What the well-dressed salesperson is wearing nowadays
I had the privilege of addressing a group of construction managers from one of my clients last Saturday morning about sales.
Yes, you read that right. The (mostly) men in my audience manage construction projects for their clients, and their employer wanted them to be aware of selling opportunities that they might come across in their daily dealings with clients. They are the “boots on the ground” who are on the client site every single day; they see and hear everything that goes on. All of them on occasion stumble across sales opportunities for their firm, but too many of them pick themselves up, dust themselves off, and continue on as if nothing has happened.
David Maister uses three terms that I find particularly apt in this situation: grinders, minders and finders. Grinders are the folks who go about their daily work, and do it well. They know their first and most important obligation is to do what they’re paid for and deliver the expected value. Finders are the people in the organization whose main work is to go out and find new business; they’re the designated hunters. Minders are grinders too, but they also go further—they take time to network, develop contacts, and build long term relationships.
Minders can be a huge asset for any organization, because they have continuous access to clients; they have established credibility, and they have deep knowledge and insight into their needs. They can become aware of opportunities very early in the client’s buying cycle, which can be a tremendous advantage if they pass on the right information to the finder. They are the scouts who can make heroes of the finders.
Many minders come by it naturally—they like dealing with people and build relationships through just being themselves. But a lot of grinders are technicians, engineers, or professionals, who tend to be a bit more introverted and less likely to even pay attention. They may need a little boost.
Turning grinders into minders is first about attitude. They need to have the attitude that:
- Business development is in their own interest. It allows them to do the grinder work they love, and it avoids the disruption of moving to a different client or even city when current work dries up.
- Selling is not a “bad” thing. As long as they are sincerely helping clients solve problems or take advantage of opportunities, they do their clients a favor when they bring them new ideas.
- If they don’t take personal responsibility for it, it may never get done.
Second, it’s about education. You don’t need to give them sales training or try to turn them into finders, but you need to help them know how to spot and deal with opportunities. How much do they know about your firm’s total offerings? Once they know that, can you give them some specific keywords, scenarios or symptoms that they might notice which would indicate an additional need? If they do, do they know whom to notify to follow up on the opportunity?
Related articles:
This could hurt
Selling what others widely perceive as a commodity can be tough enough, but imagine trying to do that when broader trends combine to drive down demand for your product. That’s the challenge that faced Mohawk Fine Paper, a company profiled in Saturday’s Wall Street Journal. Their response to the challenge provides some excellent general lessons for salespeople.
Mohawk used to have a profitable business selling paper to companies for their annual reports, but the business began to shrink in the late 90s when firms began putting their filings on line, and then really plummeted in 2007 when the NYSE no longer required companies to send paper copies to shareholders. The company gradually scaled back operations from seven days to four at its main plant.
Their response was to literally bet the company on a strategy aimed at moving up the price/value pyramid, as they began selling high quality stock to small batch digital printers such as Shutterfly. Their debt swelled from $8m to $103m as they made the necessary investments to make the shift—before being certain their strategy would work.
The bottom line is that they did succeed, and today 40% of their business comes from this profitable sector. Mohawk is just one example of others in the US paper industry in general, which has seen its share prices outpace the S&P 500 by five times since 2009.
What lessons can sales professionals take from the story?
If it’s going to happen, it’s up to you. Someone unfamiliar with the details of the story could easily conclude that Mohawk got lucky—they merely stepped off one sinking ship onto another that was passing in the form of new demand. But that’s not how it happened at all. The demand was not there until Mohawk approached Shutterfly with samples of photo cards printed on special paper and got them excited about the quality.
But it takes knowledge about your customer. Approaching their customer is a new idea was an excellent example of seller-led insight and consultative selling, but even more instructive is how Mohawk was able to get to that point. They thought it was a good idea, but in order to test it they actually bought a small online company for $2 million just to better understand and test their own insights about their customers’ industry. So, by the time they brought the idea to their customer, they had huge credibility. Today they have a research lab dedicated to learning more about their customers’ needs: “the company hopes to show designers, ad executives and printing companies new ways to pair digital printing with high-end paper.”
It’s risky. Not everything Mohawk tried worked out; they tried to appeal to environmentalists by selling chlorine-free paper, but no one bought it. And they had to take on massive debt to make the investments to play in a new space. Any time you read an article like this, it’s important to keep in mind that if the company had failed, we would probably not be reading about them today. But sometimes the biggest risk is not doing anything.
Obviously, one company and even an entire industry don’t prove anything, but if you are facing your own commodity trap, I leave you with this one question: what risks have you taken to learn something new and valuable that you can teach your customers?
The previous article in this series introduced the concept of Willingness to Pay as an effective approach to quantify and justify a higher price for your products and services in complex B2B sales. It can never be determined precisely, but you can certainly impact the range of acceptable alternatives to put you in a better position to negotiate a mutually acceptable price. If your goal is to move the WTP number as high as possible (and sustainable), the more you know about the factors that determine it, the more tools you will have at your disposal to shift the range, ideally before you show up at the negotiating table.
Ironically, while WTP is “real”, the actual number arrived at is the result of a complex and shifting combination of many different factors. In general, these factors fall into two main categories, economic and psychological. I express them this way:
(ECONOMICS) x (PSYCHOLOGY)
Or, to put it another way: hard vs. soft, tangible vs. intangible, objective vs. subjective, even System 2 vs System 1, etc.
ECONOMIC CONSIDERATIONS
Although willingness to pay is elastic, it’s not unlimited. The broad limits of its range have to be based on some real economic considerations. There is a “hard” core of value that exists and is the basis for a fair market price. That hard core begins with understanding how the customer will use the product to improve their situation.
Utility: In business to business sales, utility is the unquestioned number one factor that determines willingness to pay, because it is the fundamental reason that customers spend and invest, and it is often the factor over which you have the most objective and tangible control.
In economic terms, an asset is worth the present value of its differential cash flows. In plain English, that means that business buyers pay dollars in the expectation of getting more dollars in return, or preventing a greater loss.
The expectation of future cash flows is based on how the buyer uses what you sell[1] to either increase cash inflows or reduce outflows[2]. They do this by being able to be more effective—through some combination of more production, sales or higher prices—or by being more efficient, through using fewer inputs of labor, physical inputs or time.
Your customer may know exactly how to use what you sell to increase cash flow, but often the buyer is not the best judge of how to use your product to help them improve how they do business. It may be an infrequent purchase, or an unfamiliar new technology, or the purchaser may not be the actual user, so they are not experts in the use of it. Sometimes they’re not even aware of what your product can do for them.
That’s why you have so much control over the customer’s utility; you can be the expert who helps them use your product in the most efficient and effective way to realize maximum value.
Other Economic Considerations
Besides utility, there are other economic considerations that may affect the customer’s WTP:
- Economic/market conditions and expectations: Depending on whether the customer expects changes in supply and demand that will affect the trend of prices.
- Purchasing power: The rich always expect to get richer by being able to pay lower prices.
- Affordability: They may have real limits that affect their ability to purchase, regardless of their willingness.
- Purchase terms: Timing and amount of payments can affect affordability.
If we leave it at that, then it’s clear that:
WTP = UTILITY
Available Alternatives
If utility is the main engine affecting WTP, available alternatives can be seen as the brakes. To illustrate, imagine that you sell a product that is absolutely essential to the customer’s business. Without it, they could not run their operations, or even maintain a livable work environment. Clearly, it has tremendous utility to your customer, but there’s a good reason that you can’t get any price you want for it, because that asset is water. If you jack up the price, your customer can easily find a substitute. The range of available alternatives subtracts from the utility value.
Since water is readily available almost everywhere, let’s use a more appropriate example. Consider the computer screen you may be reading this on. In some ways, it’s priceless, because you would not be able to do so many of the things you do in your work and personal life without it. It’s the tool that gives you access to the internet and allows you to communicate with customers and friends. But its price is limited by competition. If the vendor raised up the price too high, you could easily find an acceptable substitute.
So, available alternatives are also a critical factor in determining WTP, but you have no control over what your competitors offer.
Maybe not, but you do have a lot of control over the perception and even the choice of available alternatives. To the extent that you can convince the buyer that one of your unique features has special and valuable utility, you can constrict the number of alternatives that are available to them. The other point is that there is a cost to finding available alternatives: it takes time, effort, some expense, and information. You may be able to raise the cost or perceived cost of finding alternatives.
Even when other alternatives can be found, the customer might have to deal with switching costs. They may have to make modifications to existing systems and processes, train people, rearrange space, etc.
So at this point, let’s summarize the economic factors that affect willingness to pay:
WTP = UTILITY – ALTERNATIVES
We could stop right here, assume that buyers are completely rational in their purchasing decisions, and we would have a rich set of levers available to influence WTP. But wait, as the late night infomercials tell us, there’s more! In the next article of this series, we’ll start unpacking the fascinating and complex psychology that’s at play when buyers decide how much they are willing to pay to buy your solution.
If you sell for a smaller company against the behemoths that dominate your industry, you know that their superior resources can make them tough competitors. They have whole staffs that can support their sales teams, unlimited entertainment and expense budgets, slick materials, broad product offerings, and of course, excellent salespeople.
Anyone home?
That’s great. You have them right where you want them. All of those advantages carry their own weaknesses that can be attacked and exploited by a smart challenger from a smaller company. Anthony Iannarino recently wrote an excellent article in Success magazine explaining how Davids can beat Goliaths, and I won’t re-cover that ground in this article, but I will comment on the quality of their salespeople.
On the surface, their sales teams look unbeatable. They have extensive training, they are professional and polished. But when you scratch the surface, things aren’t always quite what they seem. In a class I taught earlier this week, one of the participants had been in charge of purchasing a certain class of products for a major corporation, a position which made him one of the best customers for the industry leader. His experience was that, below the executive ranks, their salespeople were actually quite mediocre. This point resonated with my own experience, in which I’ve run across salespeople who leave large companies and struggle to find success with smaller employers.
The Goliath salesperson is used to having doors open automatically for them. Whenever a sales opportunity comes up, they automatically have a seat at the table, and in fact the deals may often be theirs to lose rather than those they have to claw and scratch for.
It’s human nature to take the path of least resistance, and when you don’t need certain skills, they atrophy.
- When you can dictate the criteria on the RFP, you don’t need to engage imagination to figure out unaddressed needs the customer has in order to change the rules.
- When you can get through to the decision maker easily you don’t have to figure out innovative ways to get their attention.
- When no one ever got fired for buying your brand, you don’t need to learn how to painstakingly build up a clear business case.
- When your top executives can call theirs to put doubters in their place, you don’t need to learn how to handle objections properly.
If you work for small company, the way to beat the big companies is to do precisely those things that the big guys don’t think they need to do or have forgotten how to do. Do the research on your customer’s needs, use your imagination to find insights the big guys are too lazy to find, develop allies at all levels, and use them to supply the numbers for your business case.
When you do these things, ask the questions of the customer to get them to put the big guys’ feet to the fire and force them to go back to the difficult basics, and chances are that they will come up short. I once was shortlisted against three of the largest sales training companies, and I suggested to the prospect that they pay careful attention to whether their salespeople used the very same tools they were selling; every single one failed the test, and that damaged their credibility. When the Emperor is shown to have no clothes, it can be an ugly sight.
