by Ian Altman
When Ian was looking to purchase a luxury sports sedan, he met with David Waghelstein, president of MemberCar (MemberCar.com). Let’s face it: most people do not have a positive impression of car salespeople. One of David’s differentiators is that he has a reputation for being honest, which might not be so interesting if he was in a different industry. We’re not suggesting that he’ll tell you your baby is ugly, but he will not sneak something by you just to get a sale.
The car Ian was considering was a few years old and had only twelve thousand miles on it. When Ian drove it home on a test drive, his twelve-year-old son was jumping up and down in the front yard with excitement. Ian was ready to make the purchase, but when he returned to MemberCar, David said, “Ian, just know that this type of vehicle is likely to have annual maintenance costs of more than the car payments. It’s not meant to be driven as your primary car. I just don’t want you to buy the car and regret that decision later.” The maintenance costs had not entered Ian’s mind.
Ian ultimately decided not to buy that car from David, but Ian has referred dozens of customers to MemberCar. David and MemberCar earned a customer and referral source for life. By ensuring that Ian saw all of the potential costs, David avoided a potential disaster and earned Ian’s trust for a lifetime. In Same Side Selling, you need to seek those things that could create a less-than-outstanding experience for your client. It is your job to ensure that the buyer does not feel burned by something, whether that something is in or out of your direct control. Presenting those potential challenges to your client elevates your value and demonstrates that you put their interests above your own.
Address the Total Cost and Assess the Buyer’s Needs
Getting the total cost on the table sounds easy, right? All you need to do is create a spreadsheet that shows every cost related to your work. You can then hand it to the client, and she will understand everything, right? WRONG. Getting the total cost on the table is a collaborative process. It’s most important that the buyer understand and take ownership of the total costs. However, the seller can add value by guiding the collaborative process to identify total costs.
Here is where you can use third-party stories again. One such story might sound like:
“For a recent client, in addition to our software license of $200,000, they also needed a server for $20,000, and they needed some additional training and development totaling about $100,000. How similar might those costs be for you?”
Know where your solutions add the most value, and where you are just like the rest of the competitors in the field. If the client takes advantage of your enhanced capabilities, then you are worth every penny of premium. But if they want only the basics, recognize that the client might not be able to justify the additional investment. The important thing here is to uncover the truth. This is another place where you can use a third-party story:
“Some of our clients just want the bare basics. In other cases, they tell us that the impact we can have by addressing Situation X is potentially more valuable than the rest of the project. How does that align with your situation?”
If the client doesn’t see value in your differentiators, there are three potential outcomes:
• The person with whom you are speaking is not personally affected, and you might need to expand your contacts to find people within the organization who will care about those enhanced capabilities;
• The client does not need your differentiators, and he might struggle to pay a premium for something he doesn’t see as valuable; or
• The client does not value your unique attributes, and you have to decide if you still want the business competing as a commodity against others. This decision gets back to knowing your value and working within opportunities most likely to value your strengths.
When you simply tell the buyer about the big picture and the related costs, you might get his verbal agreement but not his heart. What we mean is that he may give you superficial agreement but not really believe it. When it comes time to defend the investment, the buyer might not have the confidence needed to go to bat for the solution.
Make it clear when someone would pay a premium and when the cheap alternative might be good enough. “If you are simply using our services for this, then you might be better served with a low-cost provider like X or Y—I can see that. Our clients are really looking for this added benefit, and that’s when we provide the lowest overall cost.”
Whatever you do, avoid the temptation to fake the analysis. Jack was helping a client with a purchase, and the seller provided a cost model that was supposed to look like it was created internally. When Jack and his client discovered that it was simply fabricated by the salesperson, it created mistrust, and they went with another vendor. Once you violate a prospect’s trust, there is not much you can do to recover.
Pitfalls of Getting the Total Cost out in the Open
You know your products and services, and you might believe that your clients will receive great benefits. However, there are two common pitfalls associated with presenting costs, impact, and value. Both pitfalls involve making assumptions about the buyer.
Phantom Savings
Let’s say Bill has software that allows each employee to perform a certain task in 3 minutes, when it would normally take 13 minutes. Let’s say that this task is performed once a day. Software sellers often use this model to justify investments. “I can save you ten minutes a day for each employee. If you have fifty employees, that’s more than eight hours a day. If your average labor costs you $1,000 per week, then this software will save you the cost of one employee annually.”
There’s one problem. What’s the chance that the company will eliminate the position from the company? Though the software might save the company a day’s worth of labor, it is unlikely to result in the company’s eliminating one position from their payroll. Phantom savings like those are not sufficient. Get back to issue, impact, and importance. Remember Finding Impact Together.
Buyer’s Perspective: You are telling me that you will save us ten minutes per day. We’re not going to eliminate a position because each person saved ten minutes. My bet is that my employees will just have another ten minutes of time on their hands to surf the Internet. I’m not willing to invest money for that.
Not Everyone Has the Same Impact from the Same Issue
Ian traveled to China to help an organization that was selling a solution for reducing medication errors. The vendor employed an expert who researched the impact of medication errors. He was considered one of the top experts on medication errors in North America. The expert explained to the people running the Chinese hospital how much each medication error costs. He also explained the percentage of errors that even the best hospitals make every day. The expert stated that if a hospital saw one million patients, it would incur over $4 million in medication error costs. This figure, of course, made the investment of $500,000 trivial.
There was one problem. The only person who believed the calculation was the one presenting it. Ultimately, the client did not believe the numbers (nor were they accurate in China), and the hospital declined to implement the technology. Though the presenter was an expert in North America, the story did not apply to China. Similarly, recognize that although your solution might be of great value to Company X, it might not have the same impact on Company Y.
On the opposite extreme, consider the pharmaceutical industry. Large pharmaceutical companies estimate that for an important drug, each day on the market equates to at least $1 million in revenue. Some salespeople question whether the $1 million-a -day number is real. But the pharmaceutical companies believe it because once their drug patent expires (this take 17 years), then generic companies can produce the drug, and the margins for the drug decline dramatically. Pharmaceutical companies will spend large sums of money if they are convinced that you can shorten the time to market for new drugs.
The key is to sell in a way that supports your clients’ beliefs, not what you think their beli
efs should be.
Cost Too High? Expand the Scope
The natural inclination of most sellers when faced with pricing pressure is either to discount the price or to reduce the scope of the opportunity. Though it might seem counterintuitive, one of your best options might be to expand the scope to create more value. To see how this strategy can work, consider the following example.
Excella Consulting was working with a client who said their price was too high. What Excella co-founder Jeff Gallimore did next might surprise you. He acknowledged that given the scope of the project, the client might not get sufficient value from Excella to justify the additional expense. (Companies that need project management professionals but don’t want to hire them directly can “rent” them from Excella Consulting.) Through discussions with the client, Jeff saw another project for which Excella could deliver value.
Jeff explained to the client that they could expand the scope to include that other project at a marginal increase in investment. Excella could use the same project management approach to oversee both projects, and the client would still get top-tier service and value with a marginal increase in cost. While every other vendor was competing on the narrow scope, Excella worked on the same side as the client to meet more of the client’s needs.
Not only did Excella earn the project, but the client valued the fact that Excella had the vision to see where else they could help the client. The expanded scope allowed the client to justify the increased investment and appreciate how Excella created more value per invested dollar than the lower-priced alternatives would have.
Compare on Value, Not Price
Sometimes your cost is the same as the competing alternatives. In that situation, you can either try to compete on price or compete on value. The problem with competing on price is that the customer who switches from another vendor to you because of price will also switch from you in the future for the same reason.
Consider the example of Calmac, a manufacturer of energy storage solutions. Calmac’s innovative technology helps clients heat and cool their commercial buildings far more efficiently than traditional cooling and heating systems. Owners of a typical building could save 20 percent or more on their annual energy costs with a Calmac solution, which often does not cost more to buy or install than other systems. Even clients that replace their existing systems break even on the investment in less than three years. Not bad, eh?
The Bigger Big Picture
As compelling as the cost and energy savings are, there is more to the Calmac story. Energy savings are just the tip of the iceberg (pun intended). When landlords implement energy storage, it helps the building attain energy efficiency certification. Calmac’s energy storage systems deliver cooler air than traditional systems do, so buildings are more comfortable for their tenants.
Efficiency improvements and cooler air are benefits in addition to the reduced costs. The decision to use energy storage from companies like Calmac can lead to higher occupancy, better tenant retention, and higher demand, all of which drives higher rents. When a solution offers not simply lower costs but also higher revenue, it becomes even more compelling for the buyer.
Never get caught in a discussion of price when you have the opportunity to discuss value. Be clear about where you add value for your client, and engage in meaningful discussions to ensure that you share a common belief about the reality of that value. Remember, if the client doesn’t seem to have the vision, this might be a good time to share a third-party story about how similar organizations have realized value.
Address Objections in Advance to Avoid the
Eleventh-Hour Disaster
There are common, recurring obstacles that come up with almost every large deal (some of these come up regardless of deal size). Following are three common scenarios and suggestions on how to overcome them.
Before the Deal Is Done: Enter Procurement
You’ve done a great job building value with the person who’s responsible for a specific line of business in a client organization. This buyer might be the head of human resources, compliance, sales, or another department. As the deal nears the conclusion, the buyer introduces Jack from procurement. Jack expects that any reasonable vendor will give them a 10 percent discount on the price you have already agreed to. (Ian is taking cheap shots at Jack here!) By anticipating this possibility, sellers can be prepared to defend their price:
“Sometimes in an organization your size, Purchasing will get involved in the end, not realizing that you and I have already worked hard to get you the best pricing possible. They’ll ask for a 10 percent discount, and when they don’t get it, they might think that we are inflexible or that you haven’t done your due diligence. We’ve even seen that result in companies choosing a vendor that would deliver less impact. Is that at all a concern here, and are there steps we can take to ensure that your purchasing team will feel confident about the value and the process?”
Before the Deal Is Done: Enter Legal
Everyone is in agreement, and Legal simply needs to review the final details. It turns out, though, that Legal or Accounting demands a change in some of the terms of the deal. The change requires you to incur additional expenses and alters the fundamental business model. What was going to be a fair deal is now structured so you fear that you’ll lose money if even the slightest snag comes up—which is sure to happen.
Here is one way to address those potential disruptions before they occur:
“Sometimes in an organization your size, Legal or Accounting will have some last-minute changes that might hamper our ability to work effectively with you. Sometimes those discussions can turn our joint collaboration into an adversarial trap. What’s the chance of that happening in your organization? If it does come up, how should we tackle it together?”
After the Deal Is Done, They Suddenly Want a Discount
For the initial purchase, you help the buyer realize that what he thought his company needed would not have addressed their needs. You engineer a wonderful solution, and the client rewards you by not focusing on the lowest cost and by appreciating the value you brought in solving his company’s problems. Six months later, it is time for the company to reorder. You get a phone call from Purchasing (not the people for whom you delivered magic the first time), and they want to order more of the same thing they bought six months ago. They have researched alternative vendors, and now they want you to sell to them for 20 percent less than the original price. It seems that another vendor, who had not invested the time to devise the solution, is willing to deliver that solution for 20 percent less than you are.
Buyer’s Perspective: When our board of directors or CFO mandates spending cuts, we look at our vendor expenses. After the fat is cut, we sometimes have to talk to valued vendors about reducing their pricing or figuring out some sort of arrangement so we can keep working with them. I know they hate that; we hate it, too. But when we keep getting sales calls from competing vendors that appear to offer better pricing, we need some way to justify the rates internally.
You won’t always be able to ensure loyalty or appreciation for past service. But you can often reframe how a buyer sees the cost by pointing to value in the future:
“After the initial purchase, sometimes reorders will get pushed to Purchasing. Reordering the same item again might not always be the right solution. Just as in this case, where what you initially requested was not the right fit, we want to ensure that we don’t simply ship more of the same only to discover later that you would have been better served by something else. If Purchasing contacts us independently from you, how should we get you involved to ensure that you get the right solution?”
Notice that in each case, you are putting yourself and the buyer on the same side of the table to solve the negotiating puzzle. As you do this (and resist the temptation to take on a negotiation death match), the buyer will often guide you through the minefield so both of you can come out on the other end unscathed.
Put Same Side Sell
ing to Work
Value is not a simple presentation of price. Rather, it is a collaborative discussion with your clients to identify, present, and confirm the value of their projects. This conversation often involves a reframing to see the “big picture” of total costs and total value. When you take a Same Side approach, you understand the client’s challenge and impact and can use that understanding to make sure the conversation does not simply focus on the purchase price.
Always present price in the context of the big picture to include the client’s resources and other costs that are required for the client to buy and implement what you are selling.
When confronted with price objections, be sure that you and the buyer are working together to evaluate the total cost, not just the initial purchase cost.
Know your own strengths, and focus on the opportunities where you can deliver the greatest value to clients.
Avoid the adversarial trap of arguing value against your client. Get on the same side, and don’t be afraid to walk away if you cannot deliver value.
Define the most common last-minute objections and obstacles, and address them with your customer.
CHAPTER 9
Deliver Impact
If you navigated through your sales process with Same Side Selling and found a fit with the buyer, then congratulations are in order! The sale is made, the deal is done, and the ink is dry. The moment is worth savoring.