Mastering the Complex Sale_8 doc

Some-times they honestly believe this work is the customer’sresponsibility and that their customers don’t need help tounderstand financial impacts—this is, after all, the commonunderlyin

Salespeople tend to shy away from quantifying theactual financial impact of their customers’ problems Some-times they honestly believe this work is the customer’sresponsibility and that their customers don’t need help tounderstand financial impacts—this is, after all, the commonunderlying assumption of the sales processes they aretaught to use.

Many other salespeople complain that it is too difficult

to uncover financial impact and quantify the value Theybase this conclusion on their experiences asking customersabout costs However, they typically ask cost questions thatencompass too many elements You know this is happeningwhen customers respond by saying, ‘‘That’s a tough ques-tion; that would be really hard to determine.’’ The realproblem is not that the cost is too difficult to quantify, butrather that salespeople do not have a proper formula forcalculating it The number one reason salespeople avoidquantifying their value is that they have not been equipped

by their companies to do so

The best sales professionals embrace the measurement

of value and realize that the starting point for determining

That price tag enables customers to prioritize theproblem and then make a rational, informed choicebetween continuing to incur its cost and investing in asolution In fact, as we see in the next chapter, estab-lishing an accurate cost of the problem is the only path

to defining the true value of a solution Cost is also thesurest way to shorten the customer’s decision cycle.Think of the customer’s pain as the decision driver andthe cost of the pain as its accelerator The higher thecost of the problem, the faster the decision will bemade to solve it

value is calculating the cost of the problem They knowthat there is always the possibility that the cost of a problemwill not be large enough to motivate the customer tochange They also know that such an outcome is entirelylegitimate If the cost of a customer’s problem does notjustify the solutions being offered, the professional willacknowledge that reality and, in the spirit of always

be leaving, move on to a better qualified customer (Ofcourse, if this happens too often, salespeople and theirorganizations might very well have a larger problem Theirsolutions may be too expensive in terms of the value theyoffer customers.)

Another common objection to the cost of the problemcalculation that I hear from salespeople is that their offer-ings are not meant to solve problems They tell me thattheir solution creates new opportunities for their customer;therefore, there is no problem to fix a cost to This is not avalid position If something is happening in a business, itcan be measured in financial terms There are risks andcosts present in every decision Even when a solution offers

a new capability, there is still a cost if the customer choosesnot to adopt it It is the cost incurred in the absence of thevalue your solutions provide

When salespeople seek to establish the total cost of aproblem, they need to use a combination of three types

of figures:

1 Direct numbers: Established or known figures

2 Indirect numbers: Inferred or estimated figures

3 Lost opportunities: Figures representing the options thatcustomers cannot pursue because of the resources con-sumed by the problem

When I talk about the total cost of the problem, I amnot saying that you must establish a precise figure Rather,the resulting number must be believed by the customer.This requires that the customer recognizes that the formulayou provide is valid, and when used with the customer’snumbers, will provide a credible outcome, that the cus-tomer is part of the calculation process, and that the cus-tomer is willing to ‘‘own’’ the outcome

With these prerequisites in mind, calculating financialimpact is a process similar to the navigational methodknown as triangulation By sighting off of three points—direct numbers, indirect numbers, and lost opportunities—you can arrive at a financial impact that is believable toyour customer (see Figure 5.2)

This is accomplished in two steps First, we need toprovide a formula that is conceptually sound Second, wemust ensure that the numbers plugged into that formulaare derived from the customer’s reality, not industry aver-ages, past experiences with other customers, or other morequestionable sources We know we have successfully com-pleted these steps when our customers are willing to defendthe validity of the cost among their own colleagues

Let’s take a look at how a cost of the problem sation should go This is based on a cost of the problem

conversation we designed for one of our client companies,

a provider of shoplifting detection equipment to stores, which was finding it difficult to sell to stores inaffluent communities

The sales professional engages the manager of a store with revenues of $1.5 million, who is experiencing theindustry average inventory shrinkage of 3 percent Thistells the salesperson that the store is losing $45,000 annu-ally to some combination of customer theft, employeetheft, and/or sloppy inventory management The manager,however, does not believe that the store is experiencing anysignificant customer theft because the store is in a ‘‘betterpart of town,’’ and therefore, is not interested in the sales-person’s detection equipment

drug-The salesperson agrees with the customer (creating anatmosphere of cooperation), and then asks an indicatorquestion, ‘‘Do you ever notice empty packages on thefloor?’’ The store owner replies, ‘‘You have a point there,but it’s not enough to be worried about.’’ ‘‘Probably not,’’the salesperson replies, and then asks the next question to

FIGURE 5.2 Cost of the Problem

establish an indirect number ‘‘Out of every 100 people inthis community, how many do you think would shoplift?’’The now-curious owner replies, ‘‘Oh, I suppose one per-cent, 1 out of 100.’’

The salesperson now asks for two direct numbers—theaverage sales per day ($4,100) and the amount of the aver-age sale ($16) This yields the number of buying customers(257) He then asks the manager for an indirect number—the number of browsers in the store who don’t buy Themanager says ‘‘About the same number as those who buy.’’That yields a figure of 514 people in the store each day.The salesperson then asks for another indirect number:

‘‘What do you think the average loss from a shopliftingincident would be?’’ The manager replies, ‘‘$15 to $20.’’From this information, the salesperson calculates thatthere are approximately five (1 out of 100) shoplifters in thestore each day and the average daily loss is $75 ($15  5).Further, the store is open 365 days each year, making theannual loss $27,000—a believable figure in light of thestore’s $45,000 annual shrinkage

The detection equipment costs $12,000 to installand $2,000 per year for activated price tags Subtractedfrom the cost of the store’s problem, this yields a posi-tive return of $13,000 the first year and $25,000 in sub-sequent years Over three years, the lost opportunity is

$20,000 per year

This example is a condensed version of an actual salesengagement drawn from our client files The salespersonmade his initial contact, taking a compelling value hypothe-sis to the CFO of a national retail chain He set up a diag-nostic agreement with the CFO, his executive sponsor, tovisit several of the chain’s locations, and held similar cost ofthe problem conversations with the store managers in eachlocation Then, he returned to the CFO, described his find-ings, and extrapolated them for the entire chain He won a

contract to install his company’s equipment in the chain’sstores nationwide.

It’s worth noting that the security director of the store chain was not interested in buying the shoplifting de-tection equipment He thought it was too expensive andnot that effective It was the CFO who was the ultimate vic-tim of the absence of value He pinpointed a lost opportu-nity cost when he said, ‘‘If I can get $20,000 back from eachinstalled system, I can fund a new store per year for everyten systems.’’

drug-As you can see, you can determine the financial impact

of a problem in much the same way as you explore otheraspects of customers’ situations You use a structured ap-proach and diagnostic questioning The answers to thesecost-related questions tell you whether customers havethe resources and are willing to solve their problems Moreimportantly, the process of answering questions allowscustomers to reach their own conclusions in their owntime Further, the fact that the customer provides the dataenhances the credibility of the resulting cost conclusions.This creates a high level of buy-in This process is far morecompelling and accurate than the generic cost/returnformulas and average industry costs that salespeople so of-ten use in conventional presentations

The cost of the problem formula is a critical nent of the quality decision process that you bring to yourcustomer Customers do not have the expertise or the incli-nation to put such a formula together on their own; how-ever, if you provide it, you will clearly differentiate yourselffrom your competitors in customers’ eyes

compo-Determine the Priority to Act

The final element of the Diagnose phase is to determinethe problem’s priority in the customer’s mind This is

one crucial test of a problem’s consequences and thecustomer’s incentive to change that salespeople oftenoverlook The fact that the cost of the problem is sub-stantial in the salesperson’s eyes in no way guaranteesthat the customer feels the same way or has any inclina-tion to resolve the problem.

There are two very good reasons for this First, it isentirely possible that the cost is an accepted part of do-ing business A retail chain includes a line item for in-ventory shrinkage in its annual budget; a manufacturingplant considers some level of defects acceptable Unlessthe cost exceeds acceptable levels, salespeople may well findthat the customer will not feel the need to make a decision

to change Second, even when costs do exceed acceptablelevels, they may not be compelling in light of the other criti-cal issues vying for the resources of the organization If,for example, a customer is confronting issues or objectiveswith larger financial impacts, it would be the right businessdecision to pursue those opportunities first If that is thecase, the most credible position you can take is to supportthe customer’s priorities rather than argue about them, anddetermine when the issue your solution addresses will rise

to the top of the customer’s priority list This is why it is

so important to ask the customer to prioritize the problemand its costs before moving out of the Diagnose phase ofthe Prime Process Again, this information is developed

by asking questions, such as conversation expanders (seeFigure 5.3)

The Buying Decision

My discussion of the Diagnose phase is now complete andI’d like to take a moment to review what the best sales pro-fessionals accomplish when they execute it well

 They help their customers realize that they are encing a condition that could be placing their personaland/or business objectives at risk.

experi- They assist their customers in conducting a thoroughexploration of the dimensions of the problem andestablish its financial impact—the cost of the problem

 They work with customers to determine whether thatcost justifies immediate action relative to other issuesand opportunities

If you are still engaged with the customer at this point

in the Prime Process, it is for one reason only: the customerhas made the decision to change and has also decided that you havethe credibility, and likely the solution, to facilitate that change.Think about that You have not made a sales presenta-tion In fact, you haven’t devoted any significant time todescribing your solutions at all You haven’t exerted anypressure on the customer whatsoever Nevertheless, the cus-tomer has decided there is a problem that is costing morethan he or she is willing to absorb and that you, the sales-person, understand the situation Invariably, the customerhas also made a leap of logic and now assumes that becauseyou have taken him or her this far through the decision pro-cess, you will also have a solution to the problem

FIGURE 5.3 Conversation Expanders: Cost of the Problem

There are two conventional sales paradigm-bustingrealities that underlie these outcomes: First, customersdon’t need to have a solution in mind to determine thatthey have a problem Second, customers don’t need to have

a solution in mind to decide to solve that problem In fact,introducing solutions too early in the complex sale will fre-quently distract the customer—creating a barrier to effec-tive diagnosis, creating uncertainty around the problem,and throwing the customer’s decision process off track.The key to managing the customer’s decision process

is staying true to the Bridge to Change decision sequence.You can gain the inside track on any sale by following thatprogression and helping your customers establish that:

 There is a problem and they are at risk

 It is costing them a specific amount to leave that lem unattended

prob- The amount it costs is significant enough to act on.You entered the Diagnose stage with a value hypothe-sis that compelled your customer to work with you Youhave now confirmed the risks in that hypothesis by findingphysical evidence, connecting it to specific performancemetrics, and collaboratively quantifying the financial im-pact on those metrics You have reached the value-requiredstage of the Value Life Cycle The customer requires value

to solve the problem or address the situation The incentive

to change has been established

At the same time that your customers have reached thecrisis stage in the Progression to Change, you are establishingyour own value in their eyes You will have earned the re-spect of your customers because of your ability to conduct ahigh-quality diagnosis You will have earned the trust ofyour customers because of your willingness to end theengagement at any time the diagnosis revealed that a prob-lem did not exist or was not worth acting on You will have

created exceptional credibility by demonstrating an in-depthunderstanding of the customer’s business You really will beseen as a valued business advisor in the customer’s eyes.Now that the customer has made the decision tochange, who do you think the customer believes is bestqualified to help design a high-quality solution to the prob-lem? Granted, customers may not openly announce thatyou are their first choice, but you will see it in theiropen and trusting demeanors All the signs, such as thecustomer’s willingness to answer questions and provideaccess to people and information, will verify the fact thatthe decision has been made If you grab hold of this oneidea—that the decision to buy is made during diagnosis asopposed to during the close—it will create a profoundchange in your results Your days of Dry Runs will be over.

Key ThoughtThe Decision to Change, to Buy, and fromWhom Is Made During the Diagnosis

Conventional salespeople believe the decision to buy ismade after they have presented the solution and asthey are handling objections and attempting to close.One of the most significant paradigm shifts of thePrime Process is that as you conduct a thorough diag-nosis, and by the time your customer has made thethree elemental decisions of the Diagnose phase, it ishighly likely that the customer has already made his orher decision to change—the decision to buy Since youhave established exceptional credibility, it is alsohighly likely the customer has decided to buy fromyou and your company It is yours to lose

Design the Value-Rich Solution

Creating the Confidence to Invest