John Hirth's commentary on sales...

"Creating your annual business plan..."

As the end of the year approaches it is time to review and measure our results and plan for better results next year. Before you work on your business plan, consider your “life plan” first. What are some of the goals that you want to achieve for you and or your family? Create goals that will require you to earn more money than you did last year. These will usually be possession goals like a new house, car or vacation.

They can also be goals that serve other people like donation goals to a church or charity or an education fund for your children. Whatever they are, to attain them will require you to make more money. “Money is not the end but merely the means to achieve your end!” To be a top achiever in the sales world you must have a strong “money drive”. Personal goals will create that drive!

After you have set personal goals for yourself and know “why” you are working, you can begin to plan your business to reach the goals you are now focused on. “Plan your work and work your plan” is an old cliché that has great value ans wisdom. Once you have established your plan you will know what needs to be done to get you the results that you want. Your plan will not only break your goal into manageable objectives but will give you great confidence that will drive your success.

We will start with your annual quota. If your company has not established one for you, you should establish one for yourself. Look at the business you were able to do last year and add to your results to establish a new annual goal. Don’t be weak, challenge yourself and resist the urge to do what is “safe”. The higher your goals the more likely you will become an overachiever. You will get what you expect!

Once the goal/quota has been established, let’s realistically look at where our/your business will come from. Start with your existing account base (if in fact you have existing business) and objectively look at what they did last year and then set a goal for what they should be able to deliver for you this year. If business plans or market conditions dictate different results take that into consideration. If your business last year was driven by an event or condition that occurred that will not happen this year consider and plan for it. Similarly if the opposite will occur that could be a windfall for you consider that as well.

Take into consideration what other products that your existing customer base might be able to buy from you. Cross selling and adding to the business that you have with existing accounts is the easiest way to get new business. Build strategies that will help you add to your business base in existing accounts without putting the valuable relationship at risk (we’ll be working with you to develop these “entry point” strategies).

As you develop your plan you will find that there are many opportunities for you within your existing account base. As you identify them and build the plans required to execute your plan your confidence in both the opportunity and your ability to develop it will grow. Similarly, like baking a cake, the likelihood of being successful increases exponentially with a recipe (plan). Don’t lose the value of the power in this simple comparison.

Once you have identified the business you believe you can write at your existing accounts it is now time to turn your attention to other opportunities. Step two of your plan will include past customers who are not currently buying from you as well as “prospects” that have identified themselves as opportunities. Start with building a list of people that you have done business with in the past. Rank them in order of importance (A, B, and C accounts) either in dollar volume or potential you believe they possess. If you sell multiple products determine your opportunities in each product offering.

Next (and still part of step two), list other prospects that have responded to any of your marketing efforts. Start with those who have responded more recently and then add older less qualified responses to the end of the list. These opportunities are better than “cold calls” and should be thoroughly explored before you go on to step three.

Step three will now include all other opportunities that you have in your territory. Rank in order of business potential (dollar or unit value) and make them the third priority in terms of time management. They will make good fill in calls as you plan your travel and calling itineraries.

“Failing to plan is planning to fail…”. Take the time to look at your business and plan your activities. Although your plan needs to be flexible, your ability to work in a planned and “on purpose” method will deliver much more than you will get in functioning “by accident”!

Action Step: Create a planning tool to review your business and build your plan. If you need help with this let me know and I can provide you with some templates, or plan on attending our goal setting program!

"Check out new "ERRA/SRA" pictures in the photo album..."

“Running the option…”

I was watching a college football game the other day and heard the announcer talking about the option play. It sounded like a great idea… set up for a pass and if you can’t find an open receiver you have the “option” to lateral to the runner. It can also be set up as a run and if the quarterback can’t see an opening for the runner he has the option to pass. It gives the offense "options" and keeps the defense “honest”.

Our selling process is designed in the same way… to create and preserve options in the selling process. Unfortunately, many people in sales are operating in a way that actually eliminates options and lessens the chances of winning. It takes some guts (like holding the ball until the very last minute), but will provide more winning outcomes.

Here’s an example of an "option" strategy in sales. A prospect asks you to send them a proposal along with a price quote. A "no option" strategy is to provide it or send it. Once they have the information they need they are in total control of the selling process and no longer need to speak with us (how many times have you sent a proposal and then had no success in reaching your prospect for follow up?). We have in essence used a no option strategy and limit or chances of success.

An option strategy would be to say “I’d be happy to provide that information for you but would you mind if I asked you a couple of questions first? Once that question has been asked  the prospect has choices to make that actually give us options. They could ask “why can’t you just answer my question?” , which would enable us to give an explanation and possibly gain either more information or even better, an appointment. Or they could say unless you get me the information I request we can't continue. You now can decide to pull out or you always have the option of giving out the information that they have requested.

Often times not complying with a customers request gives us "options" and complying removes options. The concern for most sales people is if I say I will not comply I could lose the sale (which most of the time they don't have anyway). They tend to forget about  all of the sales they have engaged in, sent all of the information that the prospect asked for (and removed all options) and didn't get the business. This time wasting activity is what they should really be worried about.

Action Step: Next time someone asks you for something consider running the "option". It might actually get you the business you want or save you from wasting your valuable time.

"While I'm looking it up..."

Talking with an inside sales representative (tele-sales, inside sales, tele-marketer, et al) from one of our clients, I was asked about responding to questions about availability and pricing on inbound customer/prospect phone calls. It is something that happens daily to both inside and outside sales people and usually not given a lot of thought. However, it is a perfect opportunity that will allow you to establish a "difference" between you and your competitors and leave the impression of both professionalism and caring. It is a question/situation that you need to prepare for that can have great impact on your business.

Often, in your haste to "respond", you give your customer/prospect the impression that you are only interested in answering a question, rather than really trying to find out what it is that they need. Often, by just answering the "literal" question you end up not attending to the underlying problems that have driven the request in the first place. Remember, questions are always asked for a reason and real sales "professionals" always try to find out what the reason is. It is a great example of the difference between an implied need and a hidden one.

So, when that next call comes in for pricing or availability try responding with one of the following reflectors;

      "While I'm looking it up... what are youcurrently using?"

      "I'll be happy to check... is this a product you are currently using?"

       "What are you currently using?"

       "How are you doing it now?"

       "There are some options, do you mind if I ask you a few questions about what you're using now?"

       "Who do you normally call for these products?"

       "Are you having a problem with your current source of supply?"

I know, I know, you already know the price and you don't have to look it up! But, keep in mind that by asking a few simple questions you might get some additional information that will allow you to help them more and really add value to the transaction. It's that type of value that will keep them coming back and create a difference between you and your competition!

Action Step: Practice using some of these reflectors and don't be in such a hurry to just "answer the question!" Sometimes the simplest strategies are the best!

"Fore-warned is Fore-armed..."

In this inflationary environment, many of our clients have struggled with escalating costs and the need to extract/invoke price increases with many of their best customers. Particularly hard hit are our clients whose products are highly influenced by the skyrocketing price of oil. In fact, with oil going up so fast it has been hard to keep up, often requiring multiple price increases in the same year.

And now, after all of these stressful and hard fought negotiations, we face the risk of starting all over again. As the price of oil drops like a rock your customers are asking for a review and all of your hard work is at risk of being undone! Talk about "Opening Pandora's box"!

I've included some strategies here that are being espoused by Purchasing Agent Consultants on how to reverse the "price increase trend" and win back some of the price concessions they have been forced to make. I thought it would be valuable to "know the other guys play-book" and prepare for the inevitable. Times are changing and we need to be "fore-warned and fore-armed" to be able to respond tho these challenges successfully!

I have included in italics below some of these strategies:

What a difference today versus 3 months ago!  Oil prices peaked at almost $150 a barrel and have just broken below $90 – a reduction of 40%.  There is general agreement that we are in a down economy, whether you choose to call it a recession is not as important as what you do to take advantage of the situation on the Purchasing side of your business.  Here are some actionable suggestions:

Review all commodities where you had to accept price increases in 2008.  You can bet that the majority of those increases were justified at least in part by rising oil prices.  Suppliers are not as quick to react on the downside of the price curve.  Your purchasing people need to contact each supplier and ask for price reductions.

As a defensive measure, you may want to consider working with your best customers in coming up with a contract similar to the one highlighted below. Choose to "pre-empt the discussion" or "wait until the discussion occurs"... both strategies are viable under the right conditions but sometimes the "best offense" is a "good defense".

Review all contracts which have escalation/de-escalation clauses.  Purchasing should do the math in preparation for meetings with your suppliers.  Here is an example of these clauses that have been written into many supplier contracts: 

Escalation/De-escalation – Volatile commodity prices usually lead sellers to add escalation clauses to contracts and individual order acknowledgments. Any escalation clause or wording should refer to de-escalation as well.  The amount and timing should be the same going up or down, but if you do not explicitly include the de-escalation piece, it may not happen as quickly as it should.  The contract language should specify the base price and the specific terms and timing for price adjustments.  I.e. – “The base price of oil is $130.00/ barrel on June 1.  Your price for “X” will be adjusted by $1.00 for every $5.00 change in the price of oil as published in the Wall Street Journal.  Pricing will be adjusted monthly on the first of the month based on the published price on that day.”  If the basis for adjustment is a published price in a trade journal or newspaper, you should review the history of that published price versus actual market experience before agreeing to use it.  Not all published prices reflect reality, especially those not tied to a commodity that is traded on a major exchange.

 It is not likely that the economy is going to get a lot better between now and the end of the year.  What contracts or blanket orders are due to be re-negotiated for 2009?  You should expect to find opportunities to lower prices and/or improve terms for next year.  Set some aggressive targets for those negotiations.

Be prepared and identify how you might be able to take advantage of this situation. Their are contracts in place that have "kept you out" now may be a great time to review those and attempt to gain new business or re-coup business you have lost!

In a business downturn, some potential suppliers are looking for new business.  Your current suppliers may be very interested in an opportunity to increase the volume they do with you.  Purchasing should be reviewing all of your commodities and taking appropriate action.

Being forewarned and knowing the "other guys play-book" will help you prepare and succeed in this challenging environment. Suffice it to say "doing business the same old way will probably not get you the results that you are looking for". Change is inevitable and better we are the "change-or" vs. the "change-ee"!

Action Step: Review the contracts you have in place now and make "proactive" decisions on what you are willing to do. Look also at the opportunities these conditions create and make your plans accordingly. Plan your work and work your plan!
 

Handling the dreaded "price increase"...

I am "re-posting" this message due to popular demand. I have been asked the question about handling price increases regularly these last couple of weeks... so in response...

Price increases are a fact of life and a subject that “strikes fear” in the hearts of most sales people. True “Masters of Selling” understand the dynamics of price increases and how best to deal with them. No “silver bullets or magic answers here”, but instead solid strategies that will help you deal with the inevitable. These ideas will help increase your percentages of a positive outcome in customer transactions dealing with price increases.

First, you have to adjust your mind set or “attitude” in relation to price increases. Price increases are a fact of life and something every business has to deal with. They all get price increases and they all give price increases. Second, particularly in relation to “purchasing Departments” it is their job to keep you from getting any price increase. So you have to take any feedback you get from them like “no one else is raising prices” with a “grain of salt”. Some other thoughts to consider are:

1. When was your last price increase? Have you been absorbing them and not passing them on? What impact will the factors that caused your price increase have on your competitors (i.e., will their prices be going up as well)?

2. What impact does the price increase have on your customers business? In conjunction with a price increase are there other products or services that you can talk with them about that might save them money or lower their costs?

3. Should you “frame” your price increase as a percentage or in $’s.  You may be increasing your customer’s price by 10%, but only increasing the total value of the product your part goes into by .1%. A three $dollar increase may sound less than a 12% increase. You’ll need to use your best judgment here.

4. When your customer “threatens” to leave you for the competition, have you done a good job of translating your value… is there a difference that justifies our price (there usually is) and have we done a good job of exploiting it?

Some general strategies in relation to price increases that will help you will include:

Forecasting- Start with being “up-front” with your prospect about pricing. If you are getting information that there will be a price increase coming, share it with your prospect early. This business/market intelligence should be some of the “extra value” that you provide to them that will help them plan for their business.

Most sales people wait to long and don’t give their customers enough fore-warning to plan for the increase. This early forecasting allows them to manage the expectations within their own companies and “soften the blow” internally.

Justifying- Trying to explain why you are raising prices is called “justifying” and it can often backfire. As soon as you start to justify and validate your position it has the tendency of making people feel like you really don’t care about them and are only interested in getting what you want. The answer you will often get after your explanation is “that’s your problem not mine”.

However, there are often extenuating circumstances that your prospect may need to know about that will help them to explain internally what is happening. Preface all of your justifications with the following conversation:

“Bob, I know price increases are never easy to accept and make your job of controlling costs difficult (softening statement shows empathy). Would industry information about what is driving the price increases be helpful to you in explaining what is going on to your management? (This by the way is there real “pain”, they are worried about how accepting a price increase will make them look to management).

Now, you are being asked to justify and that puts you in a position where you are fulfilling a request and not just trying to make your point.

Making the price increase an opportunity- This is a perfect time to offer to look at other products that you are not currently selling them to see if you can provide some savings that will offset the price increase you are asking for. It does not eliminate the price increase, and although we might have to be taking shorter margins on the new items, it is an increase in both revenues and profit. Sounds like a winner to me!

Your assistance here could come in the way of new items or more cost effective replacements to items they may already be buying from you. In essence the problem created by “the price increase” could actually turn into an opportunity to sell more! Now that’s “turning lemons into lemonade”!

Admin. vs. Purchasing (central supply)- Your admin.contacts will probably be a lot more understanding for your need to raise prices because they are faced with the same problem in their business. They might also be more open to have you go on a “hunting expedition” in order to identify some other ways you can save them money. Start talking about your price increase at higher levels and get passed down to central supply with an O.K. from above. They will approve your increase and work on other items.

There are many other issues that we could discuss here but in the interest of "brevity" we'll include  those in other posts. Primarily, we'll also look at how building  a case before the increase occurs would be a better way to handle it. You might want to access in my archives the post on "no problem".

Remember, how you think will drive your actions.  If you think a price increase will be a problem it will be. If you think it can be an opportunity it will be… it is your choice on how you decide to think! Good luck and good selling!

Check out new photos in the "Photo Album..."

Thanks again to all of the particpants in some of our recent programs. Your comments about the value and "practical knowledge" that you received are greatly appreciated.

"The only place success comes before work is in the dictionary.", Vidal Sasoon

In these challenging times we all must revert back to the habits that we know will bring success. Stay active in your market, make the calls, get referrals and apply with consistency what we teach.

"Winning the "price only" sale..."

I know... perish the thought that we actually "sell" on price. Many so called "experts" will say "I never sell on price". But what if it really gets down to the fact that "price" seems to be the only difference and you feel you have no other options. Or, let's consider the fact that sometimes we have a "price" advantage, so it might (on occasion) be worth using low price as a strategy.

Before we "go there", first decide if you have exhausted all of your options? Do you know why you are worth more and have you created a "value translation strategy" that gives you an advantage? Have you done a good job of managing and controlling the call in a way that helps you "create difference" and helps you avoid the "feature benefit trap"? If not, your selling strategy may actually be leading you to the price objection (see other "sales strategy" posts)!

Have you explored all of the other advantages your customer gets when they buy from you that are not product related? Can you split shipments, offer dating or extended terms, help lower inventory carrying costs or eliminate paper invoicing with electronic ordering? Make sure you think "beyond the product" to extract ever bit of value you and your company can deliver.

So for now, let's assume you've done a good job managing the call and you reach that "control point" where you have to decided to accept the "price only" option. It gets down to "the best price wins". You go in with your best price in hand (notice I said "go in" not send in!) and you make the offer knowing you have an extra 10% to work with... they're notorious for "grinding you at the end", so you're prepared with one more bullet. They look across the table with that steely gaze and say "you've got to do better"?

Offering to do better at this point is a huge mistake. If you give them your extra 10% now, every time you come in they have to say to themselves "based on the last situation I guess everytime I buy from this sales person I have to assume that they have not given me their best price". Your actions create distrust.

You're better off saying "I wish I could but I can't". How you say this is probably more important than what you actually say. It must be said quickly, courteously and without reservation. Your ability to respond immediately communicates to your prospect that because you answered so quickly and without the need to think about it, it must be true (we'll learn more about this "Subconscious Selling" in future posts).

Now, you will hear one of two things:

          1. "O.K., I can accept your price (it was just a test (remember, they always lie!) or

          2. If you can't get lower... you lose.

With the second response you know they mean business. Now, instead of dropping the 10%, first ask what they mean by lower... they might say 5%. But don't give in yet... tell them that you have already given the best price you are able to authorize, but that you would be willing to fight for them and try to get more. However, first they'll need to give you a purchase order at the price they want that you will take back and get approved. With a commitment from them like this, you're sure the company will be able to compromise...but  they would be unwilling to compromise unless you have "paper"! Empty promises will never get fulfilled! If they're serious they should have no problem with this request.

What does this get you? First, credibility, they believe they got the best price up front so they are less likely to question your offer the next time. You've also shown them that you will go the extra mile for them. Plus, you didn't just "drop your price" giving them the opportunity to go back and use it against you with their current supplier!

When all else fails and they tell you it's price, make sure you know how to "manage to win"! This strategy gives you options and will let you make "the price only sale" with dignity!

Action Step: Learn the strategy and role play it with a co-worker. Remember, practice, practice, practice!

Change Their "Shopping Pattern"...

I was running a public program in Chicago the other day and one of the participants started a discussion about "decision making". They wanted a suggestion or strategy on how to "keep prospects from shopping." You know the story, you give them great information on how to handle their problems, make an offer with competitive pricing and then instead of making a decision they stall and "shop your deal all over town". Sometimes you have the low price and get the deal, but too often it goes to another vendor for "just a little less".

I've always said "you can't change the way people make decisions" but you might be able to change the way they shop! What I mean by that is if it is their normal decision process to get three competitive prices, you telling them "they they can't do that" probably won't work. However, you may be able to get them to get the other vendors pricing first and then give yours. Thus, you get them to "change their shopping pattern".

(The first question you need to ask is "why do they feel the need to shop in the first place?" You may not be selling in a way that creates a difference or you are using a selling model that invites shopping. This often occurs because you are letting the prospect control what's happening. While there are many factors that contribute to this issue, we'll let it be a discussion for another day).

The example we were working with happened to involve a sales person that was selling a commodity item with no discernible product difference (i.e. steel, paper, ink, raw materials) that was also a consumable sale (product used or bought with frequency, rather than a one time capital purchase). The participant told me that she typically makes an offer with pricing and gets some of the business but often times loses to another vendor for "just a little less". It reminded me of the necessity of being "last" and being able to get the other vendors to make their offer first so if a price concession is necessary (not suggesting that this strategy is preferable) you at least have the chance to make it.

So, I asked this sales person a couple of questions;

      When you win do you get the deal because you are the low offer?

             The answer was yes (determines the prospects pattern).

       Does the customer feel confident of your abilities to deliver?

             The answer (predetermined by past action) was "yes", why else would they buy from us?

So, I suggested it might be an opportunity for us to change their "shopping pattern". Instead of providing the offer and letting the prospect "shop" off your offer, why not ask if the prospect would get the other offers first and give you an opportunity to "shop off the competitive offers" and see if you can beat their price?  If they are willing to allow you the privilege of being last it might give you an opportunity to win more of the deals you are losing now for "just a little less". Also, the prospects willingness to allow you the privilege to be last demonstrates preference, making you more willing to commit time and energy to this opportunity.

Now, let's not let this be a "carte blanche invitation" to become a "price seller" but in context with this specific example changing their "shopping pattern" will give you better results! Take a risk, think out of the box and I'll bet you'll get better results!

Action Step: Identify 3 customers that you do business with now and ask them if they would be willing to "change their shopping pattern"!