by Cindy Barnes
Has an RFI or RFP come out of the blue from a company who has never purchased anything from your business?
In general, by the time any RFI/RFP is produced, the customer already believes they understand what needs to be purchased. The opportunity to sell consultatively and offer ‘a solution’ has passed unless your salespeople have the skills to push back hard and redefine the solution. Most procurement departments like to set up competitive bidding, even if there is already a favoured supplier. So they send out requests for proposals to many other companies to get negotiating leverage with the preferred supplier. Unless a salesperson can gain access to the individual with the business need (not the procurement department) and change the specifications, the chances of winning this sort of opportunity are almost zero.
Identify your core skills and capabilities
The next step is to assess honestly and list the business’s core skills and capabilities. In an information services business, these might include communication skills, data sources and/or analytical skills. For a manufacturing company making high-function components, the core skills and assets could be manufacturing plant, R&D capability, supply chain management and specialist manufacturing skills.
The point of this exercise is to understand the building blocks with which you assemble a sales proposition. There is nothing to stop the information services company in the previous paragraph from selling its raw data – but there is much greater value in selling an analytical newsletter or update. Similarly, the manufacturing business could sell its R&D services as a separate entity, or subcontract portions of its plant to other manufacturers, but then it would be in a different business from making components. Selling individual core capabilities creates businesses that are positioned differently. By combining these building blocks into sales propositions, the company can reposition its capabilities higher up the Value Pyramid™. In neither example has the business created a new capability – it has merely reconfigured the pieces to present them to the marketplace in a different way.
This reconfiguring is also a highly effective way to achieve low-cost, high-impact innovation, as long as sales teams have the right skills and behaviours to sell this new proposition. As a reminder, take a look at the Value PyramidTM section in Chapter 3.
Decide where to place propositions on the Value Pyramid™
Sometimes, when businesses undertake value proposition work, they are shocked to find that while they think they provide high-value services, their customers see them as ‘commodity’ suppliers. This view is often out of step with how the business sees itself. How did this happen? Typically this happens when a business uses an inappropriate sales approach (often transactional and focused on competitive pricing). When, in response to customer demand for lower prices, a business always reduces its prices, the business has in effect ‘commoditized’ itself!
There is nothing wrong with commodity positioning as long as it is part of a well-thought-out business strategy. Some companies may wish to position themselves on the component level and that might well be the best strategy for them. However, many businesses invest time and money in capabilities that could enable them to position their businesses higher up, and so gain greater revenue from their sales. It is these businesses that should consider exploring a new way of presenting their offerings.
How can a business determine where to position itself on the Value Pyramid™?
There are no hard and fast rules. However, Solutions businesses share some common characteristics:
market leadership in terms of R&D;
market leadership in terms of dominant market position;
unique products or services;
sole vendor in a particular niche or geography.
Any or all of these attributes put the selling business in a position of control – either through knowledge (product innovation or service expertise) or market dominance. Any business that possesses three out of four of these attributes, and still deploys transactional selling, is leaving money on the table and weakening its own market positioning. However, a company that possesses none of them can still try to position itself as a Solutions supplier, although it will be a little more challenging. In these circumstances it is even more important that the whole company’s processes, stories and behaviours support this approach. (See Chapter 8.)
Create customer-centric propositions
This step is critical and frequently the most challenging. For many, it involves looking at what the business does in a completely different light. For example a high-precision engineering business may pride itself on well-engineered products. Sales material is likely to support this product-centric view. It will explain in detail about what the business does and the specifications of particular products. In fact, these businesses are often so focused on their technical excellence and products that all their sales material boasts about these characteristics and not how the customers will use the product. Customers may care about the quality of the product – but they care far more about what it means for them.
What customers truly care about are their own problems. So how does this product or service solve them? Let’s use a UK rail company as an example. Different privatized rail transport companies see their businesses differently. They either see their purpose as moving trains from place to place rapidly and efficiently or as a business that satisfies customers’ needs for comfortable, reliable transportation between two locations. In the first case, efficient movement of trains is the overriding objective in designing processes and company procedure. Other factors such as train length, timetables and the internal conditions of rolling stock might be sacrificed in order to achieve train movement quotas.
On the other hand, a train company taking a customer-centric view would be less concerned with measuring the movement and number of trains from place to place. It would focus instead on individual customer needs – providing the appropriate rolling stock in a timely fashion and holding spare stock to cater for broken-down and cancelled trains. If the bulk of its regular customers were commuters, it would not decide to delay commuter trains in order to let freight trains move along the line. It might even hold spare stock at key stations and have sufficient back-up staff ‘on call’ to supply an alternative service when scheduled trains break down or when a driver becomes ill. These actions might increase costs, but they would also significantly improve customer service.
In the first scenario, customers are secondary to the movement of trains; in fact, their demands could be seen as minor nuisances. In the second scenario, the same trains, drivers, etc, could be redeployed with a more customer-centric focus in which trains were provided to provide a safe, comfortable and timely journey between two locations.
This is a critical shift in perspective – from a company’s view to a customer’s view.
Hospital bed manufacturer
In discussions with customers, the company’s sales professionals used to lead with the product’s features and benefits. This included their bed being the most manoeuvrable on the market. Customers liked this but the company’s conversations with cost-constrained hospitals still came back to price against other bed manufacturers.
The company decided to adopt an insight-led approach, so it could talk to more senior decision makers, earlier in the process. Through research, it found that nurse absence rates and staff turnover were among hospitals’ biggest issues, with back pain being a major cause of both. Hospital executives recognized the problem but often did not know the costs or look for a solution.
The company calculated the full impact, which included the costs of temporary staff, sick pay, higher medical insurance rates, hiring and induction time. It then taught hospitals that the true cost was much higher than they thought, so the hospitals realized the need to act. The company then demonstrated that requiring nurses to lift less would reduce back pain and result in major cost savings.
The hospitals could now see a solution but not how to achieve it. The company’s sales c
onversations continued to the point where it was appropriate to highlight the product’s differentiators and how they made it easier for nurses to lift and move patients, significantly reducing the chance of back pain. The hospitals were enlightened on a business issue and presented with a solution, with substantial financial and human resources benefits.
By solving a strategically important issue, the bed company is now able to engage HR and finance directors, while its competition can still only address the procurement function.
A cardboard box manufacturer
A leading cardboard box manufacturer serves fast-moving consumer goods (FMCG) companies, who buy boxes to package the goods they sell to retailers. Its customers’ purchasing departments treated boxes as a commodity, with price-led decisions being the norm.
The box manufacturer’s differentiator was a unique just-in-time ordering system, which customers could install in their warehouses and distribution points. Using this meant that FMCG customers would never have to turn down unexpected orders from large supermarkets, as they would always have enough boxes to fulfil demand.
The box manufacturer’s sales conversations majored on its box quality, delivery and the option of using just-in-time ordering. However, its customers’ aggressive purchasing departments still focused primarily on price, so the box manufacturer repeatedly lost deals to lower-cost rivals.
The company moved to an insight-led approach and took the time to truly understand its customers. Through both customer and internal research, which included interviewing employees involved in implementation and box delivery, it discovered that FMCG companies kept many surplus boxes in their warehouses. This was driven by fear of being unable to meet demand from the dominant food retailers. Many of these boxes were never used, as they were either damaged over time or became redundant due to changes in packaging requirements. The surplus boxes also took up costly warehouse space.
The box manufacturer calculated the true cost of wastage, floor space and the capital tied up in the surplus boxes, across the hundreds of warehouses that each customer operated, establishing that its customers had a significant working capital issue that they were unaware of. This insight gave the company a powerful reason to talk to its customers’ senior finance executives.
By establishing itself as a trusted advisor to directors, the box manufacturer moved its relationship beyond procurement. Its sales conversations now involved working capital improvement, rather than cardboard boxes, and its customers made purchasing decisions based on business value, not lowest price.
Choose the right sales approach(es)
While there are a variety of selling styles, there are only two basic approaches: 1) transactional selling; and 2) consultative selling.
To recap, transactional selling tends to focus on price, key product/ service features and delivery terms. The salesperson qualifies hard to determine whether the prospective customer has a need for the product or service being offered and then tries to close the business. In larger deals and/or big customers, there may be many steps to this process, but it is essentially a simple process: qualify, sell and close.
Consultative selling starts earlier in the customer’s buying process. The salesperson first identifies the customer need or opportunity and then helps the customer to define and develop that need into a solution. Selling consists of doing all the things the customer requests, solving the customer problem together with the customer, and then closing the deal.
Transactional selling is appropriate for the bottom half of the Value PyramidTM while consultative selling is more appropriate for the top two tiers.
Transactional selling
At the lower levels of the Value Pyramid™ – Components and Offers – customers believe that they know what they want and they expect the salesperson to communicate the value (price, delivery, attributes) of the desired commodity. The sales style is ‘transactional’. Transactional salespeople qualify hard because they have only well-defined offerings to sell and the potential customer will either need the offerings, or not. Typically, qualifying questions will focus on:
Need: does the prospective customer believe he/she needs this item and can he/she be convinced of the need?
Budget: can and will the prospective customer pay for the offering?
Decision-making process: is the salesperson speaking to the decision maker? How will the decision be made and who will make it? Can the salesperson gain access to the decision maker?
Competition: who else is after the business? How will the prospective customer decide between vendors?
Some transactional salespeople try to move up the Value Pyramid™ by aggregating products and services and calling the resulting offering a Solution. However, if he or she is still selling to the same person within the customer organization and using the same sales techniques, what is being sold is not a Solution. It is very difficult, almost impossible, for a lone salesperson to sell a true Solution when representing a business whose products are positioned near the bottom of the Value Pyramid™.
These types of misalignment occur all the time in companies. An example of salespeople trying to sell Solutions in a business with a transactional sales mindset occurs when trying to negotiate international deals. Such a salesperson might propose to a global customer a single price based on global use of a product or service, with the overall contract being extremely advantageous in terms of revenue and profit to the selling organization. However, P&L and ultimate control of contracts might be held by country-level managing directors; while in some countries the deal would be great, for others they might end up selling at a loss when applying these terms. So, while the overall organization wins, a few countries might lose. This organizational set-up would conspire against the salesperson closing such a deal because one or two (out of 30 or 40) country managers would veto it. As a result, the overall business would lose.
Another common organizational barrier to the move to consultative solution selling occurs in technical and/or engineering organizations that manufacture and sell by product line. In some cases, there may be some functional overlap between products – a situation that creates competition within the business. Often these businesses give P&L responsibility to manufacturing/development product lines and these business centres drive how sales are contracted. In such business environments it is virtually impossible for a lone salesperson, even a sales manager, to configure a cross-P&L deal where one service line has a higher margin than another.
Sounds silly, doesn’t it? The whole business loses out on opportunities because of the way in which the company is structured. Nonetheless, it is a very common occurrence. It takes the commitment and determination of top executives to drive this kind of change. That is why, for solution selling, the whole approach must be top down and supported by processes, appropriate behaviours and collateral from the whole business.
Furthermore, marketing messages and support materials should focus on solving a customer’s big issue or opportunity rather than pushing a product or service by citing features and specifications. Top-down selling must employ a consultative approach and sell directly to the senior business person who actually owns the issue. Transactional salespeople often cannot reach this individual and, when they do, their transactional style is usually ineffective. So it is no good just telling an unsupported transactional salesperson to just call on the executive instead of procurement – these individuals will enter the engagement unarmed, speaking the wrong language and displaying the wrong behaviours.
Consultative selling
In this type of selling, the salesperson first engages with the potential customer at an earlier stage in the buying cycle: often at the point when the buyer is only aware of a problem or issue, but has no idea how to solve it or what to buy. The salesperson then has to help the potential customer to clearly articulate the issue or opportunity and work with him/her to create or design a Solution. In contrast to a transactional salesperson, the key skills of a consultative salespe
rson include:
knowledge of the customer’s industry;
knowledge of the customer’s company;
ability to lead the customer through the sales process;
knowledge of the consultative sales process and how it differs from transactional selling.
In addition, these individuals should be empathetic listeners and good at creative problem solving while building a relationship – not just brokering a deal.
Getting the best of both worlds
Businesses that adopt a top-down approach and sell solutions can still sell the component parts and, as a result, they can have the best of both worlds. When businesses wish to sell either business solutions or the component parts, they must develop a consistent marketing strategy and marketing messages to enable them to position their business successfully. In addition, many companies that elect to sell with both selling approaches to appropriate levels of the Value Pyramid™ often use the different salespeople to do the different sales jobs. Why? Not only are the attributes and skills different, but the customer has different expectations of each.
Frequently, it is not a salesperson’s skills that let down the business; it is a misalignment of sales approach and perceived value by customers that hinders a company from fully capitalizing on value proposition and customer experience work.
What happens when a business decides to sell some items as Commodity and some as Solutions? Or, as is more common, the business decides to sell transactionally to one segment of the market and consultatively to only a few selected customers? Typically, businesses employ two different sales forces or use distributors or value-added resellers to sell to the commodity segment. There are many options: what is important is that businesses should not restrict themselves to a single sales style when they operate at different levels of the Value Pyramid™ (see Figure 4.2).