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The Richardson's Sales Blog offers expert advice, sales tips and training enablement content for today's leading sales and learning professionals. Richardson is a global sales training and performance improvement company that helps leading organizations improve performance, drive results, and execute their vision. This blog also includes topics such as Consultative Selling, Sales..
Referrals are powerful because they establish an early connection between the sales professional and the customer. Essentially, the sales professional comes vetted. Here, we look at strategies for requesting referrals and how they can help jump-start a relationship.
1. Start with Mutual Contacts
A mutual contact is the strongest referral. In this case, the referral is someone the sales professional, and the potential customer both know. If the customer trusts the referral, they’re more likely to extend that trust to the sales professional.
This is critical because trust remains a major hurdle in developing a sales relationship. Moreover, starting the relationship with a mutual contact is a powerful strategy for small and large selling organizations alike.
For all the capabilities of today’s robust CRM software, sometimes a simple phone call is the most effective way to start.
2. No Referral? Consider a “Hinge”
Sometimes there is no referral. In this case, it’s helpful to have a “hinge,” a mutual event both the sales professional and the customer attended. A hinge can be a recent trade show, a shared business interest, or a personal connection like graduating from the same school.
This approach still requires preparation. It’s easy to assume that a point of commonality will spark effortless conversation. In truth, the customer is in the middle of a busy day and managing deadlines.
Take the time to plan your words.
3. Use a Relationship Map
Referrals aren’t just for starting a relationship with a new business. Many sales professionals are successful in cross-selling by using referrals from other divisions or groups within a business where a relationship already exists.
In this scenario, a relationship map is helpful. A relationship map is a visual representation of both the reporting relationships between the stakeholders and the power structures between them. The reporting relationships are the “organization chart” of the stakeholders involved in the decision-making process.
The power structure relates to which stakeholders are favorably inclined to the sales professional. Consider this customized approach to finding a referral.
4. Leverage the Power of Reciprocity
Sales professionals can be proactive by giving their customer a referral first.
This approach takes some foresight because its best to give referrals to customers that are in industries relevant to the markets likely to present future opportunities. Success in selling sits on a foundation of mutually beneficial outcomes.
This approach exemplifies that idea perfectly. The customer gets a boost from the referral while the sales professional lays the groundwork for their own referral request later.
5. Prepare and Follow Up
Jumping to the referral process is tempting. However, the sales professional needs to follow the normal routine of understanding the target customer first.
Otherwise, the referral is flying blind. Their lack of knowledge will overshadow the value they can offer by vouching for the sales professional.
Make sure to ask questions about what the new contact might be interested in and how the contact prefers to communicate. Follow up and express appreciation after the contact has made the referral.
Without follow-up, the whole exchange can feel very “you”- centered instead of “client”- centered.
6. It’s All in the Timing
Some of the strongest sales professionals can make the referral come to them. That is, they generate excitement with a new product offering or an especially compelling white paper.
An existing contact may share one of these things on social media. This is the perfect time to ask the contact to provide a referral. Moreover, if the product offering or white paper happens to be relevant to the target contact, the referral can use that material as a conversation starter.
Referrals are the single best way to ignite a sales pursuit strategy.
They allow the sales professional to bypass the gatekeeper with a “pre-sold” message. Additionally, the sales professional reduces the exhaustion and diminished morale that comes from churning through leads because, with referrals, more clients come from fewer leads.
Finally, remember, the referral must be more than an introduction. They must legitimize the sales professional by personally vouching for their ability to solve business challenges.
Optimism runs high in American businesses. In fact, optimism among small businesses at the end of 2017 surged to their highest levels in more than 34 years. This sentiment is shared among mid-sized companies as well. A staggering 80 percent of those surveyed said they were optimistic, a 39 percent increase over 2016.
If optimism is running high, then why should sales professionals be worried? The answer: too many businesses settle into inertia. They believe operations are fine as they are.
These numbers underscore a pervasive truth among sales professionals; the biggest competition isn’t another solution or another selling organization, it’s the status quo. This was an overwhelming finding in our 2018 Selling Challenges Study. When asked, “What is the biggest challenge you think your buyers face when making a buying decision” respondents decisively responded with “combating the status quo.”
In our latest brief, Overcoming the Status Quo, we look at specific ways sales professionals can incite action among buyers and decision-makers. We cover strategies like:
Engaging numerous perspectives on the customer’s side of the table
Simplify the buying process to lower the “activation energy” needed to buy
Excellence in Team Selling is critical to success for commercial selling organizations today. Customers bring more stakeholders to the table and expect to meet more than just the salesperson before making a commitment. To manage these moments effectively, salespeople need to ensure that all players are operating at peak performance – individually and as a unit- in those high-stakes meetings.
On February 26th, Michael Dalis, Richardson Senior Training Consultant and author of Sell Like a Team, will present a webinar on Winning the Team Sale: Building Selling Teams That Win Big, and we would like to extend an invitation for you to join us.
The webinar topics will include:
Why team selling is a trending topic among top-selling organizations
The five stages of fielding a winning sales team
The roles that effective salespeople play at each stage
How getting great at Team Selling can increase deal size and close rate
The webinar will take place on February 26th at 12:00 p.m. EST. If you are interested in attending or think that your colleagues may be interested, you can register here.
What happened to competitive advantage? There was a time when each business had one. Some had many. However, today, that seems to be disappearing. In 2009 The Harvard Business Review called competitive advantage “fleeting,” and less than six years later Wired called it “dead.” However, the disappearance of competitive advantages is motivating businesses to take a bold, innovative approach.
Business School Professor Rita McGrath explains, “to win in volatile and uncertain environments, executives need to learn how to exploit short-lived opportunities with speed and decisiveness.” Sales professionals are integral to this strategy.
As technology advances, competitive advantages are becoming easier to replicate. As a result, barriers to entry fall. More competitors enter the market. In response, companies are turning to more complex solutions to buoy profits. Therefore, the sales professional is expected to do more than sell and move on. They’re expected to support the customer throughout the implementation of the solution and beyond. It’s no surprise “Balancing sales and relationship management” was the leading concern among sales professionals in our 2018 Selling Challenges Study. Here we look at a few ways sales professionals can balance selling with the relationship management that’s critical to survival for both sides.
Separate Selling from Follow Up
Sales professionals can balance sales and relationship management by signaling their plan to the customer early in the relationship. That is, the sales professional must make clear their intention to keep new product discussions separate from the work they provide on solutions already implemented. Doing so allows the sales professional to carve out separate meeting time with the customer to focus on “whitespace” in the account without impeding on the value they’re expected to bring in the form of a relationship.
This approach is important for the sales professional because to grow their business with the customer they need both sides of the equation. The experience of providing ongoing support for existing solutions provides insight into the customer’s day-to-day operation. Meanwhile, the separate product discussions inform the sales professional of future business needs.
Become a Trusted Advisor with Four Characteristics
Increasingly complex solutions require deeper relationships between customers and sales professionals. Therefore, “becoming a trusted advisor” is important. Sales professionals are discovering that they need to articulate not only the value of the solution but their individual value as an ongoing resource to the customer. One Accenture survey of more than 1,200 companies worldwide revealed that sales professionals who “build a trusted relationship with customers can improve results.”
Sales professionals must develop into trusted advisors, a role characterized by four components. First, the sales professional must identify how the customer defines value. Next, they must generate ideas that resonate with this understanding while helping the customer build competitive advantage in their market. Then, the sales professional needs to communicate the value of the ideas before finally delivering on their commitment. Above all else, value must not only be communicated; it must be demonstrated.
Delineate the Groups
Sales professionals can balance sales and relationship management by approaching each routine as two, separate groups of stakeholders. This approach is important because it might limit the number of people the sales professional must engage when discussing new solutions. As a result, it becomes more manageable to bring value that’s relevant to each of these stakeholders. With this focused approach, the sales professional will also help prevent the sales cycle from becoming too long, a common outcome when engaging larger groups.
Of course, keeping the two groups separate is not always possible. In many cases, within a single company, the “relationship” and the “buying decision” customers overlap, or they might be the same group entirely. In this scenario, the sales professional can keep both relationship management and follow up conversations focused on two subsets of the single group. In fact, if some of the buying decision-makers may prefer to be included only in new product discussions as their C-level status keeps them engaged in broader corporate strategizing that doesn’t involve product implementation follow up.
Competitive advantage may be going away, but strategic thinking is not. In fact, it’s more important than ever. If the sales professional is going to help the customer leverage strategy, they must be strategic in their approach to the customer. Sustainable competitive advantage is “every company’s holy grail. And it’s no longer relevant for more and more companies,” remarks Professor Rita Gunther McGrath.
To help companies achieve this end, sales professionals need both selling opportunities and relationship management; each informs the other. Therefore, it’s critical to separate the conversations, rise to the status of a trusted advisor, and segment buyer groups.
Information is more available today than ever before. However, if this is the case, why are sales professionals experiencing increasing difficulty when it comes to uncovering the buyer’s decision-making process.
Here’s the answer:
Increasingly complex business needs are outpacing the sales professional’s capacity for determining decision processes. These multifaceted problems involve a growing number of stakeholders. Moreover, these challenges change fast as competitive pressures rise. This “enterprise entropy” is characterized by a central challenge that becomes diffused across an organization as more people weigh in on how to move forward.
The result: the decision-making process has changed from a picture to a panorama.
In our 2018 Selling Challenges Study we found that the most commonly anticipated challenge for sales professionals this year is “uncovering complete information regarding the decision-making process.”
The finding suggests that numerous stakeholders must commit to a solution before the sale can reach a close. When a buying decision occurs at the group level, it is difficult for sales professionals to acquire all the pieces much less arrange them into a complete picture. Here, we look at three ways to navigate this challenge.
Ask the Right Questions
When the decision-making process is dispersed so is the information needed to understand how it works. Simply put, more stakeholders create complexity for the sales professional. This problem escalates with larger contracts that demand more people to sign off.
Therefore, sales professionals need to ask a series of questions designed to reveal the decision-making tree. These are sensitive questions. Therefore, sales professionals can use careful phrasing like “what are the key milestones in the decision-making process?” Or, “when the stakeholders think about the decision before them, what factors are most important to the group?” Questions like these help uncover information about constraints, reporting relationships, and selection criteria.
It’s important to remember how relationships play into these questions. The more established the relationship is between the sales professional and the buyer, the more freely information will flow. The buyer is likely to recoil from direct questions about the decision-making process if they come before the sales professional has prepared some groundwork. Take steps early and often to foster trust, so these questions generate answers.
Create a Relationship Map
The decision-making process is dynamic, and most sales professionals assume that they know or have been told about all the stakeholders involved. What they do not realize is that this information changes throughout the sales process.
How can you prevent this from happening? Instead of taking one snapshot, constantly monitor stakeholders who are either newly added to or no longer involved in the decision-making process. One of the best ways to do this is through a relationship map.
A relationship map is a visual representation of both the reporting relationships between the stakeholders and the political landscape surrounding an opportunity. The relationship map consists of two parts, the relationship map shows:
The reporting relationship between the stakeholders
The power structure among these people
The reporting relationships are the organization chart of the stakeholders involved in the decision-making process. It is all about who reports to whom. The power structure is about which stakeholders are favorably inclined to you, which are favorable to one or more of your competitors, and which of the stakeholders are neutral at this point.
Start by listing all the known stakeholders and the corresponding reporting relationships. Next, overlay the power structure onto this list. The completed map should look like a pyramid rising to the top-level executive.
Don’t Short-Cut the Process
Determining the decision-making process is difficult. If it were easy, every sales person would do it. However, quotas loom large. As a result, many sales professionals may try to rush or short-cut the process. In doing so, they may attempt to jump to the top of the relationship map.
Be warned, engaging in a dialogue at the executive level is a high-stakes proposition. A setback here will not slow the process; it will stop it entirely. This approach risks missing critical details behind the customer’s needs. This information is crucial when positioning a solution. Additionally, while the final decision may rest with a C-level executive, this person often depends on the judgment of others in the organization. Bypassing this group will hinder the buying organization’s protocol.
Remember, a conversation at the executive level is a “one-shot” deal. Effective selling cannot unfold in that kind of environment because regular dialogue drives results.
Even if you have a highly effective solution, the power structure is going to have a major influence on whether you win or lose. By learning the decision-making process, the sales professional gets the opportunity to understand the thinking of each stakeholder. This insight is valuable. With each stakeholder comes a unique set of motivators. The strongest sales professionals engage this nuance and close.
During the tech boom of the 1990s Fortune 500 companies and behemoths of Silicone Valley were famous for challenging interviewees with puzzle questions. The candidate might be faced with a brain teaser like “how many times a day do a clock’s hands overlap,” or, “why are manhole covers round?” The most infamous of these questions was “how would you move Mount Fuji?”
For sales professionals today this question is surprisingly appropriate. Why? Because for many, moving Mount Fuji sounds as difficult as the biggest challenge in sales today: overcoming the status quo.
This was a key finding in our annual Selling Challenges Study for 2018. Hundreds of sales professionals offered responses to a series of question. In doing so, they presented a panoramic view of what sales professionals can expect to encounter in 2018. When answering “What is the biggest challenge you think your buyers face when making a purchasing decision,” 28% of respondents replied with “combating the status quo,” making it the most popular and decisive answer of all questions in the study.
This issue garnered among the most responses for the last two years. Moreover, the problem is growing. An increasing array of options presents buyers with numerous paths. Often this complexity leads to a “reversion to the mean” where no change occurs. Additionally, the uncertainty surrounding the effectiveness of various solutions creates hesitation.
Sales professionals realize that often the strongest competition isn’t another person or business, it’s the buyer’s inertia.
Here, we look at a few ways sales professionals can overcome this challenge.
Underscore the Opportunity Cost of Doing Nothing
Effective sales professionals instill a sense of urgency in the buyer. They do this by highlighting the risk of taking no action. While maintaining the status quo may seem like a low-risk proposition, it is, in fact, a choice to remain still while others – the competition – move forward. Sales professionals need to adopt a proactive mindset while understanding that the solution must be especially compelling to incite action on the part of the buyer.
To make a solution more compelling sales professionals must take time to understand the customer’s business. Doing so allows them to connect solutions to needs more effectively. Those who take this step will immediately stand out from the rest because “From the customer’s point of view, the greatest need for improvement is in salespeople’s knowledge of the customer’s business and industry,” reports The Harvard Business Review after interviewing more than 300 professionals.
Clear the Tracks
Interestingly, the number two and three responses to the question “What is the biggest challenge you think your buyers face when making a purchasing decision,” were “Comparing their options” and “Building internal consensus & securing budget.” These are noteworthy because they roll up into the challenge of combating the status quo. That is, the sales professional must create a decision process that is simple for the buyer.
Here, the sales professional should use simple and concise language to articulate how the product satisfies the customer’s business challenges. Anticipate the options the customer will compare. Prepare by clearly outlining how the solution at hand will outperform other options.
Additionally, it’s critical to remember that there is an emotional component to any decision. Effective sales professionals handle this by building the relationship to demonstrate that they’ll be a trusted partner well after implementation is complete.
The challenge of building a consensus and securing budgets is among the most difficult, and it belongs entirely to the sales professional. The best sellers don’t leave this job to their buyer. Instead, strong sellers get everyone to the table and have a conversation with all the decision makers. At this stage, it’s particularly effective to engage the stakeholders’ differing needs by including SMEs and C-suite executives in the selling team.
Speak to Their Competitive Advantage, Not Yours
As our CEO John Elsey commented recently,
“innovative sales leaders are focusing less on promoting their own competitive advantages.”This is an unexpected strategy in an increasingly competitive environment. John continued, “Instead, they’re exploring how they can create competitive advantages for their customer and help them lead their market – rather than worry about how to differentiate themselves from the competitor.”
The best sales professionals do just that. They consider what will make the customer stronger and they speak to those needs. Doing so will incite movement from the buyer faster than promoting one’s self.
Today’s sales professional must constantly compete for the buyer’s attention amid growing competition and diverging internal goals. By articulating the risk of doing nothing, easing the solution implementation and engaging the customer’s competitive advantage, sales professionals can overcome the status quo.
More businesses today are moving to SaaS. Implementation is fast, systems are agile, and updates are less burdensome. Therefore, it’s no surprise that “SaaS is expected to grow sharply to nearly one-quarter (23%) of all enterprise workloads by mid-2018,” according to 451 Research. Effective SaaS sales professionals are learning to adjust to these changes.
They’re refocusing their efforts on becoming more consultative than transactional because buyers can change providers at any time. Buyer expectations now extend beyond the initial purchase. The strongest sales professionals are creating relationships.
A “closed” deal never truly closes. Sales professionals are expected to be an ongoing resource for the customer. This level of engagement is critical to generating renewals that maintain cash flow while limiting customer churn.
Just as the sale never closes, the competition never ceases. Other sales professionals will not slow their pursuit simply because a customer has started a relationship with a provider. Successful sales professionals never let their guards down.
Delivering consistent value for the buyer means staying ahead of company-specific technical challenges and developments in the industry. Sales professionals need to prepare their long game in order to unlock the lifetime value of their buyers.
Measure and Report Customer Business Impact
Customer dissatisfaction doesn’t always make itself heard. It’s important to seek regular feedback and keep all lines of communication open.
Don’t assume that a lack of dialogue signifies contentment. Too often, the customer’s frustrations rise to the surface when it’s too late.
Sales professionals can leverage the platform’s analytic capabilities to prevent this problem. Customer-generated usage and engagement metrics offer insight into solution performance.
This process begins when the sales professional works with the buyer to identify goals and standards for success. This upfront information equips the sales professional to address the issues and correct problems proactively.
Leverage Insights to Address Evolving Needs
Customers need competitive solutions. The problem, however, is that what’s competitive today won’t be tomorrow. The sales professional must offer insights that inform future strategies. They must think ahead on the buyer’s behalf. Simply put: evolve or disappear.
This is one of the most powerful and challenging aspects of selling cloud solutions. Preparation means understanding the nuance of the customer’s business while considering downstream challenges. The sales professional’s competitive advantage is understanding how to spur the buyer’s competitive advantage.
Resolving Service Issues Promptly
SaaS capabilities are becoming important to nearly all aspects of a business. As a result, there are greater opportunities for problems to arise. Effective sales professionals uncover these potential service issues before they become a source of concern for the customer.
The strength of the sales professional stems from their ability to proactively address problems. In many cases, the customer’s perception of the sales professional is only as good as the last interaction. Make each one count with reliable service and resolutions.
Remaining Agile in SaaS Sales
Changes in cloud computing are not only inevitable — they’re accelerating. If the sales professional is going to stay in the game, they must match this rhythm.
They can do so by effectively connecting customer needs to specific solution capabilities. While SaaS solutions boast considerable power, sales professionals must remember that the software is a tool. Therefore, the tool is only as effective as those who use it.
Sellers don’t add value by making SaaS solutions known and available. They add value by helping inform the user how it fits their business and goals. Doing so requires agility as the scope of SaaS broadens.
Today, SaaS adoption is strongest in customer-related categories, including marketing, eCommerce, and customer service. The buyers in these categories understand the importance of their relationships with their customers. Therefore, SaaS sales professionals must be prepared to match this commitment when talking to the buyer.
The complexity surrounding SaaS sales and software buying decisions is increasing. The reason: traditional software models based on one-time, upfront licensing fees have evolved to SaaS cloud solutions. Now, pricing is pay-as-you-go. Therefore, buyers expect value that extends beyond the closing of the sale. This change in the software market means that professionals selling the cloud need to redesign their approach to buyers. However, the buyers are also changing.
Simply put: IT buyers are only a segment of the group. With more business functions depending on SaaS capabilities, multiple stakeholders are entering the buying process. Cloud computing service providers need to engage various needs while articulating how the solution brings value to the business.
While these challenges are significant, so are the rewards. According to Gartner, “As of 2016, approximately 17 percent of the total market revenue for infrastructure, middleware, applications, and business process services had shifted to the cloud.” Moreover, “through 2021, this will increase to approximately 28 percent.” The future isn’t up in the air — it’s in the clouds.
Here, we look at five best practices for selling the cloud.
Selling SaaS Solutions to New Buyers
Today, IT stakeholders have moved to an influencer role, while business-unit stakeholders and C-level executives occupy the primary buying position. As a result, the sales cycle is increasing amid divergent objectives within the same organization. Each stakeholder has a personal definition of value. The selling professional must address each one. Without the appropriate preparation, too many sales professionals are falling short of this need.
According to Forrester research, eight out of 10 executive buyers believe sales meetings are a waste of time, citing that “salespeople grade themselves an A minus on understanding customers’ issues and where they can help, whereas buyers give salespeople a failing grade.” Sellers must be aware of the players on the field and their positions. Only then can they truly prepare and deliver value.
Focusing on Different Stakeholder Needs
In a rush to meet the needs of companies shifting to SaaS, PaaS, or IaaS, too many sales professionals fall into the trap of simply reciting product features. Doing so lacks answers to the essential question “So what?” The appropriate answer to this question is different depending on who the sales professional is engaging. CIO and CISOs are increasingly focused on managing risk. Therefore, they need to understand how the solution will address those concerns.
Meanwhile, the CTO needs to know how the software delivers value to the technology team. These are the kinds of meaningful conversations that fulfill the ROI expectations that continue to escalate on the buying side of the transaction.
Driving Buyer Consensus
The buyers will not achieve consensus on their own. This job falls to the sales professional. The status quo is the boulder they must move in order to reach the sale. Customer stakeholders must come together, vocalize their viewpoints, and allow sometimes difficult conversations to unfold. This aspect of selling is critical to maintaining momentum. Here, it’s particularly effective for the seller to not only join disparate groups but also to underscore the risks of not moving forward.
The benefits of making buyer consensus a priority will be substantial in the future. Bain predicts that revenue from the Global Cloud IT market will increase from $180 billion in 2015 to $390 billion in 2020. Earning a share of this growth requires sellers to take the initiative and bring people together.
Aligning on a Buyer-Centric Sales Process
The path to the sale is paved with experience. To consistently improve their process, sales professionals must watch how previous customers capitalize on the solution. This routine is not limited to just those in a sales position. Marketing and customer service professionals must also regularly renew efforts to keep pace with customers. The result is synchronicity in which the sales process develops into a repeatable flow. This approach creates a compounding effect that keeps the customer’s experience at the center.
Remember, this is part of the organizational learning curve. Therefore, achieving results takes time and consistency. If the selling organization cannot unite themselves, they will have difficulty uniting those in the customer’s business.
Communicating Value Without Overpromising
SaaS sales are no longer characterized by upfront capital investment. In some ways, the sales professional’s relationship with the customer is only as good as their last subscription renewal. The customer can part ways with the sales professional at any time. Therefore, promises must be right-sized and unwavering. It’s easy to cut the cord when there never was one in the first place.
Conversations must be open, honest, and transparent. The sales professional will assist their rise to the role of a trusted advisor by demonstrating a forthright demeanor. In the end, the buyer understands that they’re talking with someone who stands behind their word.
As IBM reported, “80 percent of US companies are planning to increase their use of cloud-managed services.” Sellers willing to do preparation and combat the status quo will capture much of this growth.
Competition in sales continues to escalate. In response, more businesses are renewing their focus on sales performance initiatives. However, these directives leave little time for the most critical step: measurement. Even the best sales performance intensions will fall flat without measurement.
After decades of working with sales organizations across industries, we’ve determined a core group of eight sales metrics. These measurements are critical for getting an actionable read on how they’re performing as an organization, which is driven, in part, by sales performance initiatives. Some organizations will only need to use a few of these. Others may need them all. Here, we take a closer look at how each one works and why they matter.
Win Rate: A team or company’s win rate serves as the primary indicator of market competitiveness. As an all-encompassing measurement, the number is easy to track and easy to baseline. This is a simple gauge of how many new pursuits close with a win status. However, win rates should not be viewed in isolation because the measurement is often a starting point, telling leaders where else to look for clues on business performance.
Quota Attainment: When leaders want to compare performance with expectations, they turn to quota attainment as a measurement. This qualitative number answers, “What percent of the sales team is meeting their goal?” This figure serves to judge performance against expectations and is a function of how all initiatives are operating.
Time to Productivity: Like a jet on a runway, a new seller has only so much time before they need to be “wheels up.” Time to productivity measures the length of this runway. This metric is particularly useful when looking to expand team capacity or when an organization is facing high-turnover. As Harvard Business Review reports, global companies like SAP examine time to productivity and even ongoing productivity. In doing so, they gain insight into what sellers can accomplish while helping managers more effectively staff their teams.
Attrition: According to a body of research from the Center for American Progress, the median cost of turnover is 21 percent of an employee’s annual salary. For this reason, attrition is a valuable measurement. Attrition signals the health of the sales team and, to an extent, the demand of the product that they’re selling. The number is also a lagging indicator of other measures, such as ramp time, productivity, and engagement.
Contract Value: Sellers today must work harder than ever before. Many competitive advantages have equalized as technology puts other players, big and small, on the same field. In response to this pressure, more sellers are seeking larger contract values so that the deals they close offer more value. In doing so, contract value serves to gauge the effectiveness of a team’s shift to multi-divisional solutions.
Profitability: Profitability is a function of price and product mix. Moreover, diminishing profitability may stem from price-cutting, which indicates a failure to convey competitive advantages. Sustaining profitability is ultimately about effectively improving the product mix, as different products carry different margins. With this key financial measurement, sales leaders can understand their degree of efficiency when utilizing resources to win the sale.
Pricing: Pricing is the primary driver of profitability. However, controlling pricing can be difficult as market conditions tighten. Effective sellers, however, can control pricing and therefore profitability by creating meaningful value and eventually elevating themselves to the role of a trusted advisor. Given that most sellers are compensated based on revenue generation, adjustments to price can also influence motivation.
Sales Cycle: A company’s sales cycle reflects the effectiveness of the sales team and buyer’s engagement. Changes to the sales cycle arise from the ability to adapt to a changing marketplace. Additionally, new customer acquisition requires much more time than selling to an existing customer. Therefore, a shorter sales cycle emerges from improved customer loyalty. Research from Accenture shows that “only 12 percent of CSOs believe that their customers and prospects view their companies as trusted partners with the majority considering them as only as vendors or suppliers.”
These metrics serve not only to answer key questions regarding the health of a business, but they also lend valuable insight as to where leaders should explore further. Nearly every business will find that they have access to data that allows them to leverage at least some of these eight metrics.
Sales leaders and business leaders are constantly chasing more business opportunities in the race to reach their number. However, more selling isn’t the only answer. Some are discovering that smarter selling can accomplish more. With sharper negotiation skills, sellers can preserve or even increase margins of the sales that they earn in order to make each closing count.
Effective negotiating occurs throughout the selling process. Sellers do this by shaping the customer’s perception of value and working to understand their needs. The result is a mutually beneficial outcome that allows for future business. Here, we look at a few specific negotiating skills that sellers can develop in order to increase the margins of their sales.
Six Negotiation Skills That Increase Margins
“Prime” the Negotiation with Preparation
In any selling environment, the customer is likely to link their impression of the seller with their perceived value of the product or solution. For this reason, the seller must be prepared to illustrate their value by delivering industry-relevant insights.
This approach helps to “prime” the conversation, prompting the customer to see the seller in a positive light. As a result, trust develops at an early stage, creating an environment that’s conducive to successful negotiations.
The reason: trust signals fairness. Research published in Psychology & Marketing echoes this fact, noting that “priming a consideration for fairness, a seller can increase a customer’s satisfaction without sacrificing profit.” A negotiation outcome in which the seller is able to preserve or increase margins requires positivity from the customer. This positivity starts with a sense of fairness.
Understand the Power of the Anchoring Bias
Sellers can build on fairness by recapping common ground. This step also helps lead to the next part of negotiating: making an offer.
The conventional wisdom suggests that one weakens their negotiating position by making the first offer. Science says otherwise. Research from Northwestern University reveals that “there is virtually no research that supports the claim that letting the other party open first is advantageous.” To understand why this is true, we need to look at the anchoring bias.
The seller creates an “anchor” when they make the first offer. This anchor is a number that acts as a center of gravity for all that comes next. In most negotiations, the customer is unlikely to venture wildly from this figure. Some call this “pre-suasion.” The seller is setting boundaries by planting a flag. Being cognizant of the anchoring bias means that the seller can confidently make a complete first offer without timidity or hesitation.
Convert Demands to Needs That Can Be Met
After making the first offer, a seller will encounter resistance in the form of customer demands. Effective sellers convert demands to needs by seeking to understand the underlying “why.” This approach is important because needs (e.g., “I need more flexibility in the payment schedule.”) are much easier to discuss and resolve than demands (e.g., “I can’t pay that much.”).
Sellers can convert demands to needs with questioning. Doing so helps clarify the picture for both sides. The key is to take the time necessary to explore the underpinnings of the customer’s position. Too often, sellers in the heat of a negotiation resort to shrinking the scope of work or make price concessions that negatively affect their margins in order to accommodate customer price demands.
Protect the Value of the Sale with Trading
In some cases, converting a demand to a need is not possible. In these scenarios, sellers can still protect the value of the sale by trading. Effective trading means protecting essentials without unilateral concessions that leave money on the table.
Trading cannot occur in an adversarial setting. In such an environment, a customer, otherwise willing to trade, may resist at the behest of their ego. Findings published in the Harvard Negotiation Law Review “serve to shatter the myth that adversarial bargaining is more effective and less risky than problem-solving.” The author continues, “the research indicates that a negotiator who is assertive and empathetic is perceived as more effective.”
Seeing a negotiation through to a successful end almost always requires some amount of trading. What’s important is that the seller understands the dollar value of everything that they’re trading and comes out with a sale that preserves or increases margins.
Understand the Difference Between a Commitment and a Close
Reaching the maximum outcome means first gaining a commitment that precedes the close. To reach a close, a seller must first earn the customer’s commitment by reaching an agreement on the terms and scope of the sale. This step provides the necessary momentum for winning the sale. Occasionally, however, unresolved points slow progress. In these cases, make the sticking points contingencies and move towards a conceptual buy-in. Provide specific, actionable next steps with clear language. Otherwise, the deal is liable to drift.
This concise language creates a proactive pursuit of the sale, which avoids the exhaustion that sets in with over-negotiation. Reaching a deal is incredibly energy intensive, and everyone has a breaking point. Stop short of that event.
Maintain the Relationship after the Contract
Issues are bound to arise, even after signing the contract. This is when the value of a relationship is most apparent. In fact, research published by MIT Sloan Management Review explains that “formal contracts are often ineffective in taking care of the uncertainties, conflicts, and crises that a business relationship is bound to go through over time.” This same body of research cites trust and confidence as being the most important characteristics for the longevity of a relationship.
By maintaining support after everything is signed, the seller demonstrates that they value more than the financial aspects of the deal. That is, a successful negotiator considers how the outcome of the first sale impacts the likelihood of future business.
Negotiating isn’t a fixed point in time — it’s a continuum. Generating more value through increased margins requires work before, during, and after the signed contract.