Monday, June 29, 2015

For Sale, Not On Sale - The True Cost of Discounting and What to Do About It

By Mark Schlueter & Tom Pisello

More sales execs are revealing that discount pressures are at an all time high, and as a result, they
need more transactions than ever just to make the numbers.

There are several reasons why prospects are demanding higher discounts and making it harder for you to achieve your goals:
  • Buyers are more empowered, with on-line / social resources readily available to research your competition and obtain competitive pricing.
  • Procurement specialists’ incentive pay is now directly tied to the discounts they can extract from each vendor.
  • A lack of substantial differences in your solutions and sales / marketing approach are leading you and your competitors to make price the key differentiator.

So how bad has it become? IDC reports discounts of 20% are now commonplace, but most vendors wish that was all. We routinely see much more pressure, with one network provider recently admitting to discounts of 70% or more, while an enterprise software provider routinely gives 90% discounts to close deals.  Absolutely unacceptable, and potentially VERY costly for your business and career.

For every $10M in realized sales revenue, a 20% current discount rate means you actually could have achieved $12.5M in sales revenue if you were able to eliminate the discounting altogether. At a 60% discount rate, your $10M in realized revenue actually could have actually been 2.5 times higher ($25M). 

And the impacts don’t end there. Because the costs of the goods / sale are fixed, every dollar of discounting means you are giving up that equivalent amount on the bottom-line as well. For every $20M in discounts, you're also giving up that same $20M to the bottom-line. If your P/E ratio is 20, this yields a whopping $400M in additional market value you just left on the table – 20x the discount.

A friend of ours often says - “My products and services are FOR sale, not ON sale”, and for good reason.  Discounts result in less sales revenue and lower profits. For a company that is currently at $500M in sales revenue, moving the current average discount rate from 40% to 35% can add over $41 million in additional sales revenue and EBITDA. And discounting changes how buyers perceive your brand, conditioning buying at the end of your quarter when the sales reps offer up big discounts, and reinforcing a focus on price above all other decision criteria.

So how can you reduce the average discount your sales reps are surrendering by 10%, 15% or more?  It all comes down to the ability for your sales reps to communicate and quantify your unique value – earlier in buyer’s decision cycles, and reinforced often throughout the buyer’s journey:

 Why Change? - It’s important to engage with prospects as early as possible, helping your buyers identify hidden challenges and quantifying the cost of “do nothing”. The key at this stage is motivating buyer’s as to “Why Change?”. Your proposed investment likely pales in comparison to the cost of not solving the problem, so the key is quantifying this delta. Your ability to dramatize and quantify the contrast between status quo costs and your proposed solutions’ pricing can help motivate the decision and certainly reduce early price pressure.

Why Now? – In the middle of the buyer’s journey it is important to prove how your solution will help the prospect overcome their challenges, and deliver substantial business benefits as a result. Rather than focusing on the solution features/ price, it is important to spend as much time quantifying potential cost savings / avoidance, productivity / process improvements, risk avoidance and revenue growth your solution can deliver. Your sales reps ability to clearly communicate and quantify the tangible value your proposed solution can deliver, focusing on the benefits and returns versus the proposed investment, can help prioritize approval and reduce discounting.

Why You? – Later in the decision cycle, you are usually compared head-to-head against competitive offerings, and procurement gets much more involved. This is a critical time to not shy away – to further substantiate your proposed price and proactively go head to head with the competition. At this stage, again the key is to elevate beyond purchase /service price, and quantify the comparative total cost of ownership (TCO) and incremental benefits for your proposed solution. This includes tallying not just the initial purchase price or monthly service costs, but the entire costs for the proposed solution over the useful service life, including operating costs, support, administration, and evolution expenses. Fight back against procurement by justifying your proposed pricing versus reduced current costs, lower TCO compared to lower-priced competitors and your unique incremental benefits.

Why Renew? - And the value communication and quantification doesn't stop with the initial sale. Much more B2B revenue is now tied to on-going subscriptions, which also face price pressure each renewal period. Way before renewal time, your sales reps and customer success managers should be quantifying the realized ROI from the investment. This means having an initial baseline of the current costs and opportunities, and measuring the tangible improvements, then comparing against the initial investment to tally the payback and ROI. A quarterly or at least semi-annually tally of the cost savings, productivity / process improvements, risk avoidance and business growth you were able to actually deliver is key to assuring that your realized ROI is recognized and maintaining retention contract rates and levels. 

Don’t take our word for it.  Mark Arman former VP of Business Development from ShoreTel launched an Alinean-powered TCO tool several years ago to get sales reps, channel partners and customers all focused on better communicating and quantifying the unique value of ShoreTel’s unified communications solutions, especially compared to status quo legacy and the competition.

Mark is quick to highlight that the TCO tool delivered personalized calculations and communications as to each customer’s unique cost of “do nothing”, value of change and comparative competitive value. Often, the metrics proved ShoreTel was 50% lower TCO than the market leader and 20%-30% less than its competitors, making it vital that these results were not delivered by some home grown model, but via 3rd party tool with a substantial and credible pricing / research database.

Mark estimates that the TCO tool and associated guarantee program significantly boosted ShoreTel’s competitive win rate (from 62% without to over 90% with). And most importantly, due to less discounting, ShoreTel’s revenue was 10% higher each year than it would have been without the TCO tool and program, resulting in at least $30 million in incremental revenue each year.

So what is discounting costing you, and what are you doing to migrate your engagements from product / solution to value in order to reclaim this revenue that is rightly yours?

Read about more case studies leveraging value marketing and selling to improve your sales performance in The Frugalnomics Survival Guide (available on Amazon) - http://www.amazon.com/Frugalnomics-Survival-Guide-Unique-Market/dp/0692350926

See more client examples of reduced discounting - http://alinean.com/benefits/

Wednesday, June 17, 2015

No Decision is No Excuse

By Dan Sixsmith and Tom Pisello
When Sirius Decisions stepped forward last month to announce that several commonly held beliefs about B2B buyers and sellers were not true, it got me thinking. What other falsehoods are out there?
Well, we might have found another one, but first let’s recap the myth busting by SiriusDecisions. As espoused by several analyst firms, B2B sales reps were proclaimed a dying breed, with buyers anywhere from 57% to 85% complete in their decision making process before contacting sales, helping drive 1 million B2B salespeople to look or other careers in the next 5 years.
But at SiriusDecisions Summit, research clearly pointed to both statements as pure bunk. First, the buyer’s journey today is so disjointed that it cannot be generalized. It's a highly personalized experience and unique to each company and stakeholder, involving sales and marketing at different stages throughout the process. Secondly, buyers are indeed doing more online research and they are more knowledgeable, but they indicated they still seek out / need sales reps. In fact the #1 piece of content requested by buyers today is still a sales presentation, according to their research. People buy from people.
So, here is another 'fact' on which we may want to call BS: 58% of deals end in ‘No Decision.’  

What is a No Decision I began to ponder? SiriusDecision puzzled this in their own take on the No Decision dilemma, so we were not alone in trying to shape and rethink this general belief.

The reality is that anything but a "Yes" to move forward is a "No". They are not buying your proposed solution, and chances are they didn’t get back to you to tell you the bad news, or they did, only to indicate that it’s going to go on the back burner for now, or there's no budget. You get the idea. 

It became apparent that although a big challenge (in fact one of the biggest for most Sales organizations), not all No Decisions are the same, and that far too many sales reps use No Decision as a crutch - a way to classify deals in a way that lets them off the hook for perhaps a subpar engagement process.

So if No Decision is being miscategorized, what's the approach to deal with those No Decision opportunities and get them to "Yes"?

1.   Cost of Do Nothing: At Alinean, http://ow.ly/3xWnPV , we begin work with many large organizations who immediately talk products/ services and  the solution's benefits right out of the gate. However, neuroscience tells us that buyers are more likely to move away from a pain than toward a gain. We counsel our clients to first help their prospects understand that there is an issue that needs to be solved and then to quantify the cost of doing nothing to elevate the severity and raise the priority. As a sales rep,  you have to illuminate and quantify the pain of not moving forward with your deal,, and this is more important than the solution and benefits. We create interactive sales tools that help guide sales reps through this exercise, helping to uncover hidden challenges and communicate / quantify do nothing costs. As a result, Alinean customers are growing revenue on average by 25% - Dramatic decreases in "No Decisions" and more wins.

2.   Early Diagnosis: Much like a medical patient, many buyers today do their own research, and diagnose their own ailments. And like those surfing the web to self-diagnose their ailments, many get it wrong. The top sellers are helping buyer’s assess and diagnose issues, especially making them aware as to new potential challenges and risks. The key to this approach is to engage early and provocatively, not waiting until the RFP and expect to win the deal. And if you engage later, not just responding to the RFP (like a doctor performing an operation based on a patient's research of the ailment online), but working to assure proper diagnosis and framing of the challenges and solution. Scott Santucci ex-Forrester analyst points out, 74% of deals go to the company that engages in this manner, helping establish the buying agenda, while a paltry 26% of wins go to the winner of the bake-off. 

3.   Consensus: With over 5.4 decision makers in every deal (and more than that the larger the deal / prospect gets), CEB emphasizes the importance of aggressively identifying all of the members of the decision committee, and then building consensus among them. In particular, they suggest arming a “mobilizer” within your prospect to help. This is easier said than done, and requires you to get the full buying picture, work with as many stakeholders as you can directly reach, and get the mobilizer armed with the right value communication and justification, so they can make the emotional and logical case to the buying committee members you can't reach. Since each stakeholders' challenges and perception of value are unique, you have to work as a sales rep to effectively illuminate the pain and communicate/ quantify the gain with as many decision makers as you can, and empower the mobilizer with the content and tools needed to do the same for you with all of those you cannot / will never meet.

The Bottom Line
In a world of a more empowered, skeptical and economic buyer (Frugalnomics), successfully getting to “Yes” requires a new vocabulary of value, an enhanced set of tools to better diagnose buyer challenges and communicate / quantify your unique value to drive engagement and consensus.
So let’s do away with the “No Decision" generalizations, and instead go back to rebuilding the priority of the problem and value of your solution with all stakeholders and getting them to "Yes".


Thursday, June 11, 2015

What do Myth Busters, B2B Sales Reps and Real Estate Agents Have in Common?

Shy the pyrotechnics and crazy stunts, but still to the delight of the 2,000+ on hand, SiriusDecisions played the role of “Myth Busters” at their latest Summit in Nashville.

Analysts Marisa Kopec and Jennifer Ross retold the “tall tales” of Gartner, Forrester and CEB, about the Death of a Salesman. The myths? That B2B buyers were thought to be anywhere from 57% to 85% complete in their decision making process before contacting sales. That much of the buying will not need sales reps anymore, and that over 1 million B2B salespeople would go the way of the dodo.

So will 1 in 5 reps really be looking for a new career over the next 5 years?

SiriusDecisions pointed to comprehensive research of over 1,000 sales and marketing leaders, clearly indicating that these findings were just not true.

In discussions with the analysts, I suggested looking at B2C world, which has been ahead of B2B on its leverage of online resources and ecommerce, for evidence of how the B2B sales reps. Indeed, several commodity sales reps’ careers were completely rocked by the explosion of on-line resources, apps and ecommerce. Amazon continues to contribute heavily to the death of retail sales. Expedia and Orbitz have definitely had an impact on the general travel agent (although specialty travel consultants are thriving).

But these impacts are not similar to most B2B sales. Perhaps we could look at a more complex sale, that of real estate. Many predicted the demise of the real estate agent 15 years ago, but the evidence shows that these reps are still going strong despite a much more empowered customer.

Back in the day, the real estate agent held all the cards. Information and pricing about available properties and comparable was kept close to their vest, and obfuscated by cryptic MLS listings.

Today, there truly has been a revolution, enabling both buyers and sellers with a wealth of information and resources. As a buyer, you can use Zillow, Trulia , Realtor.com and other resources to learn more than ever before about available properties, pricing, value estimates and more. As a seller, you can research comparable properties, and even list your house for sale with little effort or stress. In fact so many tools are available that many ask, why use a real estate agent, and why do agents even still exist?

Despite these advances, not only does the real estate agent exist, but they appear to be more engaged than ever, with 89 percent of buyers retaining an agent, up from 69 percent in 2001. It's the same on the seller side, where only 9 percent sold a home without an agent, down from a high of 20 percent in 1987. 

So why are real estate agents still relevant?
  • A significant purchase decision – Your home represents one of the most significant investments you can make. There is high risk if you make the wrong decision (wrong schools, hidden costs or overpay), sell to early / late (as we learned during the bubble), and high reward if you get it right (great capital gains, no worries and awesome lifestyle). Agents are much better today at explaining the risk adjusted ROI, helping to ease the emotional strain and providing financial justification.
  • Unique insights – Agents today are much better at knowing the market, especially culling information that is not publicly or easily available. The most successful use these unique insights to teach the buyer, guide the decision making process and provide an edge (eg. Segmented pricing analyses, pocket listings)
  • Diagnostic advice – almost like a doctor, today’s better agents are assessing buyer / seller needs: asking the right questions to guide the buy or sell decision making process and generate better outcomes.
  • Consensus required – Most real estate transactions involve multiple decision makers on both the buy and sell side. Perhaps the most important role of the agent today is working with couples to gain consensus – easier said than done with so much money and emotion at play. The agent has to get couples on either side of the table on the same page, and then gain agreement quickly between buyers and sellers are the most successful.
  • Complex buying process – there are many steps to manage in the listing, search and purchase process. The agent helps shepherd the stakeholders through each step to make sure they are prepared and the transaction goes smoothly through each step of the process.

Clearly, the transactional agents of the 80s are not the agents of today.  Today’s best agents are more diagnostic, more consultative, and despite a plethora of online information, have found a way to leverage these tools to productivity, while at the same time uniquely valuable through the purchase journey.

So did SiriusDecisions find similarities in regards to B2B reps? Indeed, the predicted demise of the B2B sales rep like the real estate agent has been greatly exaggerated. However, like tagents evolved, there are several similarities and significant changes on the horizon that you need to be prepared for:
  • Facilitating a complex journey - The buyer’s journey has become so non-linear and complex that it cannot be generalized, and is hard to guide with just on-line content and tools. It's a highly personalized experience, unique to each company and stakeholder, and requires careful and skilled facilitation.
  • Frugalnomics - Buyers are indeed more empowered, but they are also more skeptical and frugal, more risk averse and require more proof points to get to “Yes” (Frugalnomics). And although buyers are doing more online research and they are more knowledgeable, the #1 piece of content requested by buyers today is still a sales presentation, according to SiriusDecisions. And rising in importance, an economic focus on ROI and the business case.
  • Consensus - With more stakeholders involved in each purchase decision, some 43% more than just 2 years ago, each deal becomes an exercise in consensus building amongst all the stakeholders. 
So what are you doing to help #SavetheB2BSalesRep?

Join us on July 23rd to learn more in our live SiriusDecisions Interview: Death of the B2B Sales Rep? with Jim Ninivaggi, SiriusDecisions’ Practice Director for Sales Enablement. We’ll discuss this new research and discuss the impacts / what to do at length.

Click here for more information about this event:

Learn more about what to do: The Frugalnomics Survival Guide - How to Use Your Unique Value to Market Better, Stand Out and Sell More - http://www.amazon.com/Frugalnomics-Survival-Guide-Unique-Market/dp/0692350926/


Sources: 



Why do real estate agents still exist? -






Thursday, June 04, 2015

Trigger Events, Value Selling and a Little Weekend Project Involving a Power Sander

I recently sent a copy of our new book "The Frugalnomics Survival Guide - How to Use Your Unique Value to Market Better, Stand Out and Sell More" to Nancy Nardin at Smart Selling Tools, hoping to get a little positive feedback, and maybe have her include us in a summer reading list.

I was humbled by her response to the book:


"The Frugalnomics Survival Guide is one of those books you’ll want to come back to again and again as you head down the path to true value selling. No one likes to spend money, especially precious and limited budgets. 

Let’s consider the value of this book at 30 bucks… if you get just one good idea from it – which would be impossible not to have happen, it can impact your ability to hold a value conversation instead of a sales pitch - which just could change the trajectory of your entire career or the success of your organization as a whole."

See her entire review at:
http://smartsellingtools.com/summer-reading/?sthash.nZWmMjME.mjjo

Order a copy for yourself from Amazon:
http://www.amazon.com/Frugalnomics-Survival-Guide-Unique-Market/dp/0692350926/


Wednesday, May 27, 2015

The Art or Science of Sales and Marketing?

There is an ongoing debate in sales and marketing: Are the most effective marketing campaigns and sales reps relying more on art and creativity, or leveraging a more systematic and scientific approach?
With the current focus on big data, a scientific approach to sales and marketing certainly has its pundits. Data is now collected and insights leveraged to learn more about buying behaviors – what works and doesn’t - helping marketers design and execute more effective and automated campaigns, and focusing sales reps on what matters most.
However, those believing art has more influence point out how “big data doesn’t do the buying, humans do”. In the end it all comes down to a conversation – digitally or person-to-person – between you and your prospect.
And here too, we see the debate regarding art and science. Modern decision economics argues a formula for an effective conversation – a prescriptive method to convince a buyer to “Yes”. While the neuroscience outlines an equation for effectiveness, it also reveals how important art remains in creating more attention-getting, memorable and effective campaigns and conversations.
In our new book, The Frugalnomics Surivival Guide, we discuss the importance of both art and science, how getting these aligned and balanced in your sales and marketing strategy can lead to better productivity and extreme sales and marketing effectiveness. 
Here's a little reveal of our findings ...

Balancing the Art and Science of Effective Sales and Marketing

The effective balance between the art and science of sales and marketing is revealed in an unlikely but real alignment between the ancient “art of persuasion” from Aristotle and the modern Neuroscience of decision-making.
Some 2,600 years ago, Aristotle wrote about three vital elements to persuading an audience or individual. In the The Art of Rhetoric, Aristotle writes ”Of the modes of persuasion furnished by the spoken word there are three kinds. The first kind depends on the personal character of the speaker; the second on putting the audience into a certain frame of mind; the third on the proof, or apparent proof, provided by the words of the speech itself”.

Following Aristotles advice, there are three essential ways to leverage the “art of conversation” to convince a buyer to advance from “Do Nothing” to “Yes”:

  • Ethos – appeal to credibility. Provide evidence that you are trustworthy through your actions and consistency. Provide 3rd party proof points and references that what you are communicating can be backed up by others in the community. Include video testimonials and case studies of customers just like your prospect. Document the tangible financial benefits, professional and personal success achieved by others just like the prospect to demonstrate low risk and provide examples of substantial rewards.
  • Pathos – appeal to the emotions. To make a more emotionally charged impression, communicate your value in a story, and utilize visuals to make the story more memorable. Show contrast, painting a picture between business-as-usual and proposed improvements.
  • Logos – appeal to logic and reason. Quantify the pains and risks of the status quo, such as the “cost of doing nothing”. Address the strategic and financial benefits that can be gained, including the ROI, key performance metrics and quantified improvements within reach. Provide financial justification and make it personal, relevant and specific. 


The Neuroscience of Decision Making meets Aristotle's Art of Persuasion

Although Aristotle had no inkling of what modern neuroscience would later reveal, his mapping of these three essential persuasive elements startlingly aligns with the Triune model of the brain and decision making – a representation of how three parts of the buyer’s brain need to be stimulated in order to gain buyer’s attention, motivate their decision making and get to “Yes”.

The three major buying centers of the brain include:

  • The New Brain (and Logos) - The neo-cortex is often referred to as the New Brain, as in evolutionary terms, it is the latest to advance. This part of the brain is responsible for thinking and processing rational information such as cost-benefit analysis, financial justification and ROI.
  • The Middle Brain (and Ethos) - The middle part of the brain is where “gut” feelings are most often attributed (think “gut decision”).  Your credibility is what counts. Providing proof points / success evidence is essential to give this part of the brain a fuzzy / warm feeling that the decision is a sound one.
  • The Reptilian Brain (and Pathos) – The most ancient part of the brain in evolutionary terms, the Reptilian brain is responsible for survival. This part of the brain is responsible for “fight” or “flight”, and responds to visual stimulation / storytelling and contrast. Stimulating this decision making center determines whether your prospect pays attention / remember, feels empathy and connection to you, are motivated fundamentally by survival instincts to change, and are emotionally connected to your proposal and purchase decision.

The Bottom Line

As a sales leader, sales enablement exec or marketer you struggle with the Art vs. Science of sales and marketing. The good news? It doesn’t have to be one or the other, and in fact should be both. 

The smarter seller and marketer know that it takes leveraging both art and science to get buyer’s to engage and motivate them to purchase. You have to master the three elements of Aristotle’s art of persuasion (Ethos, Pathos and Logos), as well as leveraging modern neuroscience (the new, middle and reptilian brains), stimulating the three "buy buttons" in your prospects brain to get to a positive decision.

Art or Science? Leverage the art of persuasion and the science of decision making as your guide to sales and marketing effectiveness.