September 2011 Archives

Part IV (Continuation from the Case Study in Part III)


Situation # 2: Overcoming Early Questions about Price

 

During the initial meeting with an executive, the question of cost comes up. The executive is still in the Whether to Act phase. The sales person knows the prices paid by past customers, but is afraid that if he/she says how much, the executive will get sticker shock and lose interest (and rightfully so). The salesperson is looking for ways to address the cost question without appearing evasive.  

How should the salesperson respond?

The Response:

First, reply that the cost of services depends on the nature and breadth of work that is done.  You don't know anything about their organization, their current state, or the information and knowledge that already exists. You have no idea what it would cost, but you do know that one of the first steps in any engagement is to quantify the opportunity so that program investments can be put into context. 

Second, when one talks about cost, one has to take into account the total cost: investment of customer resources, purchased services, cost of new hires (if any), cost of developing and validating new protocols, etc. Every customer's implementation path is unique to them - with different balances of new and old processes, in-house and contracted work providers, manual vs. automated systems. Again, how can you know cost at this juncture?

Third, you're not trying to be evasive, it's just that at this stage with no goals and implementation path set out, it would be irresponsible to put something specific out there. This isn't a product or a piece of software; it's a change program (or solution or transformation or whatever). The first step is to explore with the executive team whether this program even makes sense given the company's strategy, resources, and current priorities. But, you can say, that if either the opportunity or the costs to realize that opportunity don't make sense, you'll be the first to say so because you don't want to waste their time or yours pursuing something that ultimately won't stand to reason.

Finally, if you are still getting pushback, say something like:

"...Look, companies that are serious about this <transformation> consider it a strategic investment. That means in order to realize the vision, it takes both a significant management commitment and a significant financial commitment. You can't get there otherwise, at least not any time soon. 

"The first steps are very low cost, and are designed to frame and quantify the opportunity, lay out the path to get there, secure the buy-in of the stakeholders, and define what it will cost all in all in to reach the desired state. 

"Each step in the process is designed to inform the decision about whether or not to proceed to the next, as each step will involve more significant investment, inside and out.  Getting started, if it makes sense to do so, it is typically a high-five digit figure (or whatever the range). Before that work is done, you'll have a sense of your current profitability for these procedures, how much opportunity exists for you to improve that profitability, and some insight into what it will take your organization - with your leaders, your docs, and your processes - to move the dial. If it's worth it, you'll continue, with or without us. Worst case, you'll end up with some short-term improvement opportunities that you can take advantage of to eek out some extra profits from your current processes." 

And, lastly, remind them that all you're trying to do now is decide whether it's worth everyone's time (your executive team & theirs) to have a sit down meeting and explore the potential of the programs.   

If the prospect is pushing back on the fact that you're not giving him a price, but not pushing back on the idea's relevance, the truly sophisticated sales person can employ reverse selling. It works like this:

"I don't sense your organization is ready for this anyway. Our work is transforming the economics of what is arguably the fastest growing service line in the hospital. Payment processes are on the verge of major change - which is going to cut the financial legs out from underneath the least profitable hospitals, but they won't know it until after it's done. Our clients seek to be leaders in their local markets; specifically market share leaders and financial leaders. They're smart business people. If it's this hard to even get a conversation about what's possible, I can't imagine how hard it would be to get people to actually do something, make a commitment, or drive change. It seems like there's too much inertia at this time, or too much focus on the little spending decisions at the expense of the big financial elephant in the room."

Granted - it takes a very confident sales person to use this approach. The point, however, is that the sales person has a lot more power in the early phases of the customer engagement cycle that they don't have to fall into traditional patterns of acquiescing and defensiveness. Your company is bringing an opportunity to the table and seeks only to be treated with respect and courtesy as you decide whether this opportunity is worth exploring further.  

So by now you should have a good idea of how exercising the power of intimacy can benefit the sales cycle. Giving a sales person the tools and self respect to reframe questions about price, experience, and track record will give them the confidence they need to truly sell value, which is what True Solutions are all about.

Part III: A Hospital-Solutions Example

In this example, we tackle two customer situations that often pose difficult challenges to sales people chartered with selling True Solutions early in a company's transformation to a Customer-Intimacy Business Model:

  1. Breaking out of the "Can't start because we haven't done it before" cycle. This is when sales people can't sell your newer, broader solutions because the company doesn't yet have a track record of experience and success.
  2. Addressing Price questions raised in initial meetings and elsewhere early in the proactive sales cycle, before you know enough to give a good answer and before you have established enough credibility to justify whether or not spending that kind of money is a good idea.

Situation #1: The Early Reference Requests

A healthcare solutions company is positioning a new orthopedics patient-care model in with a prospective executive buyer - which in this case is the COO of a hospital system. The buying organization is in the Whether to Act Phase. The Entry Project would create a future-state vision and a high-level business case, and would tee up different approaches for achieving the future state vision (i.e., prepare them to enter the How to Act Phase). In going through the purchase approval process, the COO has asked some questions about the experience of other hospitals. The buying executive passes the questions along to the sales person via email and asks for an appropriate reply. The sales person is stressed because this is a leading edge solution and there really aren't examples where his company - or for that matter other hospitals - have implemented an entire solution before. They've done all the pieces, but never an end-to-end implementation.   

How should the sales person respond?

The Response:

First, shift this dialogue to a "live" conversation rather than emails. Use the phone to ask some clarifying questions rather than dive into answers, even if the answers are unknown. The goal is to use clarifying questions to understand the COO's real concerns and educate him/her along the way. Ultimately, this process is used to instill confidence.

Second, and this is very important, don't answer the questions as if the buyer is vetting the people or your company. Answer them as if they are seeking to further understand how this solution might actually work and be applied to their unique situation. So, don't use phrases like "we never have..."  Instead, use phrases like "so-and-so has done this..." Even if they're not your past clients, you've studied the market so you can speak knowledgeably. Remember, the customer is in the "Whether-to-Act" phase, and answers should address this decision.                                          

Early in the discussion, the sales person could also offer to help introduce the COO/Executive Buying Team to others they could learn from - but the sales person must recognize that this is hard to actually arrange because references and contacts are few. Therefore, if such contacts are offered, the sales person should then use the process of talking through the concerns/questions in such a way as to leave the client thinking that ultimately making those contacts is an unnecessary step.

During the discussion, here are some other tactics that could be used by the sales person to redirect the inquiry and turn it into an advantage, possibly even building greater support for the initial work effort:

  • Suggest benchmarking and case study development as part of implementation work, i.e., you'll do the research for them (and build into the cost/price of future work).
  • Remind the customer that this is a leading edge topic, so the initiative needs to be dissected into pieces and lessons drawn that are specific to each piece. Some pieces have more track record than others. Some will be unique to them.
  • Pull from personal experience as much as possible when talking. "When we implemented a big change program through the doctors at Gotham City Health, we..."   and   "When the Metropolis Hospital System started their quality initiative, they had some rogue doctors and they did..."    The individual experiences may be narrow, but the collective set of experience implies an overall capability and instills confidence in the buyer.
  • Cite freely other companies of which you have knowledge, even if you haven't done the work. It's your knowledge a client is buying, and that knowledge is born of both personal experience and studying the market.
  • Show that the risks are being managed at each juncture: every major step and decision in the process is only made after the sufficient information, and trust, have been developed to enable it. This is how True Solutions are designed.

Bottom line, the sales person should be addressing the COO/Buying Executive's underlying concerns. But it's impossible to be able to address all of them because there are circumstances that are unique to the buyer. So, as a supplier, you're not on the hook to know everything and have done everything. Rather, as their expert, you will bring them all they need to know.

Part II: Reframing the Sales Cycle to Lead an Executive Customer to a Decision

 

In the previous post, we talked about how the success of the Customer Intimacy solution is dependent on equipping your sales people to move early sales cycle discussions away from price and instead, establish, upfront, the value of your company, your people, and the potential solution/opportunity itself. Since this capability isn't easily put into practice by most sales forces, we'll now discuss how to do that.

To turn theory into reality, sales people need to be equipped with the talk track tools, not to mention confidence, to get through the many customer interactions that will occur when selling complex solutions. In short, they need ways to reframe conversations so they are not about price; that is, until the end of the process when the last thing to be decided upon is price. 

Remember, we are targeting executives now, not Procurement. And, we are engaged early in the process, i.e., there isn't a mandate within the customer organization to buy anything, or even do anything, about the opportunity/topic that your solutions address. So given this context, the sales cycle needs to be approached with the mindset that there are three decisions being made throughout its duration, shown in figure 1, below. The sales person's role is to lead the customer organization through the process of making these decisions. Understanding what phase of the decision process a prospective customer is in helps determine the discussions that need to take place, as well as those that do not. 

Figure 1: Three Phases of an Executive's Buying Decision

ThreeExecDecisionPhases.jpg

PHASE I: Whether to Act - in this phase, the discussion will generally focus on questions about the feasibility and impact of an opportunity:

  • Is the opportunity real?
  • Does it apply to me?
  • Is the implementation path practical?
  • Are the risks and effort worthwhile?
  • How does this rank vs. other priorities the executive might have at this time?

PHASE II: How to Act - in this phase, the discussion focuses on different paths to realize the opportunity:

  • What is the role of technology?
  • What various solution architectures should be considered?
  • What process changes need to occur?
  • Does outsourcing make sense?
  • How can we be sure the benefits are being realized?
  • How do we decide the best implementation path?

PHASE III: With Whom to Act - in this phase, the discussion focuses on the specific players to whom the executive will hand over implementation responsibilities:

  • Who will project manage this? 
  • What partners will I use?
  • Whose technologies will we use?
  • Who is accountable?
  • What's the role of internal management vs. external providers?

For executive buyers, these decisions happen in sequence. Understanding where a prospective customer is in their decision process is vital to connecting well, or in other words, to building intimacy.  As one converses with an executive prospect, one's talking points need to align with where the executive is in their decision process, else those points will come across as irrelevant or, worse, annoying. To a prospect in the Whether to Act phase, it matters not that your company has more experience than any potential competitor. To a prospect that is in the How to Act phase, it is already understood that the operational cost savings potential of the opportunities makes for a rapid payback on investment. Nothing discredits a sales person more than speaking to a decision that has passed, or making points that aren't relevant to the decision at hand.  

By understanding where a prospective customer is in their decision process, a sales person can tailor the talk track to help progress the prospect through the current decision and onto the next. In so doing, they are better positioned to win the decision that matters most in the end: With Whom to Act.

Knowing which decision phase a prospect is in also helps guide a sales person's responses to various questions. Take the innocuous question, "Where have you done this before?" Depending on where a customer is in their thought process, the meaning of the question is different:

  • In the Whether-to-Act Phase: This question is most likely intended to probe on the feasibility of the opportunity. The more it's been done, the more real the opportunity and the lower the perceived risk. Follow-up questions are likely to probe the specific circumstances of previous customers and the applicability of their situation to the executive's situation.
  • In the How-to-Act Phase: This question is most likely intended to probe the different approaches used by others as a means to inform decisions about possible implementation paths. Follow-up questions will likely address the challenges faced in each of the different situations and how they were overcome.
  • In the With-Whom-to-Act Phase: This question is most likely intended to probe the specific experience and qualification of your company. Follow-up questions will likely address your success rate, and past customers' specific experiences. If references are going to be checked, this is when it would occur.

An analogous breakdown can be done on another innocuous question, "How much does it cost?" The answer depends on the phase of the decision process. In the early phases, the question is about the feasibility and the economics of acting relative to the potential impact. In later phases, it's about price relative to alternatives.

Of course, none of this matters if a sales person can't respond to questions in the right way relative to the decision phase. We've written up case examples for clients to put the theory into practical use and to help sale people prepare for situations they are likely to encounter when selling True Solutions and leading their customers through their own internal decision processes. We also place high importance on writing very specific talk tracks or dialogue maps to guide meeting flows, and provide some response pathways to questions a sales person is likely to get.   

The point of all this theory, examples, and preparation is to give the sales force not just tools, but the confidence to leverage the real power they have in a proactive sales cycle. After all, they are bringing to the table real opportunity backed by know-how, resources, and the leadership to bring a customer's organization forward and realize the promise. This power is made possible by the Customer Intimacy Business Model.     

Part I: Changing the Power Dynamics in a Sales Cycle


One of the most common challenges raised by many of our clients is the difficulty their sales forces have with engaging Customer Executives in discussions about opportunities to impact their business as business people. Much has been written in these pages about creating solutions and offers that truly impact a customer's business, and on the need to engage customer executives to sell those solutions. Now it's time to address the challenge of enabling the sales force to be successful in taking those solutions to the target executives.

To start, it helps to understand the nature of the challenge at hand, namely, moving beyond the experiences of your sales people themselves. In many industries - and especially at companies that have competed for a long time on the differentiation of their products and services - sales cycles have long since become "responsive" in nature. In other words, sales people were primarily engaged in responding to demand that had already been created in the buying organization through some other means. The buying organization had already decided to buy and was in execution mode (hence, the heavy involvement of Procurement). Whether on their own or with the help of others, the buying organization had already made decisions about:

  • the business needs they wanted to address
  • the actions to take
  • ownership of the initiative, and
  •  the funding to make available.  

In responsive sales cycles, all that's left for the buyer to decide is the final vendor and price. These, of course, happen in parallel. As a result, most successful sales people are adept at selling their company's differentiation and managing the discussion around price. Absent differentiation, or the ability to sell the differentiation, they are left with only price. In fact, a close look at the contract approval processes within many companies will show that most of the internal discussion is just about price - as in, how low are we willing to let it go?

 By pursuing a Customer-Intimacy business model, and bringing True Solutions to market, one engages the customer much earlier in their decision process. It might be so early that you are discussing opportunities and impacts that the customer hadn't even considered yet. Or, it might be an area in which a customer knows they need to take action, but hasn't really applied any energy yet to figuring out what to do and how to go about doing it. These are what we call "proactive" sales cycles, because the sales cycle is about leading the customer organization through their own decision processes. Even if the customer eventually goes out to RFP, your odds of winning are many times higher  because of the trust, mutual knowledge of each other, and the intimacy built during the work of making the case for action and developing the course for action.  

Unfortunately, the experiences of successful sales people in the "reactive" world often leave  them ill prepared to lead "proactive" sales cycles. This can be addressed, but it takes more than just equipping them with sales training and new value propositions and talk tracks. They need to retool the way they think about their role in the buyer/seller arena. In particular, they need to think of themselves as having much more power in the relationship than was possible in a responsive sales cycle. The power comes from the fact that they are bringing ideas, opportunity, know how, and resources to bear that will effect change for the buyer's organization.  

The challenge is that most sales people have never had that kind of power in the relationship, and they either don't realize it or don't know how to use it constructively. To illustrate the challenge a traditional sales person will have in selling in a more consultative environment, consider this true story:

I once went on a sales call with one of the more successful sales people at one of our technology clients. The client had already developed and piloted some True Solutions. We were now in the mode of scaling the sales model out to the main sales force. I was coaching this sales person on selling solutions and, in particular, the sale of an initial Entry Project as the first part of a Service Chain. Those of you familiar with this blog will have read about such offer concepts before.

This was our third meeting with the executive prospect. The first meeting included meaningful discussion about the idea and opportunity underlying the True Solution being taken to market, and the second meeting involved a deeper exploration of that opportunity with a broader stakeholder audience. Both had gone very well and it was clear there was broad support for moving forward. After discussing the objectives and scope of the Entry Project, it was evident that our executive prospect was interested and ready to move forward. 

"So, how much will this first project cost?" the executive asked. 

"$65,000" the sales person replied, with the confidence of one who can sense a deal close at hand. 

The executive did not reply right away. In fact, he sat motionless, with no discernible expression on his face. It couldn't have been five seconds, but must have seemed like an eternity to the sales person.

"But because you are an important customer we can do it for $50,000," the sales person offered unprovoked, as if responding to an inner voice chastising him for having been so bold. The executive agreed and they began discussing how to staff the team.  

I have often shared this experience through the years because it illustrates a common challenge within our client companies: their sales force has been conditioned to believe they have little power in negotiation during the sales cycle and the best and only platform they have on which to win is price. While that no doubt brings dismay to many business executives and marketing managers who insist their sales force needs to sell differentiation and price premiums, to many sales people those concepts are just words; it's all about cost.

In fact, many buyers have been conditioned to push back on price, even if they're happy with it. History suggests there is more discount available to those who demand it. In fact, a common buying tactic is to get a price early in the decision process, and over the duration keep pushing back on it; the more iterations and time that passes, the more discount extracted.

For the seller, the whole reason to move to greater customer intimacy and higher-value solutions is to combat commoditization of their offers. The process by which True Solutions are brought to a prospective customer, by its very design, demonstrates the value of a potential solution - as well as the seller - early in the customer engagement process. Theoretically, this should reduce price pressure and the sales person ought to have much more leverage to push back on price-reducing demands, whether real or imagined.  

That's the theory. But can it be put into practice? Only if sales people can overcome biases and behaviors stemming from their own past experiences. If they are used to selling on price, they will fail when selling solutions and programs because they will leave unanswered the many questions a buying executive has before he/she can make the decision to move forward.    

Fortunately, we can equip sales people to see and address the total picture with a prospective executive buyer - with price in its proper context - giving the sales person the power, confidence, and tools to be successful in a proactive sales cycle.   

We'll explore the concept of equipping the sales force further in Part II. 

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