Sales management is a thankless task, even in the best of times. Steadily increasing revenues have to be delivered every quarter, requiring good people management as well as expert organisational skills.
In the worst of times, customer decisions are often deferred, leaving sales pipelines empty further than three months ahead. There may be plenty of attractive-looking prospects, but recessions make converting them ever more difficult, especially if buyers sense an air of desperation in the people selling to them.
This is especially true for companies that are purely product-based. Customers become more frugal and less likely to replace products when times are hard. My advice to business owners is to try and re-position your company as a service provider.
At least a fifth of every product offering can be defined as a service, such as support or training. All you need to do is ask the customer what they want; more often than not they will ask for additional services.
The dream of every sales manager is to have a healthy pipeline of customers who provide them with recurring revenue as part of a long-term service contract.
Managing a sales pipeline should be the same process as managing people, with a service rather than a product mentality. This approach will seem more natural and thus sit well with both your salespeople and the customers themselves.
Some companies end up at this point by accident; others set themselves up specifically to take advantage of this mutually advantageous business relationship.
Steve Booth started his sales career in advertising and then moved to a security company specialising in closed circuit television systems for retailers. He soon realised that the value was not so much in the hardware itself, but in the data that it generated.
While preventing shoplifting was important, much more valuable was to use the captured data to help improve retailers' knowledge of the footfall around their outlets. Margins in retailing are notoriously thin, so any competitive advantage is highly prized.
His first foray into this business in 1997 was not a success, ending up in administration. Booth puts this down to bad timing, difficult market conditions and the wrong combination of unproven technology and investors.
In 2002 he started again and formed Springboard, which now provides automated customer counting services for high streets, shopping centres, retail parks, entertainment centres and even transport interchanges.
Among Springboard's customers is the British Retail Consortium, the trade association, which uses Springboard's system to monitor shoppers' activity.
Retailers spend significant amounts on marketing to get people to visit shops and once they are there an even greater effort is made to convert them into regular customers.
Crucial to this process are the valuable services that Springboard provides on a recurring basis, which must make their sales manager sleep much easier at night.
The recurring revenue concept is a fundamental part of Springboard's business model. The company develops a long-term relationship with a client, providing a continuing service based on measurable outcomes. While the software and hardware are interesting for the technical people, they are seen merely as detail in the delivery process, rather than an end in themselves.
This neatly summarises the business challenge of every high-tech start-up, including those where I was responsible for selling the software. Smart people had written clever software that had dozens of potential practical applications, but none that were yet proven in the real world.
What was needed was to combine hot technology with a real social driver to deliver a genuine business benefit. Looking back, I was mistaken to try and sell technology as a product.
If I had re-positioned the software as a service, not only would it have been easier to sell on an incremental basis, it would also have ultimately delivered a long-term and recurring service revenue, once proven.
Springboard can be found at www.spring-board.info
Originally published in The Financial Times. Copyright © Mike Southon 2012. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.
First of all, in order to prepare to have a great 2012, you need to know what numbers you need to hit. This will either be a sales target figure or a revenue/profitability figure.
You also need to work out your average order value (or average profit if you’re targeted on profitability figures), and then work out how many orders you need to hit that target.
Don’t be one of those people that says “I don’t have an average order, my orders are all different!” Simply take your revenue/profit total from last year and divide by number of orders.
The next stage is to look at what your existing customers have spent with you in 2011, and then work out what you think each account will spend in 2012.
For most people, this will involve a certain amount of educated guesswork, however it’s still an exercise worth doing as it will help you to understand how much business you think you can get from your existing base next year.
Don’t fall into the trap of being overly optimistic (or overly pessimistic) – and if you really have no idea what they will spend, use their 2011 spend figure if you’re in a business that gets repeat business from their customers, rather than one-off purchases.
Once you have your existing customer figure, take that from your total revenue/profit needed and move onto the next step.
The figure you’re now left with (total revenue/profit, minus existing customer spend) is the figure you’ll need to achieve in 2012 from new business.
You’ve already worked out your average order value, so now it’s time to work out your average new client value. In order to get this figure, find out how much each new customer in 2011 spent in total in the year.
The figure should average out – in other words you’ll have some clients that spent a lot, and some that spent little – perhaps because they only came on board towards the end of the year for example.
This will now tell you how many new clients you need in 2012 to hit your targets. Again. I’m not expecting these figures to be perfectly correct – you can always adjust them as you go along, but at least it gives you a base to work from.
Now you’ve got all your overall numbers, it’s time to break down those figures in terms of activity. You’ll know the critical numbers in your company of course, but the usual ones to look for are the number of sales calls to meetings, meetings to quotes, quotes to orders and so on.
These figures will then enable you work out how much sales activity you’ll need to do in order to hit the targets that you’ve set.
Once you’ve got these figures, you’ll notice you start to feel a little more confident about hitting your targets for 2012. Now it’s time for the next step.
The figures you’ve worked out above are based on purely hitting the targets you’ve set. The next step is to stretch you a little.
Once you’ve got all your figures together for the above tips, work out those figures again – but this time for 120 per cent of your target, 150 per cent and 200per cent for example.
This will give you the figures (and the activity) required to hit those new targets.
Then I’d pick one of the stretch targets to aim for (rather than just the 100 per cent of target). Don’t worry if it makes you feel a little uncomfortable – that’s part of the process!
Now you’ve worked out how you’re going to hit 100 per cent or more of the targets you’ve set, it is time to break those figures down.
You want to break those yearly figures into quarterly ones, monthly ones, weekly ones and even daily ones! This will enable you to see the revenue/profitability figures you need to be aiming for – and more importantly for the salesperson – the activity you need to be doing on a daily/weekly/monthly/quarterly basis, in order to hit (and exceed) the targets you’ve set.
If you’ve done the above steps properly, you’ll now start to feel more confident about hitting the targets you’ve set, as breaking them down usually makes people feel like they’re more achievable.
However, depending on your activity levels in 2011, you might have given yourself a bit of a shock, in terms of how much activity you’ll need to do in 2012 to hit your new targets. However it’s better to know that now that find out halfway through they year when you’ve got less chance to do anything about it!
This is probably THE biggest tip I can give you to set yourself up for a great 2012.
You see, most salespeople and business owners won’t have even taken the time to READ this article, let along do anything about it!
If you’re one of the few that not only has read this, but is actually taking the time and effort to work out these numbers in order to give you the edge you need, I congratulate you.
Now it’s about keeping that motivation up consistently in 2012, and now you’ve given yourself a head-start over your competitors, making sure you stay there!
Good luck with your sales in 2012.
Everyone is different. We have different needs, wants, desires, tastes, habits etc. Most relevant to pricing, everyone has a different Willingness To Pay (WTP). We don’t force everyone to wear the same clothing style, or eat the same foods, or drive the same cars. Similarly, we don’t have to force everyone to pay the same price. We can customise pricing.
Car pricing is customised. Not the sticker price, but the actual price people pay. I just bought a new car and it is very unlikely that I paid the same price as anyone else for the same car at that dealership. I certainly negotiated differently and had a different WTP.
Airline seats are pretty customised. Although a few people on the plane may be paying the same price, not many are. The airlines have figured out great techniques for charging different customers different prices, trying to capture more of each customers’ WTP.
Some items, like potato chips, are harder to customise for just a few people, but they do customise for larger groups. They charge different prices for different flavors in different regions of the country. They offer coupons to let the price sensitive pay less.
Pricing is customisable. The first step is thinking of two customers or customer types that have different WTPs. The second step is figuring out how to let people with lower WTP pay less while not letting people with higher WTP have the low price, all while everyone thinks it is fair. That’s where the fun comes in.
Mark Stiving is a pricing strategist, runs Pragmatic Pricing, and is the author of Impact Pricing: Your Blueprint for Driving Profits.
Want to read more by Mark Stiving? Read Why value-based pricing works best.
All too many products or services are seen by the marketplace as being very similar to one another and as a consequence they’re treated as commodities.
Most people, for example, consider one motor insurance policy to be much like many others, one brand of petrol or diesel to be much like the others, one Windows computer as much like many others, one accountant, lawyer, banker, IFA, web designer, printer or utility supplier to be much like many others, one hotel much like many others, one airline much like many others and so on.
Even in the best of times nobody wants to pay more than they have to for a product or service. So whenever your customers believe that they can get products or services that are similar to yours from other sources, your product or service becomes a commodity and your prospects and customers will always tend to shop around for the best price. And in today’s world of online search tools and web-connected mobile devices anyone can easily compare your prices with others in a matter of seconds, wherever they are.
In a commoditised marketplace whoever charges the best price for a given product or service tends to win. And if you don’t want to lose out, you have to be prepared to match prices.
But if you manage to set your product or service apart from all the others out there, you can charge what your product or service is really worth. Differentiation, as in so many things, is the key.
The question then becomes “what will the market bear?”
And in many cases it’s a lot.
You can buy an entry-level Lexus car for around £23,000 and they go up to £90,000 for the LS 600, without extras. Then Lexus introduced the LF-A supercar at £330,000. That’s around 50 per cent more expensive than the most expensive Ferrari or Lamborghini, and on a par with the most expensive Rolls Royce Phantom.
If you think of a Lexus LF-A as “just” another Lexus, £330,000 seems like a ridiculous price. But that’s before you see how it’s made; what it can do; the astounding attention to detail; and above all how it does what it does so well. To hear one is to want one. And to drive one is to want one even more. So can it really be worth £330,000? Let’s just say that the entire planned production run completely sold out within two weeks. And I’d have one in a heartbeat, given the chance, in preference to any Ferrari, Lamborghini, or Porsche. It is SO astounding that anyone who is truly passionate about cars, and can afford it, will likely part very happily with the value of a suburban house to own a Lexus LF-A.
What about professional services? There are plenty of reports in the press of top lawyers with specialist expertise and high profile clients earning millions of pounds a year. Top PR consultants like Max Clifford make millions looking after clients such as Simon Cowell, Kerry Katona, Freddie Starr and Rebecca Loos. The market will happily pay a fortune for anyone who can demonstrate that they’re not a mere commodity like so many others in their field.
Those are great questions. But before you answer them, consider this story about Pablo Picasso.
A woman was strolling along a street in Paris some years ago when she spotted the world famous painter Pablo Picasso sketching at a sidewalk cafe. She plucked up the courage to approach him and asked him if he could do a sketch of her and charge her accordingly.
Picasso obliged, and minutes later she was the owner of an original Picasso.
She then asked what she owed him.
“Five thousand francs” he replied.
“But it only took you three minutes,” she politely reminded him.
“No,” said Picasso, “It took me my entire life.”
The point is, if you’re not just seen as another commodity you really don’t have to charge by the hour like everyone else does. You can often charge by the years. And if you’re good enough, plenty of people will happily pay a premium for your special expertise, because like an original Picasso for FR5,000, it is still represents amazing value.
It’s like the man who suffered from a persistently squeaky floor in his house. He finally called in a carpenter who had been recommended to him as a true craftsman.
The craftsman found the squeak, set his toolbox down on the floor and got out a hammer and nail. Then he pounded the nail into the floor with three blows. It took all of 30 seconds. But it fixed the squeak forever.
He wrote out an invoice for £95, which itemised what the invoice was for:
The moral of the story: charge for knowing where.
I was in Shanghai doing a few seminars a while ago. It's a dizzying place. Every time I looked out of my hotel window the building they were putting up had gained another storey in the night, because people were working 24 hours a day.
Ambitions there are limitless — but not many people understand marketing well as yet. What they are especially good at, though, is asking highly relevant and perceptive questions.
One man asked me to explain the relationship between sales and marketing.
This made me think about a problem we come up against time and again. As Thomas Watson Jnr of IBM put it, "Nothing happens in business until something gets sold."
Many of the people we work with who are in sales appreciate that unless they have a full pipeline of leads the business is in trouble.
More to the point, they are in trouble — because they're judged by sales results.
And why are they in trouble? Very often because although they have to produce the results, they don't have the money — the marketing budget. The marketing director has that. And he or she is often more concerned with things like branding and advertising. Lamentable, really.
Results: impasse — and very often bad blood between sales and marketing.
What's the answer? Collaboration.
In far too many firms, sales and marketing — who should be natural partners — are sworn enemies. The sales people see the marketing folk as a bunch of high-falutin' theorists who know nothing about the real world. The marketers regard the sales people as a bunch of unsophisticated oafs. Yet the truth is — as you would know if you ever had to take money off people face to face, that selling is damn hard work.
Get them to talk to each other. Get them to explain each other's problems. Then get each side to come up with solutions — for the other guy's problems. A session which involved doing this would achieve a lot more than some of the stuff that passes for training in business.
Want to read more by Drayton?
Here are a few of his inspirational articles and blogs:
Forget you and forget your standard sales presentation.
Let me explain. All of us have our own unique way of perceiving the world. This map has been created from the moment you were born to this very day; all your experiences have gone into the pot and created your map. Nobody else will have had your experiences in exactly the same way. They will have had their own experiences and will perceive the world in their very unique way.
So what does this mean to you and importantly how can you use this to increase your sales?
It’s really important to get into the map of your potential client, really understand them, their problems and desired objectives. Only then can you deliver an offering that is irresistible and create the desire to buy from you.
Why is it then that so many people pitch their offering before finding what the buyers “map” is?
This causes so many challenges when it comes to sales:
It’s so much more effective, and actually easier, not to start with your pitch. Start by asking well-crafted open questions — any that start with who, what, when, where or how. Avoid “why” questions as they can seem confrontational. Find out what’s going on in their world, from their perspective. Do they want to solve a problem or do they need something to move them forward.
Forget what you think they need until you’ve got every last scrap of information from them. Then you can tailor your pitch exactly to their needs, using their words, values and beliefs.
It’s also crucial to use “you” language. This is so much more engaging and shows that you are really in their space — their map! Whenever you use “we”, “I” or your company name, you are in your own map and focusing on yourself, your offering or your company.
The benefits are enormous:
One more thing — give your buyers lots of time to answer, really listen and pause when you think they have stopped. It’s often in these pauses that you’ll get the golden nuggets of information that make all the difference!