author of lots of stuff

February 2010

Neil Rackham

. . . Author of Lots of Stuff

Station Breaks

• You are probably like me . . .

• So I will give you at least 1 discussion break every 10 minutes.

Station Break

I don’t learn from listening. After 10 minutes my mind

wanders. . .I learn from

discussion and argument. . .

Station Break

In one sentence:

What’s the purpose of a

sales force?

“The sales force convinces the client to

buy from you rather than from a competitor by showing how your

services are superior.”

… Senior Consultant

Systems Integration and Software

Company

What’s the Purpose of a Sales

Force?

“The reason for a sales force is to ensure that the

customer has the right information about the

advantages of your products at the right

time, so that the purchasing decision is

influenced in your favor.”

… Regional Sales Manager

Printing Equipment Company

Some answers . . .

What’s the Purpose of a Sales

Force?“The sales force builds relationships and shows

customers that you have something worthwhile to

offer that meets their needs.” . . . SalespersonOffice Products Company

“The sales function is like a translator: its job is to

take your products and services and translate

them into language that the customer

understands.” … Sales ManagerControl Systems Manufacturer

“The purpose of a sales force is to communicate

to customers the value of your offerings.”

… Sales and MarketingLarge Regional Bank

The Common Factor:

Each definition is about

The Shifting Marketplace

Unique

Products/Services

Substitutable

Products/Services

• numerous competitors

• buyer has many

options/choices

• no perceived

uniqueness

• no competitors

• buyer has no

alternative source

• perceived

uniqueness

10 9 8 7 6 5 4 3 2 1

Station Break

Compared with 3 years ago, are your products

and services:

More unique?

Unique

Products/Services

Substitutable

Products/Services

10 9 8 7 6 5 4 3 2 1

Less unique?

What’s Happening in the USA

Unique

Products/Services

Substitutable

Products/Services

3 years ago

10 9 8 7 6 5 4 3 2 1

10 9 8 7 6 5 4 3 2 1

Today

10 9 8 7 6 5 4 3 2 1

In 3 years

6.4

4.5

3.7

SSI Data: 47 corporations

773 sales executives

Station Break

Why are products and

services in most markets

becoming more

substitutable?

Market Forces

Decrease Differentiation • Products/services look more similar

• More of them (Increasing competition)

• More demanding clients

• New Technologies (quicker time to market, internet, etc.)

Create Differentiation• New products/services

• Value-added services

and support

• Product bundling &

pricing

• Customized options

Corporate Strategies

10 9 8 7 6 5 4 3 2 1

Creating Value vs.

Communicating ValueUnique

Products/ServicesSubstitutable

Products/Services

10 9 8 7 6 5 4 3 2 1

• Selling process

must create value

for clients

• Not enough for

salespeople to

communicate

value

• Salespeople must

become value

creators

Market Forces

• Product/service

creates the value

• Salespeople

communicate

product benefits

• Salespeople

succeed through

value

communication

Corporate Strategies

Station Break

. . . and customers are changing too.

What’s the biggest difference in how major customers

behave today compared with 3 years ago?

Most People Agree . . .

• Customers are getting tougher to deal with; even before the economic meltdown

• They treat you more like a commodity

• But they also demand more expertise and support than ever before

• They are using new purchasing techniques to force greater value from their suppliers

Station Break

Define “value”

What is Value?

Value is

something the

customer is

prepared to

pay for

Value = Benefits – Cost

Station Break

What things do we do for our

customers during the sales

process that are so valuable

that customers would be

prepared to pay us for them?

Customer Value Survey

We asked 1,100 buyers from US

Companies:

Where Customers See Value

9

8

7

6

5

4

3

2

1

0

1

Change of strategic direction

Problem solving & customized solutions

Customer advocate

Time-stamped info on industry/competition

Talking brochure: negative value added

The Value Map

High cost

offering (Y)can compete

with low cost

offering (X)if it has

more benefits.

VALUE

DISADVANTAGE

VALUE

ADVANTAGE

Benefits

YCost

X

But . . .

Y can’t

compete

at higher

cost without

additional

benefits.

VALUE

DISADVANTAGE

VALUE

ADVANTAGE

Benefits

YCost

X

Value Map in Selling

VALUE

DISADVANTAGE

VALUE

ADVANTAGE

Y

Value Created inSelling Process

Sales

Cost

Value Selling Strategy

VALUE

DISADVANTAGE

VALUE

ADVANTAGE


Sales

Cost

1

OPTION 1:Create more valuein selling process

2

OPTION 2:Slash sales costs3

OPTION 3:Hybrid of options 1 & 2

Y

Station Break

VALUE

DISADVANTAGE

VALUE

ADVANTAGE

1

2

3

Y

Which

option

has the

highest

success

rate?

The Toughest Strategy to Execute

Most people believe hybrid should be

easiest

Very, very difficult with many failures

VALUE

DISADVANTAGE

VALUE

ADVANTAGE

1

2

3

Y

The 3 Customer Value Types

Value = Benefits – Cost

Strategic

Value

Buyers

Enterprise

Assets

Extrinsic

Value

Buyers

Intrinsic

Value

Buyers

Intrinsic Value Customers

• Understand the product

• Perceive product/service as readily substitutable

• Focus on the cost

• Resent time/cost associated with sales people

Extrinsic Value Customers

• Focus on how product is used

• Interested in solutions and applications

• Value advice and help

• Willing to invest time and money with sales people to create solutions

Strategic Value Customers

• Focus on leveraging suppliers’ core competencies

• Prepared to radically change current process to get best from suppliers

• Connection between supplier and customer so close individual roles are blurred

Selling Models for Value Creation

COST OF

SALE

Enterprise

model

Intrinsic Extrinsic Strategic

VALUE

CREATION

POTENTIAL

• Convenience

• Cost

• Availability

• Problem solving

• Customization

• Business process changes

• Leveraging total enterprise

resources

Transactional

model

Consultative

model

The 3 Selling Models

Transactional

Value created through

cost reduction and

ease of acquisition

“I know what I need; I

don’t want to waste

time/effort”

Consultative


advice, problem

identification, problem

analysis, and

customized solutions

“I don’t know the

answer; I need

help/expertise”Enterprise


leveraging enterprise

capabilities beyond

products“I need a partner; I’m

willing to change my

organization”

VALUE

DISADVANTAGE

VALUE

ADVANTAGE


Sales

Cost

1

2

3

Y

Consultative and Transactional

Sales on the Value Map

Transactional

Sale

Consultative

Sale

Enterprise Sale

Positioning the Sales Effort- the

Change

ConsultativeCustomers

TransactionalCustomers

“sweet spot”

captured most customers


Change



Transactional customers

become even more

transactional due to:• segmentation strategies

• internet

• perceived commoditization


Change



Consultative customers

up the bar:• Up-front investment

increases

• client expectation is higher

• Winners over-invest in

attractive opportunities

The “Sweet Spot” Vanishes



sweet

spot

A sales force positioned here will Fail

• unable to compete transactionally

• too little and too late for winning the

consultative business

Optimizing the Selling Investment

1

Investment by Customer

Investment

by Supplier

Waste

Balance

Risk


2


Investment

by Supplier

Transactional

EnterpriseCreate extraordinary value

Create new value

Strip cost

Consultative


3


Investment

by Supplier

Transactional

Enterprise

Consultative

X

Most sales forces are here:

• too expensive to succeed transactionally

• under-resourced and underskilledto succeed consultatively

Station Break

Are these changes happening to us here in

India?

And, if so, what must we do differently to be successful?

The Transactional Sale

• The customer knows the answer / solution without help from a salesperson

• Customer decision criteria are price and convenience

• Customers resent time spent with salespeople

• The salesperson adds little or nothing

All the value lies in the mousetrap

The Consultative Sale• The customer doesn’t know the

answer / solution without help from a salesperson

• Customers demand expertise, advice and handholding during the sales process

• Customers insist on multiple meetings with salespeople and others

• The salesperson often adds more value than the product or service

The salesperson creates as much value as the mousetrap

Station Break

Can the same salesperson be successful selling a

mixture of transactional and consultative opportunities?

Or must they sell only one or the other?

A Vote

No: people can

do one or other

but should never

do both.

Yes: people can

do both.

OR

Mixing Transactional and

Consultative: A Great Truth

No sales force can be

effective if the same

salespeople are chasing

a mixture of

Transactional and

Consultative

opportunities.Why?

Why Transactional and

Consultative Don’t Mix:

Any salesperson who is

talented enough to make

Consultative sales is too

expensive to use for

Transactional opportunities

where customers don’t

want, don’t need and won’t

pay for high-level sales

talent.

Economic Reason

Why Transactional and

Consultative Don’t Mix:

Psychological Reasons

When salespeople have

both Transactional and

Consultative opportunities,

they always pay too much

attention to the low-margin

transactional business at the

expense of higher margin

[but longer sales cycle]

Consultative opportunities.

World-class Sales Forces

• Focus ruthlessly on the best consultative opportunities

• Over-resource the best opportunities at the expense of less attractive business

• Push transactional business to other cheaper channels

• Build their expertise and problem-solving capabilities

A Good Read. . .

author of lots of stuff

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