvement:
One of the defining aspects of any profession is a standard body of professional knowledge, so I’ve been reflecting on what a sales person needs to know to aspire to the title of professional. Success in complex B2B sales requires a surprisingly large body of knowledge; here are four general areas that coincidentally all begin with the same first three letters: PRO.
Product: You have to know what you sell, how it works, and what its strengths and weaknesses are. It’s true that product knowledge has declined in relative importance because there is just so much information available to buyers, and sometimes they will know as much about your product as you do, and even more about competing alternatives. However, it will never go away as a requirement because new products are being introduced all the time, and someone needs to be able to explain them and how they work. A more sophisticated form of product knowledge is the type of knowledge that sales engineers usually provide which includes knowing how to implement and install the product and make it work within a complete system. Product knowledge includes everything that affects the delivery of value to the customer, so a sales pro has to know how orchestrate and deploy his or her company’s resources to the customer’s benefit.
Product knowledge is about yourself. The next three areas of knowledge focus on the customer.
Problem: If you’re going to sell solutions, you have to know a lot about your customer’s problems. While this sounds obvious, you can pick up just about any piece of sales literature today and find the word solution plastered all over it, with nary a mention of actual problems. I’ve heard salespeople blather on about their solutions without ever once asking a question to confirm that the customer has a problem or to understand the nuances of their particular challenges. Remember that even if you have seen it all before—to that customer, on that day—their problem is unique. A professional salesperson balances the credibility of having seen similar issues before with the concern for the customer’s perspective.
Process: You may think you’re selling products, but what your customers are really buying is process improvements. Their businesses are a collection of processes and workflows that either deliver value to their customers (e.g. shipping products) or enable them to operate on a daily basis(collecting accounts receivable). Sales pros know those processes intimately and can identify specific improvements opportunities within those processes that reduce inputs, take out steps, improve throughput, and increase or improve outputs.
Profit: At this level, you not only know how your product improves outcomes for your customers, but also why. In other words, you can connect the entire thread from your product to process improvements to business impact. This requires a deep understanding of your customer’s business goals and strategies, their business and competitive environment, industry opportunities and threats, and a wide range of general business knowledge. Armed with this level of in-depth knowledge about your customer, you will be able to work with them to spot unseen opportunities to improve their business, and quantify your value. More importantly, that’s what it takes to earn the position of a trusted business advisor—which is as good a definition of a sales professional as I can think of.
Without realizing it, your first answer probably affected your second, through a phenomenon called anchoring. Psychologists Daniel Kahneman and Amos Tversky first discovered anchoring in 1974 in experiments using a roulette wheel. Participants were asked the same question, but first were asked to roll a roulette wheel, which was secretly rigged to land on either 10 or 65. Participants who landed on 10 on average estimated the number of countries at 25%, and those who landed on 65 estimated an average of 45%. (The answer is 23%)
Anchoring also affects our choices. In an experiment described by Dan Ariely in his book, Predictably Irrational, an audience is first asked to write the last 2 digits of their social security number, and, second, to submit mock bids on items such as wine and chocolate. The half of the audience with higher two-digit numbers would submit bids that were between 60 percent and 120 percent more. The simple act of thinking of the first number strongly influences the second, even though there is no logical connection between them.
The anchoring effect means that the first information we receive has a disproportionate influence on our thinking.
One of the most surprising things about anchoring is how powerful it is even when we’re on guard against it. Even when we know the initial number is totally arbitrary, or way beyond anything reasonable, it still has an effect. If we’re given a high number to begin with, we adjust our own estimate downward, but we don’t adjust it enough.
Even well-informed professionals such as real estate agents are not immune to the effect themselves. In one experiment, four different groups of agents were given 10-page packages describing a specific property. The only difference was in the listed price. When asked to appraise the property, the median value correlated to the listed price, even though each denied that it had any effect on their decision.
Surely professional economic forecasters with serious quantitative training are protected from anchoring? Wrong again–the Federal Reserve studied professional economic forecasters and found that they exhibit anchoring bias toward previous forecasts. In another study, bank loan examiners who know the previous rating given to a loan end up closer to that rating on average than those who begin with no prior knowledge.
What does anchoring mean for persuasive communication?
In personal communication, first impressions set the initial anchor. Interestingly, bad first impressions tend to be longer lasting than good first impressions. The reason is that when we have a good first impression, we are more likely to spend more time with that person, and thus have more opportunities to gather information that can correct our initial impression. When we have a bad first impression, we will spend less time with that person and thus have fewer opportunities for correction.
First impressions are of course also important in presentations. Just as starting high and coming down leads to higher estimates of the product in the number exercise, a strong beginning in a presentation anchors the audience’s perception of you as a confident speaker with a relevant message.
In addition, the order in which you present information sets anchors that influence how choices are perceived. Suppose you are proposing a solution to a problem, which will require a $500k investment. In your presentation, it’s helpful to show that you looked at several options, but be sure to list the most expensive option first. $500k will seem less if you first tell them you considered an option that would cost $700k.
This tactic is commonly used in sales, especially by retailers. Williams-Sonoma once offered a breadmaker at $279, which sold OK. They introduced a bigger model at $429, and few sold…but sales of the $279 model nearly doubled. List price is another form of anchor that makes the sale price look good by comparison. At the supermarket, they post a sign offering 20 yogurts for $10. There’s no unit savings from just buying one, but they’re counting on you buying more as a result of the high anchor.
It works with larger purchase decisions as well. A friend of mine once told me that when he moved to Las Vegas, he specified to the real estate agent the price range of homes he wanted to look at, but complained that she took him to several houses way above the price range first. I told him that she was just setting the anchor.
Successful negotiators use anchoring all the time. People who ask for more initially tend to get more. They stake out extreme positions initially, and even though they may have to retreat a significant distance from the opening position they will usually end up higher. Don’t be afraid to ask for more.
If you’re on the receiving end of anchoring, what can you do about it?
The easy answer is that being aware of its influence should make you less susceptible to it, but unfortunately studies have shown that anchoring exerts its mysterious influence even when you know about it. The problem is that when we adjust from the initial anchor, we don’t adjust enough. It’s like an invisible bungee cord that limits how far we adjust.
There are really only two approaches that work. The first is to arm yourself with as much information as possible so that you have a realistic idea of what something is worth, before you come to the meeting or sales call. The second is “consider the opposite”. Before you make a decision, list the reasons that your estimate could be wrong.
So, have you figured out yet why Hooter’s sells Dom Perignon? The $110 price (at the time I saw it; honestly, dear– it was just for research) is the anchor which makes every other menu item seem cheap by comparison.
If you want to know more about anchoring, or are interested in the psychology of pricing, I highly recommend Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone.
For more about how anchoring is used in negotiations, I recommend Negotiating Rationally by Max H. Bazerman and Margaret A. Neale.
1. Get back to basics. When things are going well, it’s easy to cut corners and get away with it, such as doing less sales call planning, making the prospecting calls, etc. Get more training or at least review the material you already have from previous training sessions.
2. Pay extreme attention to detail. It’s very easy to lose a customer when times are tough. They’re not in a forgiving mood, because the prevailing attitude is that there is a lot of spare capacity around, so they expect to be treated very well. (Think of how you feel when you want to get a contractor to work on your house. When things were busy for them we were grateful for them returning our calls; now we’re incensed when they don’t respond immediately)
3. Work on your network. Extend and diversify it, but most importantly, put effort into helping others, especially those who are not in a position to help you right now.
4. Prepare for the turnaround. It will come, despite how easy it is to be pessimistic. The trick is to come out of this stronger than when we went in. Learn, network, add value, and it will pay off.
5. Give a little extra. When people ask for three ideas, give them 5.
Every business problem impacts someone in the organization; the people most impacted are the problem owners. This is an important definition. The problem charged with solving the problem is not the owner—it’s the one who suffers if the problem is not solved. For example, the VP of Sales may be concerned about decreasing margins, so she asks the Director of Training to find a course that will teach salespeople to better sell value. The Training Director may be asked to solve the problem by recommending or choosing a course, but in the end the VP of Sales feels the pain of decreasing margins and owns the business results to be generated from the purchasing decision.