Many home buyers look at houses that are outside of their original budget. This is normal behavior for people going through the evaluation of alternatives phase, as it costs little other than an investment in time to look at a variety of different options.
Once they have narrowed their choices down to a couple of ideal options, buyers start to become more concerned about the risks of their buying decision.
Our home buyers may ask: Is this the best price for this house? How secure are our jobs? Can we afford this house if something happens to either of us? Can we make the monthly mortgage payments for the next 30 years? Only when they have answers to their questions about risk will our buyers move forward with a purchase commitment. Evaluating risk causes people to slow down their decision-making process, and maybe not make a decision at all.
For decades, this model of the psychology of buyers has remained consistent, except for one important aspect—for Buyer 2.0, who is buying in a period of sustained economic unpredictability, the level of concern about risk has been elevated throughout the buying process. When people cannot reliably predict what direction the economy is likely to take, and how those trends may affect their business and their organization, they hold on to cash in order to remain flexible and adaptable to uncertain conditions.
We see this unprecedented level of buyer concern about risk manifesting in several ways:
More thorough buyer evaluations, with more people involved in the buying process. CSO Insights found in a 2013 study that over three-quarters of all business-to-business purchases included at least three people in the buying process, and only 3 percent of purchase decisions were made by one person.11 More people involved in purchases means sellers must communicate with more people than ever before. Their conversations need to communicate value in different ways to each person, and they must navigate successfully through the politics of the customers' buying decision process, which can be complex and difficult to discern.
More buyer decisions to remain with the status quo. CSO Insights also found that of all the opportunities that sellers forecast to close, nearly one-quarter (24 percent) result in no decision by the customer.12 When buyers perceive a high amount of risk or they don't have a compelling reason to act that is greater than their perception of the risk, they typically opt not to buy at all. We often refer to this as losing to “No Decision Inc.”
More involvement by formal procurement departments. According to a global 2011 study by KPMG of procurement best practices, almost 60 percent of all business purchases were managed by formalized procurement departments, and this level is expected to increase, especially in larger, more mature businesses.13 The role of formal purchasing departments is expanding beyond their initial goal of expense control to also include improvement of cash flow, managing supplier relationships, and mitigating purchasing risk. Sellers should not ignore the increasingly important role that formal purchasing departments play in buying decisions.
Buyer 2.0 versus Buyer 1.0
As previously discussed, with unprecedented access to information Buyer 2.0 is not so reliant on sellers to lead the buyer through the early stages of the buying process. Prior generations of buyers, whom we refer to as Buyer 1.0, were much more dependent on the seller for information, especially in the early buying phases of the buying process. The new buyers (Buyer 2.0) identify their own business issues, conduct research, reach out to peers, participate in blogs and forums, and attempt to determine their own needs and formulate a list of evaluation criteria. In many cases, the seller either is completely locked out of early buying process phases or is contacted only informally to help validate initial findings. (See Figure 2.3.)
Figure 2.3 Buyer 1.0 versus Buyer 2.0 Engagement of Sellers
As a result, in the emerging world of Buyer 2.0 behavior, sellers find themselves generally reacting to preestablished visions of solutions created by buyers, instead of helping buyers to identify critical business issues and then shaping solution visions for them. Buyer 2.0 now forms a hypothesis of the capabilities needed to address business issues before ever engaging with sellers.
The abundance of information available to buyers can put even the best sales professionals on the defensive—in a position of simply reacting and competing on price. The ability to sell the value of possible solutions is more critical now than ever. Sellers must be more agile to engage effectively with Buyer 2.0. Sellers who can adeptly capture and then enhance or reengineer a customer's vision of a solution now have a distinct edge. The new breed of informed buyers requires rethinking how sales process and sales methodologies are best structured and applied.
Adapting to the Buyer 2.0 Paradigm
For companies that strive to market and sell higher-value solutions, there are many potential ramifications of the Buyer 2.0 paradigm. Many organizations are reacting tactically to buyer behavior changes, using highly fragmented approaches without truly understanding what fundamental changes are happening and why they are occurring. This is akin to a doctor prescribing a remedy without first understanding the malady. In medicine, this is called malpractice; in sales, we call it recklessness. Here are a few examples:
We've seen organizations invest heavily in product training, thinking better understanding of their capabilities will enable sellers to have more meaningful conversations with buyers. Usually, this simply leads to more focus on product selling instead of understanding customer problems, and therefore to misalignment with Buyer 2.0.
We've seen organizations attempt to address sales performance gaps by introducing new incentive compensation plans. But all too often the plans do not take the new normal of Buyer 2.0 behavior into account, leading to misalignment with buyers and poor results.
We've seen organizations invest more heavily in sales skill development, such as negotiating or closing. They do this because they believe better execution of selling fundamentals will help to close business. Usually, this addresses a specific symptom, but not the systemic causes of the performance issue. Teaching sellers to close early, often, and aggressively, for example, without demonstrating value or understanding critical business issues will certainly lead to misalignment with Buyer 2.0.
We've seen organizations invest in automated support tools for the sales team, such as CRM, knowledge management, and sales enablement applications, thinking these systems will improve efficiency and thus close performance gaps. CRM and related tools can be useful, but if they don't help with the sellers' effectiveness rather than simply their efficiency you may be in for a disaster. Think about it: if sellers are doing the wrong things and you improve their efficiency, you may only be helping them to do something bad or poorly more often.
In order to adapt successfully to the Buyer 2.0 paradigm, sales organizations need to recognize the larger trends, and then adjust how they engage with buyers on a more strategic level. There are three high-level aspects of the new buyer paradigm that, if thoughtfully considered, can help sales teams to successfully align with Buyer 2.0 norms:
Marketing and sales are blurring together.
Buyers are becoming highly informed comparison shoppers.
Risk aversion is the new normal.
Marketing and Sales Blur
The tenets of business development (sometimes known as stimulating interest or lead generation) within Solution Selling are still very relevant for marketing and sales today (i.e., don't lead with product; focus on critical business issues; focus on how you've helped others and on the results). The dilemma for sellers engaging with Buyer 2.0 is they are being forced out of the early interest stimulation or lead generation aspects of selling. However, our research shows that sellers who are involved earlier in the buying process, as opposed to reacting to an active lead, have a much higher probability of winning. The challenge for sellers, therefore, is how to engage early with Buyer 2.0 in a way that is not intrusive or disruptive to the buying process.
In addition, traditional marketing has less control over the perception of the company
in the marketplace. With the emergence of blogging, discussion boards, improved search engine optimization, third-party information aggregation services, and social networks with communities (e.g., groups on LinkedIn), there are more conversations, opinions, experiences, and information about your organization and your products and services in cyberspace than ever.
However, while sellers and their organizations can no longer completely control the message, they can monitor, listen to, and participate in conversations and help to shape them.
Messaging and credibility building are no longer just the role of formal marketing departments. Many marketing organizations simply don't have the bandwidth to operate at levels this granular. To get back to the front of the buying process, sellers must now extensively engage in informal marketing: active participation in industry or community discussion groups to demonstrate thought leadership and credibility. They need to regularly engage in discussions that are taking place in relevant communities. To accomplish this, sellers need to become both literate and proficient in using social media. They need to become power users of new tools and technologies that allow them to engage efficiently when buyers are forming their initial ideas about a potential problem or emerging opportunity.
At the beginning of the purchase process, Buyer 2.0 is having conversations about possible alternatives, but not with sellers. However, sellers can find and participate in those conversations to help Buyer 2.0 understand and form a vision of a possible solution for the buyer's critical business issues. Sellers can influence and guide Buyer 2.0 in decisions to evaluate alternative solutions, by demonstrating they can contribute meaningfully to the conversation.
Buyer 2.0 Is a Comparison Shopper
Armed with an abundance of information resources, Buyer 2.0 is empowered to conduct extensive research and fact finding when suspecting a problem or need. More often than not, by the time an actual sales conversation takes place, Buyer 2.0 usually has a premise already forming about the nature of the problem and how to solve it. This doesn't mean the buyers are fully aware of the scope of their problems, the underlying reasons for them, or the financial impact to their business. It also doesn't mean they are objectively informed, but their perspective has already been shaped and influenced by a wide variety of resources and mediums.
This means a different level of sales conversation needs to occur. The seller needs to quickly ascertain where the buyer is in the buying process, the business drivers behind the buyer's interest, and the thoroughness of the buyer's premise or hypothesis for a potential solution. The ramifications here are clear: the seller must possess a high degree of situational fluency with respect to the buyer's industry, issues, best practices, and competitive pressures, as well as be able to objectively validate, enhance, or reengineer the perceptions of the buyer.
In addition, buyers may already have formed an opinion about the value a seller will bring to them if and when they decide to engage that seller. They may have searched on LinkedIn, Facebook, and other web-based media to formulate an opinion of individual sellers and their organizations.
During Buyer 2.0's research, it is important that sellers are seen in a favorable light—one that fosters credibility and also helps form, elevate, or confirm the seller's personal brand. This can be developed through participation in thought leadership conversations, authorship of relevant blog posts or white papers, associations that suggest professionalism in your job, and so forth. In essence, buyers are comparison shopping not only solutions, but also the people behind them.
Risk Aversion as the New Normal
Recent research indicates that nearly half of forecasted opportunities fail to close.14 This is not the result of organizations failing to perceive problems they need to solve or failing to see opportunities they can capitalize on. There are other strategic factors that contribute to the high percentage of “failure to close” opportunities.
The global economic climate has undergone multiple forms of trauma in the past decade. The bursting of the Internet bubble was closely followed by events of 9/11, and the persistent instability of the global financial system has suppressed corporations' willingness to invest. A by-product of this environment has been the emergence of increasingly sophisticated and powerful purchasing functions within corporations. These organizations have typically undergone extensive training in effective procurement and negotiation practices, and have created a new layer for sellers to navigate in order to succeed.
Buyer 2.0 is not just a more informed consumer, but also tends to involve an increasingly more risk-averse and sophisticated purchasing function. As a result, sellers in the Buyer 2.0 world will need to be exceptional in their abilities to position, articulate, and defend the value of their offerings. This is a key concept in dealing with Buyer 2.0. They must provide Buyer 2.0 with a compelling reason to act if there is not one naturally present. The financial impact, whether positive or negative and articulated in the form of the cost of delay, may be just the reason they need to take action.
Purchasing organizations are also arming themselves with formidable negotiating capabilities. In addition to increased levels of business acumen, sellers need to be well versed in principles of effective negotiation.
These higher levels of sales proficiency will require investment in both education and tools that integrate business acumen and value-based execution through the entire sales process. Sellers must be insightful and effective at legitimately helping the buyer rationalize the need to take action—in a manner that is mutually beneficial to both buying and selling parties.
The Relevancy of Solution Selling and the Evolution of the Collaborative Sale
At the beginning of this chapter, we posed the question of the continued relevancy of Solution Selling. The inherent design of this methodology, based on aligning with the buyer process, has enabled Solution Selling to remain useful and productive for sellers. The emergence of Buyer 2.0 behavior, however, requires Solution Selling to adapt and evolve.
This evolution involves three distinct character parts—or more accurately, personae—that solution sellers must play in order to align with and engage successfully with Buyer 2.0: the Micro-Marketer, the Visualizer, and the Value Driver. These personae are each defined by a set of specific behaviors, competencies, and attitudes that enable sellers to succeed with today's buyers. By assuming the right selling persona at the right times, sellers can gain access to early-stage buyers and work in harmony with them throughout the entire evaluation and purchase decision process. We explore each of these personae in depth in Chapters 4, 5, and 6.
In addition, solution sellers must recognize the rise of Buyer 2.0 empowerment in the buying process. Sellers can no longer control buyers by dictating how and when they get access to information about solution alternatives. Instead, sellers need to recognize buyers as knowledgeable and empowered partners, and learn to collaborate effectively with them as a valued adviser and counselor. While Solution Selling historically stressed control over the buying process, the Collaborative Sale emphasizes more alignment and collaboration with Buyer 2.0 than control.
The Collaborative Sale enables sellers to:
Engage with buyers when they are not seeking out sellers, without alienating and annoying them.
Know where buyers are in their buying process and how to align with where they are (and not where a seller prefers them to be).
Develop and demonstrate understanding about the buyer's industry, business trends, and best practices, and provide useful expertise and creative thinking.
Create a vision of a solution, or capture and enhance the buyer's current vision, or reengineer the buyer's vision to new or better ways to solve problems or capitalize on opportunities.
Capture and articulate the quantitative value of a solution in a way that is compelling for the buyer.
Sell openly and transparently by sharing everything you know about the buyers' situations with them, so they know that you know.
Bring new ideas, new
products, and new services to the buyer even if they are not your own. This means always putting the buyer's interests first, before your own.
In summary, in order to do business with Buyer 2.0, sellers must collaborate with buyers as equals, focusing on solving the buyers' problems and providing value in every interaction throughout their buying process. In addition, sellers must learn how to play different parts (i.e., personae) within the customer's buying process, much like an actor might play different parts within a theatrical production.
The essential and foundational competency required for sellers to be effective with Buyer 2.0 is called situational fluency. This unique combination of knowledge, skills, abilities, and attitude is required of all collaborative sellers, and therefore is worthy of further examination, which we do in the next chapter.
The Story (Continued)
Nancy lowered her voice. “Jon, did you tell the broker anything about ExyRisk that he couldn't have researched on his own?”
“No, but people are busy. I didn't want to assume he'd done any research. I didn't want to just jump in, I wanted to warm him up and tell him what we're about.”
“Jon, I advise three companies and they're telling me it's not uncommon for a C-suite exec to attend an initial meeting with a vendor. Even if they're not C-suite guys, buyers have been coached by supply chain experts to do their homework before appointments. The fact that you got a warm introduction put you ahead, but you didn't maximize that lift.”
She lowered her voice even further, “Customers respect sellers who are smart, who know about their business, understand their problems and can give them ideas, first and foremost. That's the value you're offering, far more than the product. You are the value, through what you know and what you've helped others achieve.”
The Collaborative Sale Page 4