Carpe Diem Consulting - Sales & Marketing Blog For Microsoft Partners

Sales Tactics for Tough Times - #1 Shedding Customers

This is the first in a number of articles I intend to write, focussed on outlining specific tactics for Microsoft Partner sales teams to achieve sales success during tough economic times.

 In Australia Microsoft is tackling this issue head on, outlining a number of strategies for Partners - check out Nick Mayhew's blog for details.  More on this in subsequent articles.

For now, I want to focus on the issue of customer profitability.  In our consulting efforts with organisations - both within but also outside of IT - inevitably we find that the Pareto principle applies to customer profitability ie often 80% of the profit comes from 20% of the customers.  (For a step by step guide on how to calculate cumulative customer profitability, download this extract from Carpe Diem's Action Oriented Marketing course.)

When we mention this to clients, there are general nods of agreement - but it is rare for us to see anyone doing much about it!

This phenomenon would not be so much of a problem, if it weren't for the fact that - in general - the majority of a Partner's resources are usually allocated to the tail - making this an unprofitable tail.  Chances are some of your larger customers are actually subsidising the smaller ones.

Here are the key steps you should consider following:

1. Undertake an analysis to identify which current customers are actually costing you money to service.
2. Divide this list of customers into 2 - customers which can be made profitable (perhaps by selling a managed services contract, or by renegotiating service levels etc), and customers that will likely remain unprofitable.
3. Implement a plan to exit the unprofitable customers from your business (perhaps by referal to an organisation that can service their needs, but that has a lower cost structure).

Don't, however, stop here - if you do exit these customers, there will be some loss of revenue - it is important you remove the costs associated with servicing these loss making customers.  This could mean shedding some staff - although it could also mean redeploying these staff into areas where they can generate more revenue, at the same time adding more value to the remaining customers.

If you think "exiting customers" doesn't happen in real life, check out this article from Brand Autopsy, that catalogues how US telco Sprint dropped 1,000 "demon" customers.

How good a plan do you currently have in place to ensure ALL of your customers genuinely contribute to your bottom line?  In tough economic times in particular - can you really afford to be charitable when it comes to supporting customers that will only ever cost you money?

Selling in difficult economic times

Have just finished reading an interesting blog by Gavin Ingham entitled 7 Tips For Sellilng in an Economic Downturn - and it caused me to reflect on the role of a solution sales process, and what its relevance is in difficult economic times.

Over the past 2 weeks I've had a number of "sales people" (quote marks intentional!) try to convince me that they should have a meeting with their sales manager to request a lower target over the next 6 months.  Their rationale is "tough times - less budget for IT - we will get less sales".

This sentiment should be offensive to professional sales resources!

The foundation of a solutions approach to sales is to bring to prospects' attention business problems they are experiencing BEFORE they decide to go out and obtain quotations.  Once the prospect achknowledges the business problem, a roadmap is then established so that both parties can work together to solve the problem.  This is why we sell outside - as well as inside - the IT department.

Now - it seems to me in "tough economic times" that businesses will be having even more problems - and hence if we come up with "problem solving opportunities" in fact there should be MORE business for us to do during a downturn.

To me this argument crystalises the difference between being a "high level sales administrator" (ie waiting for the customer to figure out the problem, come up with their own solution, and then approach the market - ie the world of competitive selling) and being a "true professional salesperson" (ie predicting in advance what problems a prospect may have, obtaining agreement from the prospect that the problem is real and needs to be fixed, partnering with the prospect to remove the pain).  If our role is to spot business problems and then work with prospects to solve them, our funnel should be even fuller than usual!

In their terrific book Selling is Dead, Marc Miller & Jason Sinkovitz offer this most appropriate quotation:

We see many high salaries being paid to glorified account managers and customer service people who bear the title of salesperson, but who are incapable of actually being consistent creators of business value and new business revenue.

That’s a lot of money to pay for a cream-skimming, easily replaced, noncreator of demand and growth.

In an earlier posting I wrote about the demonstrated link between IT and competitive advantage - surely in tough economic times it should be easier - rather than harder - to "genuinely sell"?

Are you a cream-skimming, easily replaced, noncreator of demand and growth?

The power of nothing

Readers of this blog will know I'm a disciple of Garr Reynolds' Presentation Zen blog - purveying all that is good about delivering powerful presentations that allow a focus on the speaker - not detailed and boring Powerpoint slides.

Here's a good deck of Garr's designed to point out the power of empty space on a slide.

 

Particular favourite slides of mine:

#51 - particularly pertinent in a sales situation
#61 - used to love Pac-man(!)
#70 - so relevant for Microsoft Partners
#75-78 - if you're going to give a presentation, go the whole hog and provide handouts - the audience will appreciate the take-away, and your slides will be less cluttered (because you've created an avenue for removing the clutter)
#82 - what a great way of showing an agenda, complete with the time each segment will take up

Stop selling software - start selling competitive advantage

It is continually frustrating to see IT sales people that know so much about their products - but so little about the businesses of the customers they sell these products to.  In a 2006 Frost & Sullivan report on the key issues holding back the Enterprise Content Management market, they rate Difficulty in understanding business benefits and Mismatch between business needs and solutions offered as the highest and 3rd highest "market retardant" factors.

As an IT sales community, we should hang our heads in shame.

Increasingly research is at hand that points out the link between IT and "competitive advantage" within the firm.  A great example is the recently published article Investing in the IT That Makes a Competitive Difference, by Andrew McAfee and Erik Brynfolfsson in the Harvard Business Review.  They argue that the US economy has accelerated to unprecendented levels, and that the key engine behind this growth is IT.

They suggest a 3 step approach to maintaining a competitive edge:

1. deploy a consistent technology platform
2. innovate better ways of working
3. propagate those process innovations throughout the company

Andrew also references the article on his blog here.

This approach should ring bells of joy within the Microsoft community.  The concept of a consistent technology platform - as represented by the "Microsoft stack" - is a key element of the Microsoft value proposition.  Indeed, a course entitled Realising Platform Value has been developed to assist sales teams to have platform discussions with customers about realising the additional ROI that can be generated from the Microsoft platform.  (This is one of the few courses I'm aware of that was compulsory for EVERYONE within Microsoft Australia to attend.)

What a great conversation starter for a meeting with a CIO.  Instead of saying "what would you like to buy today?" we should be asking "are you happy that your technology platform is providing as much competitive advantage to your organisation as possible?"  What a terrific way of supporting our CIO customers - assisting them to provide a technology platform that can maximise their firm's competitive advantage.

This diagram - from the Realising Platform Value course - illustrates the progression we can achieve for customers in moving them from point solutions to an integrated platform:

Having written all of the above - it is also important to be aware of contrary arguments - and Nicholas Carr has written an excellent article entitled IT Doesn't Matter - arguing that "scarcity, not ubiquity, makes a business resource truly strategic", and hence - like electricity - IT is now a commodity, freely available to all and hence not providing competitive advantage.

Either way - wouldn't this all be a terrific - and differentiating - conversation to have with a prospect!

"Brand" - powerful but misunderstood

Invariably when I discuss the concept of "brand" with a client, they immediately start talking about their "logos", "slogans", "creative elements" etc.

In the right hands, these corporate identity elements provide a visual and textual summary to assist a range of stakeholders to make sense of "what the organisation is on about".  But they are shorthand - they are not the brand itself.

My favourite definition of brand I attribute to Leslie de Chernatony in the excellent book From Brand Vision to Brand Evaluation, Second Edition: The strategic process of growing and strengthening brands. 

The definition - "Brand is promise".

This is really powerful - if an organisation can create and enact a unique promise, that is valued by its target markets, then it will achieve significant competitive advantage.

Try this exercise within your organisation - send an email to all employees, asking them to reply with what they think is the promise that your organisation makes to its customers.  You'll be surprised (horrified!?) by the results.

I recently came across the following online slideshow, provided by Marty Neumeir, author of the book Brand Gap.  Marty captures well the link between brand and the intent of the organisation - although I think his definition of brand is a little too "receptor sided" (ie it would be useful to differentiate between "intended brand" and "perceived brand").

The presentation and material, however, are excellent - enjoy!

A condom too expensive....

Terrific book here from Garr Reynolds, to assist us all to make "better" presentations - ones that ensure the focus is on the speaker and the message, rather than on the bullet points and "noisy" slides.

Presentation Zen is my favourite blog on the art of presenting - and a recent article by Garr highlights some of the problems we can get into when using charts in presentations. He also references some comments made by Seth Godin, particularly his 3 laws of great graphs.

Powerpoint is a terrific and widely valued tool - but many of its features simply shouldn't be used.  Use the subtlety of Powerpoint to help you tell your message - don't employ its technical wizardry (text flying in from all angles, 3D charts, multi-coloured backgrounds etc) such that it detracts.  Just because Powerpoint can, doesn't mean we should.

Trust and the $5 muffin refund

Today I was reminded about the difficulty - and the power - of being able to successfully market "trust".  I've been facinated with the "marketing of trust" ever since I wrote my MBA thesis - I've long forgotten the exact topic(!) - but I vividly recall it was a paper combining the theory of marketing trust with the difficulties in building the concept of trust into long term IS outsourcing contracts.

For anything but the most basic ICT transaction, ultimately the customer has to trust that we're going to do "the right thing" by them.  But how can we market the degree to which we can be trusted?  Every firm says they can be trusted - but not all firms can be trusted to the same degree.  How do we get this message across?

In our Essence of Selling Solutions methodology, we speak of the necessity of using Evidence - case studies of other organisations that are happy to go on the record to speak favourably about our work with them.  (Indeed - on our web site we use a quote from one of our key Microsoft contacts as Evidence that we're "up to the job".)

But what if we're in an existing relationship with a customer, and we're about to enter unchartered waters - perhaps they're about to outsource a significant chunk of their IS infrastrucutre to us, and it's just too hard to write a contract to cover every eventuality.  HOW DO THEY KNOW THEY WILL BE ABLE TO TRUST US?

Marketers define trust as (and I'm paraphrasing!)

A can trust B if B has the opportunity to rip A off - and chooses not to do so.

In an outsourcing contract, the vendor will end up with much more information about the customer than the customer has about itself - it would not be difficult to use this information to unfair advantage.  It's the very fact that the vendor has this information - but chooses not to use this to its advantage - that defines the trusted relationship.

So - where do the muffins come in?

This morning I went and bought the family muffins for breakfast.  I was charged $20 - there were quite a few muffins so I handed over the $20 note, and walked off, very happy as I was able to get the last muffins in the store.  (No fun returning to the muffin hungry family empty handed!)

Literally as I was driving out of the carpark - some hundreds of metres away from the store - I spied in the rear vision mirror the shop assistant that served me running frantically towards my car, waving madly.  I thought I must have left my mobile phone behind - but to my amazement she ran towards the car waving a $5 bill.  When she drew near she explained breathlessly "I'm so sorry - I overcharged you - the muffins are only $2.50 each - I don't know what I was thinking!"

WOW!  I would never have noticed this - there would have been absolutely no recriminations if she had not come after me.  But she did.  Once she realised her mistake, she had the opportunity to knowingly "rip me off" - and she chose not to.  I can trust her - and by association I can trust her store.  I now don't think I could ever buy muffins anywhere else!

SO - next time we quote a service fee to a customer based on the numbers of days it will take us - and it turns out we don't need anywhere near that number of days - do we reduce the size of our invoice?  If it's close to the end of the financial year, and we need a certain sale to make our target - but all of a sudden we become aware under confidentiality of a far superior solution that will only become available in the new financial year - do we deliberately postpone the sale, even if this means we won't make target?

What efforts are made in your organisation to "do the right thing" by your customers?

You're not selling a commodity unless you want to

A short article from Seth Godin - but spot on the money!

Price comes up so often as the reason why we didn't win the deal.  Our theory, however, is that this is generally just a way for a conflict averse prospect to let us down gently.  Rather than say "you didn't win the deal because we actualy preferred your competitor" they say "what a great proposal - unfortunately you were too expensive".

How do you know the REAL reason why you didn't win the deal......

Getting past the "Gatekeeper"

I've given up counting the number of times participants in our Effectively Selling Solutions courses have asked for advice on getting past the Gatekeeper.

As with sales in general - there is no "silver bullet", there is no excuse for "trickery" or "intimidation".

Nothing better than to get advice from "the horse's mouth".........

The role of "influence" in the sales process

Here's a useful summary of the seminal work of Robert B. Cialdini, Ph.D. into the various techniques available to influence people.  It's interesting to work through how the 6 influencing factors are evident in any sales process associated with successfully selling solutions.  It's even more interesting to reflect on the line between "influencing" and "manipulating".

The Rule of Reciprocity is about one person "repaying" what another has provided. A solution selling example would relate to advising a prospect that we're willing to invest our time and resources to prove our capability to them - but in return we need them to introduce us to the decision maker.

A related procedure - the so called "rejection then retreat technique" - relates to making an extreme request that we know will be rejected, but then "retreating" to a lesser position, inviting the prospect to reciprocate.  For example, in our quest to measure the level of "buy in" we're getting from a prospect, we might want them to take an action to fill in some sort of questionnaire.  Our initial offer may be that we need them to spend half a day working through a structured workshop with us:  if they recoil in horror at the time commitment, we could "retreat" to getting them to fill in the questionnaire.  Because we have retreated, the prospect reciprocates by agreeing to fill in the form.

The principle of Commitment and Consistency reveals the desire individuals have to display behaviours consistent with an initial commitment they have made.  In a buyer/seller relationship, a crucial initial commitment made by a prospect may be to pay for an initial "fact finding" or "needs analysis" exercise on the part of the selling organisation.  "Training" prospects that the time of our technincal/consulting staff is very valuable - and thus must be commercially reimbursed - is an important foundation for a relationship built on mutual respect.  Conversely - giving consulting/technical time away for free creates a dangerous precedent.

Social Proof principles prescribe that people are more likely to determine that something is correct based upon finding out what others believe to be correct.  In the solution selling world, this correlates nicely to the provision of "Proof", "Evidence", case studies, reference sites etc.  The article advises that social proof is most influential in uncertain situations (soluion selling example - when a prospect has never dealt with us before, and therefore doesn't know what to expect), and when the evidence offered is from someone "similar" to themselves.  Clearly - having a range of customer "success stories" is critical - and there is a real need to match up the person giving the reference to the title, industry etc of the prospect.  Far too often we only have 1 written up success story per customer - we actually need multiple, from various different roles (eg IT Manager, HR Manager, CEO, Operations Officer etc).

(As an aside - in our training we advocate the somewhat extreme view that commission should not be paid until a documented case study/customer reference is in place.  This is invaluable to the sales process - but also offers a built in "quality check" mechanism ie if the new customer won't offer us a reference, there is probably something not quite right about the installation.)

Surprise, surprise - prospects are more likely to say yes to people they like! The article list a number of factors that will increase the likelihood of being liked.

People are more likely to agree to requests from someone perceived as being an authority figure.  Obvious symbols of authority include job title, clothing, cars etc - although holding a position on a company Board of Directors, being included in a key Government comittee etc will also send powerful authority messages to prospects.  Being known as a Microsoft Gold Partner provides a sense of authority.

The final factor - scarcity - reveals that people assign more value to opportunities when they are less available.  Too often our initial reaction to a meeting request from a new prospect is to jump straight in the car and get over there!  But what message does this send?  Imagine if your prospect had to book in to see you weeks in advance.  This would send a powerful message about how valuable your time was.

So - is this selling, or is this manipulation?  Is there in fact any difference?  In my heart I really believe selling should be about recognising and solving problems for other human beings.  The trouble is - sometimes we need a "leg up" to get the opportunity to meet with a prospect.

Let me know your views.  Is there a role for the principles outlined above in professional selling?  Do we have any ethical issues?