February 2010

Neil Rackham
. . . Author of Lots of Stuff
Station Breaks I don’t learn from
Station Break
listening. After 10
I learn from minutes my mind
discussion and wanders. . .
argument. . .
In one sentence:
• You are probably What’s the purpose of a
like me . . . sales force?
Station Break • So I will give you at
least 1 discussion
break every 10
minutes.

What’s the Purpose of a Sales What’s the Purpose of a Sales

Force? Force?
Some answers . . . “The sales force builds relationships and shows
customers that you have something worthwhile to
“The reason for a offer that meets their needs.”
sales force is to “The sales force . . . Salesperson
Office Products Company
ensure that the convinces the client to
customer has the right buy from you rather “The sales function is like a translator: its job is to
information about the than from a competitor take your products and services and translate
advantages of your by showing how your
services are superior.” them into language that the customer
products at the right … Sales Manager
understands.” Control Systems Manufacturer
time, so that the … Senior Consultant
purchasing decision is Systems Integration and Software
influenced in your Company “The purpose of a sales force is to communicate
favor.” to customers the value of your offerings.”
… Regional Sales Manager … Sales and Marketing
Printing Equipment Company Large Regional Bank

The Common Factor: The Shifting Marketplace

Each definition is about
Unique Substitutable
Products/Services Products/Services

10 9 8 7 6 5 4 3 2 1

• no competitors • numerous competitors

• buyer has no • buyer has many
alternative source options/choices
• perceived • no perceived
uniqueness uniqueness
Station Break What’s Happening in the USA
Unique Substitutable
Unique Substitutable Products/Services Products/Services
Products/Services Products/Services

10 9 8 7 6 5 4 3 2 1 10 9 8 7 6 5 4 3 2 1

3 years ago 6.4

Compared with 3 years
ago, are your products 10 9 8 7 6 5 4 3 2 1
and services:
Today 4.5
More unique? Less unique?

10 9 8 7 6 5 4 3 2 1

In 3 years 3.7
SSI Data: 47 corporations
773 sales executives

Station Break Market Forces

10 9 8 7 6 5 4 3 2 1

Why are products and Decrease Differentiation • Products/services look

more similar
• More of them (Increasing
services in most markets competition)
• More demanding clients
becoming more • New Technologies (quicker
time to market, internet, etc.)
substitutable? Corporate Strategies
• New products/services Create Differentiation
• Value-added services
and support
• Product bundling &
pricing
• Customized options

Creating Value vs.

Communicating Value
Station Break
Unique Substitutable
Products/Services Products/Services . . . and customers are
10 9 8 7 6 5 4 3 2 1 changing too.
• Product/service • Selling process What’s the biggest difference
creates the value must create value
for clients
in how major customers
• Salespeople Market Forces
communicate • Not enough for behave today compared with
product benefits salespeople to
communicate
3 years ago?
• Salespeople
succeed through value
Corporate Strategies
value • Salespeople must
communication become value
creators
Most People Agree . . . Station Break
• Customers are getting
tougher to deal with; even
before the economic
meltdown
• They treat you more like a
commodity Define “value”
• But they also demand more
expertise and support than
ever before
• They are using new
purchasing techniques to
force greater value from their
suppliers

What is Value? Station Break

Value = Benefits – Cost What things do we do for our

customers during the sales
process that are so valuable
Value is that customers would be
something the prepared to pay us for them?
customer is
prepared to
pay for

Customer Value Survey Where Customers See Value

 We asked 1,100 buyers from US 9 Change of strategic direction
Companies: 8
7
Problem solving & customized solutions
6
5
4
3 Customer advocate
2
1 Time-stamped info on industry/competition
0
1 Talking brochure: negative value added
The Value Map But . . .
VALUE VALUE
High cost DISADVANTAGE DISADVANTAGE
offering (Y) Y can’t
compete
can compete
Cost Y at higher Cost Y
with low cost
cost without
offering (X) additional
if it has
more benefits.
X VALUE
ADVANTAGE
benefits. X VALUE
ADVANTAGE

Benefits Benefits

Value Map in Selling Value Selling Strategy

OPTION 1:
VALUE VALUE Create more
DISADVANTAGE DISADVANTAGE value
in selling
1 process

Sales Y Sales Y OPTION 2:

Cost Cost Slash sales
3 costs

VALUE VALUE
ADVANTAGE 2 ADVANTAGE OPTION 3:
Hybrid of
options 1 & 2
Value Created in Value Created in
Selling Process Selling Process

Station Break The Toughest Strategy to Execute

VALUE
 Most people believe hybrid should be
VALUE
Which DISADVANTAGE easiest DISADVANTAGE
option 1  Very, very difficult with many failures
1
has the Y Y
highest
success 3 3
rate? 2 VALUE VALUE
ADVANTAGE 2 ADVANTAGE
The 3 Customer Value Types Intrinsic Value Customers
Intrinsic
Value • Understand the product
Buyers
• Perceive product/service
Value = Benefits – Cost as readily substitutable
Extrinsic • Focus on the cost
Value • Resent time/cost
Buyers associated with sales
people
Strategic
Enterprise Value
Assets Buyers

Extrinsic Value Customers Strategic Value Customers

• Focus on how product • Focus on leveraging
is used suppliers’ core
competencies
• Interested in solutions
and applications • Prepared to radically change
current process to get best
• Value advice and help from suppliers
• Willing to invest time • Connection between
and money with sales supplier and customer so
people to create close individual roles are
solutions blurred

Selling Models for Value Creation The 3 Selling Models

COST OF
SALE “I know what I need; I
Transactional don’t want to waste
Enterprise time/effort”
model Value created through
cost reduction and
Consultative ease of acquisition
model “I don’t know the Consultative
answer; I need
Enterprise help/expertise”
Transactional Value created through
model advice, problem
Value created through identification, problem
VALUE leveraging enterprise analysis, and
CREATION capabilities beyond “I need a partner; I’m customized solutions
Intrinsic Extrinsic Strategic POTENTIAL products willing to change my
• Convenience • Problem solving • Business process changes organization”
• Cost • Customization • Leveraging total enterprise
• Availability resources
Consultative and Transactional Positioning the Sales Effort- the
Sales on the Value Map
Enterprise Sale Change
Transactional Consultative
VALUE Consultative Customers Customers
DISADVANTAGE
Sale
1
Sales Y
Cost
3
Transactional VALUE
2
Sale ADVANTAGE

“sweet spot”
Value Created in captured most customers
Selling Process

Positioning the Sales Effort- the Positioning the Sales Effort- the
Change Change
Transactional Consultative Transactional Consultative
Customers Customers Customers Customers

Transactional customers Consultative customers

become even more up the bar:
transactional due to: • Up-front investment
• segmentation strategies increases
• internet • client expectation is higher
• perceived commoditization • Winners over-invest in
attractive opportunities

Optimizing the Selling Investment

The “Sweet Spot” Vanishes 1
Transactional Consultative
Customers Customers Waste

sweet
spot Investment
Balance
by Supplier

Risk
A sales force positioned here will Fail
• unable to compete transactionally
• too little and too late for winning the Investment by Customer
consultative business
Optimizing the Selling Investment Optimizing the Selling Investment
2 3
Enterprise Enterprise
Create
extraordinary
value Most sales forces
are here:
Investment Consultative Investment Consultative • tooexpensive to
Create new succeed
X
by Supplier value by Supplier transactionally
• under-resourced
Strip cost and underskilled
Transactional Transactional to succeed
consultatively

Investment by Customer Investment by Customer

Station Break The Transactional Sale

• The customer knows
the answer / solution
Are these changes without help from a
happening to us here in salesperson
India? • Customer decision
criteria are price and
And, if so, what must we do convenience
differently to be successful? • Customers resent time
spent with salespeople
All the value lies in
• The salesperson adds the mousetrap
little or nothing

The Consultative Sale Station Break

• The customer doesn’t know the
answer / solution without help from a
salesperson Can the same salesperson
• Customers demand expertise, advice be successful selling a
and handholding during the sales
process mixture of transactional and
• Customers insist on multiple meetings consultative opportunities?
with salespeople and others
Or must they sell only one or
• The salesperson often adds more the other?
value than the product or service
The salesperson creates as much
value as the mousetrap
 Mixing Transactional and
A Vote Consultative: A Great Truth
Yes: people can
do both. No sales force can be
effective if the same
OR salespeople are chasing
No: people can a mixture of
do one or other Transactional and
but should never Consultative
Why? opportunities.
do both.

Why Transactional and

Why Transactional and
Consultative Don’t Mix:
Consultative Economic
Don’t Mix: Reason
Psychological Reasons
Any salesperson who is When salespeople have
talented enough to make both Transactional and
Consultative sales is too Consultative opportunities,
expensive to use for they always pay too much
Transactional opportunities attention to the low-margin
where customers don’t transactional business at the
want, don’t need and won’t expense of higher margin
pay for high-level sales [but longer sales cycle]
talent. Consultative opportunities.

World-class Sales Forces A Good Read. . .

• 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