Business Skeptic

 You have got to qualify people so you spend your time making money and not educating and entertaining people.

There are two basic rules to qualification:

1.        Qualify High. This means you need to speak candidly and directly with the people that can actually make decisions. They are busy and won’t waste your time. So if you ask them a direct question, you will get a direct answer. You might not like the answer, but at least you’ll know and can move accordingly.

2.        Ask the difficult questions. Many sales people shy away from asking the difficult probing questions (what I call poking them in the eye) and accept vague “kind of optimistic” responses. They are concerned about “offending” the prospect. If the news is bad you want it direct and as soon as possible. Unfortunately, people are nice and don’t like to give bad news, so you have to probe for it. Ask the tough probing direct questions. You would rather have bad news than waste your time. This is about your income! Just do it.

Remember there are two winners in a sale. One is the person that wins the deal and the other is the competitor that got out earliest, and didn’t waste time on a deal he couldn’t win. He moved on to a new deal he could win. Coming in second is going broke.

Ok you did your cold call prospecting and now you have a meeting with the executive (your first date). The following is some guidelines for that first conversation.

Rule 1. Get to the point. Do Not Waste Their Time. Executives are very busy. Forget the niceties and chit chat. Thank them for their time and get out a strong and succinct value proposition. The primary characteristic that got the executive the job is their ability to judge people. You are being judged by someone that has a very short first impression window. You need to grab that opportunity and convince them that you belong there and you are valuable to them. Don’t fumble around or try to “break-the-ice”. Get to the point. Also don’t be surprised if they are very direct; bordering on rude. They are just determining if you have the “stuff” they can count on to deliver.

Rule 2. You have to give in order to receive.  Simply stated, you can’t go in and start pummeling an executive  with questions. You need to provide them with a strong value proposition (What your company does better than anyone else).

Here is a value proposition  I use.

FirstRule is a New Customer Acquisition Specialist. We help companies grow sales in the most important way possible, through new customers and aggressively taking marketshare. We will increase lead generation and conversion by 3 to 4 times and more than double your sales productivity. Most important, we install the systems, procedures and train your organization to become a tribe of A+ hunters.  

Rule 3. Explain and validate your value proposition with an example. The example helps to clarify what you mean by the value proposition and gives them a relevant example that they can relate to their operation. What I try and do is attempt to figure out their business model and how the executive is measured ahead of time. 

It is important to stress that this is a specific and relevant example of how we execute on our Value Proposition. It is not trying to sell that specific solution and don’t be pulled into selling that solution immediately by the prospect.

Rule 4. Don’t Try and Set The Hook Too Early. You goal is not to try and sell the first “need” that comes up. Your goal is to get as much information about their business model, how the executive is measured and the urgent priorities. It is important not to focus on the example as a sales opportunity. It is a validator. If the executive is not opening up other pain areas, you can use another relevant example of a different competitive transformation.

Rule 5. You close them on a Sequence of Events. Basically you are closing them on a next action and follow-up. As you identify pain points and close on follow up the executive will often try and delegate downward to those people that are tactically responsible for the pain area. Agree that you will follow up with the subordinate, but make it clear that you will get back to the executive regarding your findings and how your company might be able to help. You want to establish that you work with the executive and are a peer.

Rule 6. Reaffirm the sequence of events in a thank you email, reinforcing that you will get back to him / her personally. In you thank you email, reiterate the sequence of events and remind the executive that after you and your team have had time to evaluate the situation, you will get back to  him.

Rule 7. You can qualify tough. Ask tough and direct questions. Executives are the best people to qualify. So be direct and to the point. They will tell you straight if something is important enough for them to move and when.

Prospecting is simple, it’s just not easy. I have heard from a couple of you (thank you) that you are having trouble getting through to the target executive. In some cases you just can’t get past the admin and in others, you get a call into the executive but they just hang up on you or won’t engage.

Before we discuss strategies for dealing with this situation, we must first talk about time management. Sales is the greatest occupation in the world. Basically you are the CEO of your own company. Your success is the direct result of your efforts, effectiveness and efficiency. A great way to keep this foremost in your mind is to take your desired compensation, divide that by your commission rate (to get your personal sales quota) and then divide that by 2010 hours in a year. This will give your sales per hour metric. You shouldn’t engage in activities that don’t pay back on this effort. Now prospecting tends to have the highest return because it finds lucrative opportunities for very little investment. However, not all prospects are worth the time and hassle. There are a lot of prospects out there (you should be continuously prospecting in your current accounts with new executives in addition to pure cold calling) so given that there are a lot of fish in the sales opportunity sea, you need to determine for yourself whether it is worth pursing a difficult to reach prospect. Assuming the prospect is worth the trouble, here are some things to help you get “in front” of the executive.

First, refine, hone and fine tune your value proposition. Are you specifically addressing a pain the person has that you have verified from your research of their website, annual report and other sources? Annual and analyst reports are great sources to find the specific pain. Create your value proposition accordingly. A generic value proposition will not open the door. It has to be a rifle shot aimed directly at the heart of their issues. The generic “Hello my name is ABC from XYZ Company and I would like to discuss how XYZ can help your improve your operating efficiency and reduce costs”. Might sound find to you, but if you are a food processing operations executive, does it really hit a bull’s eye? How about “ Hello my name is ABC and I am a Food Processing Profit Risk Management Specialist. I work with Food Processing Operations Vice Presidents like you to help them protect their bottom line from increasing raw material and energy costs.” While the solution might be the same with both value propositions, the second one is more targeted towards his or her specific pain. Food Processors are getting their margins squeezed by increasing food and energy prices and are measured on their conversion costs and efficiency.

Work on your value proposition. Really think about it and the value your company brings to this specific prospect. Do not put the responsibility on the customer to figure out how your company can help. Do your research first and then speak directly to the issue.

Assuming you’ve got a killer value proposition and still can’t get through to the executive, try the following. Purchase a recent business book specifically relevant to the prospect’s business and industry.

It should be a very recent release and hardbound. A book the prospect is unlikely to have already read. Avoid general business topics, such as management or leadership. The book should be specific to the industry. This shows your interest, knowledge of the market and the issues faced by the prospect.

Send or hand deliver the book (giving the book to the admin is fine, because they won’t through it away). Include a note: “Dear Mr. Smith, I found this book interesting and insightful. Some of the ideas and concepts appear especially relevant to “Company Name”. I hope you enjoy it. Thank you.”

Autograph the inside front cover. “To : Name: From Your Name and Company. Attach your business card to the title page with a paper clip. If you are really trying to impress, highlight a couple of specifically insightful passages with small sticky notes on the outside edge, so the sticky notes just stick-out from the book. Do not highlight with a marker.

Call the prospect a week or so after delivery of the book.

It is important to realize that a phone call is an interruption and that many people are not listening to what you are saying because they are trying to do email etc at the same time. Do not use this as an excuse not to make calls, because phone calls are still the most effective. Occasionally if you can’t get through, try an email or good old-fashion paper letter. Understand that people are more polite with other people on the phone than they will be with an inanimate object like a letter. So your letter has to be even better targeted, powerful and to the point in order to get it read. Also, do not expect they will just pick up the phone and call you. Plan on calling them and following up on the letter. Good luck and good selling. Let us hear from you. How can we help?

I like to think of sales as having 2 improvement dimensions: Effectiveness and Efficiency. Effectiveness is how good you are at winning deals. Efficiency relates to how you spend your time and how much you invest in an opportunity. For most companies their win ratio indicate they are quite effective, but when you look at funnel constipation (length of time opportunities don’t close etc) means they have an efficiency challenge. To become more efficient you need more robust, ruthless and objective qualification. When thinking about opportunity qualification think N.A.M.E.

Need: Does the account truly have a need for our solution?
Authority: Am I dealing with someone that can actually make the decision?
Money: Does the account have the money available for purchase now?
Emergency: There must be urgency to drive it. What bad thing will happen if
they delay the purchase. If nothing bad happens, it won’t happen?

Remember to qualify every opportunity and person. I use a simple trick to remind me. Every time I meet someone at an account, I say, “I’m sorry, I didn’t catch you NAME.” This prompts me to then ask the necessary qualifying questions.

The definition of a genius is a person that can hold 2 disparate thoughts in their minds at the same time and believe both. Sales is all about being a genius. You need to be infinitely optimistic since much of the day is rejection, but at the same time you need to be ruthlessly objective, and completely qualify opportunities so you don’t waste your time. I have a little mnemonic I use to help me be ruthless, its called DIGAS. Which stands for D0 I Give A Sh*t.

What I do is try to understand my target executive. How they are measured and what is really important to them. What is on their radar screen. Then I put myself in their shoes. Looking at my offering from their perspective, I ask myself DIGAS? If I don’t, I’m not going to make the sale so I move on.

Don’t blink when a prospect asks for a better price. It’s cheap to ask. It doesn’t cost them anything to ask. So they ask. It’s ok to say no.

Being asked for a better price is a perfect opportunity to qualify and possibly close the sale.

For example, if you are asked for a better price, make a presumptive close and move the customer to a negotiation. Say, “I am glad you have chosen ABC Company and I am happy to discuss price and all aspects of our terms and conditions to finalize a contract. Do you have time now or should we schedule time at a later date for this negotiation.” If they are not ready, they will quickly back-off and say they aren’t ready to purchase they just wanted a price. Now you can re-qualify and move the buyer forward. “Glad to discuss price with you, but first let’s make sure that “ABC” is your first choice. What issues are outstanding that I can resolve so you will choose “ABC ?” Have them choose “ABC” before discussing price.

Try and avoid price discussions with people who do not have the authority to negotiate the contract. Rough orders of magnitude etc are fine for people who do not have the authority to do the deal. You want to avoid serial negotiation. This is when you negotiate price with one person, only to find that there is now someone else who wants to negotiate, and then it goes to purchasing who wants to negotiate. Get them to decide on your company and then negotiate once with the people who have the authority to do the deal.

I was closing a deal and the buyer said, “you’ll need to do better on the price”. I said, “I sorry, I didn’t realize you couldn’t afford my services. Let’s discsuss what we can remove from the scope of delivery to meet your financial constraints.” The buyer then said, “No I can certainly afford your services, I just want a better price”. I said that my service was a great value and priced appropriately and I was not going to discount the price.” He said, “gee everytime I ask for a price discount I get one. Well ok, I figured I just had to ask, I had nothing to lose.” He then signed the PO.

Efficient financial markets are supposedly a hallmark of our modern capitalist system. The vast portfolio of financial instruments is touted as providing global liguidity at low cost to support productive investment and thus improve economic growth and development. I have no doubt that new capital market technologies and infrastructure have reduced the administrative cost of capital and has thus made investing more efficient and cost effective, thus providing a improvement in capital and investment productivity. However, I question whether the system has involved into global on-line gambling and the “capital efficiency’ argument is merely a marketing whitewash.

An investment vehicle value, by definition, can be represented by a probability distribution. Trading, transactions and hedging are the result of differential view points regarding this probability distribution. I purchase an investment because I believe that it is currently undervalued based on upon “my” opinion of the future and how it differs from the imputed market consensus embodied in the current price. Said another way, I am betting that I can “beat the house” (where the house is the market consensus of the expected value of the probability distribution). This is fine and is the way that financial vehicle pricing is supposed to work and it is this dynamic and continuous trading flux that provides financial liquidty. If we all agreed on valuation, then no one would trade except when their personal circumstances required a change in investment strategy. Considering transaction volume and frequency, it is mathematically easy to prove that the bulk of trading has nothing to do with changing investor economic and life circumstances warranting a change in investment strategy but rather the continuous betting on differential views of the future outcomes. As mentioned before this at its foundation is the key to financial market liquidity.

There is an important presumption in this analysis, and that is that the “differential betting” is restricted to the amount of capital that is required by the global value creation machine. Or more specifically, you must have a differential outcome believe regarding the value that can be generated from a given amount of capital, since that is what defines the probability distribution. Therefore, the amount of financial instruments should be reasonable proportional to the underlying productive capacity of the economy and invesment capital employed. If the amount of “betting” exceeds the underlying productive capacity and invested capital, the market is no longer operating as a liquidity engine but rather speculative gambling in which, since there is no productive economic capacity underlying the speculation, must result in a negative return (a zero sum game minus the cost of transaction).

The global financial markets currently appear to be awash in speculative gambling, unsupported by global economic capacity. The worldwide value of credit is currently 4 times the global GDP. Hence the world has borrowed 4 times more than its output. If you assume (mathematically supported of-course) that value is created by increases in productivity, and that the rate of productivity is on average less than 10% per year, then it could be centuries before our investment market and our productive capacity are in alignment. More worrying is the amount of credit derivatives in the market. Currently there is 10 times more value in credit derivatives than in the underlying credit on which they are based. Stated a different way, the total value of worldwide credit derivatives is 40 times the value of global GDP. Since there is no economic rational between the total value of derivates and the underlying productive global capacity, the derivatives market is far more like a gambling casino than an efficient capital market.

There is a substantial difference between Las Vegas and global credit markets. In Vegas, the probability distribution of any game of chance is fixed and regulated. The probability distribution is not influenced by the amount of money being gambled. The probability I will beat the house in Black Jack is the same whether I bet one dollar or one million dollars. The difference in global credit markets is that the micro probability distribution (the probability distribution for each “gambler” can be altered by the amount the gambler invests, but the overall macro probability distribution does not change. Since there is no productive capacity underlying the bet (as there is no productive capacity in a deck of cards) the consolidated outcome of the game is at best zero sum (some will win and others lose). However, because of the interrelated nature of the capital markets, the size of your bet can alter your odds. If your odds improve, then consequently someone else’s odds must go down, since the game remains zero sum. Gamblers that have the resources to place the biggest bets, hold the financial markets hostage and thus, cannot be allowed to lose. Somebody has to pay. In order to pay, you must have productive assets (economic capacity), hence the final payer (I can use the word bail-out) must be those that actually produce something, product output. That means you and I. The government will step in and save the gambler and you and I will foot the bill in increased taxes and lower economic growth. When there is 40 times more money betting on the outcome than the outcome can support, there is going to be some serious problems. Ooops, I’m late. The serious problems have already arrived.

The subprime crisis is becoming a field day for our society’s addiction to the blame game. I am not going to heap additional fodder into the cannon of public opinion. While questionable acts and motives abound in this situation, they did not cause the crisis but are an artifact of the real reason behind the collapse. The chilling fact is, the crisis would have occurred regardless, because it was engineered to fail from the very beginning.

A free market, whether mortgage backed securities, structured investment vehicles or coffee, is a dynamic system that is stabilized by feedback. A free market is defined by feedback. The process of negotiating a price, the force pushing a market or transaction to equilibrium is feedback. It was the structural lack of systematic feedback which caused the crash.

There are three essential characteristics for feedback to effectively stabilize a system. These are:

Relevant Information: The feedback signal must be directly related to the feed forward momentum of the system.

Timeliness: There must be a minimum of delay between the information feedback and forward signal. Too much delay causes the system to become unstable and it becomes increasing out of sync with the controlling information.

Amplitude: The strength of the information. Basically is the feedback signal strength strong enough to be heard over the noise and strong enough to effect the system process.

Structured investment vehicles, for which I am including subprime mortgage backed portfolios, where constructed in a manner which precluded effective feedback. In a structured investment vehicle, the base transaction (the feed forward signal) was dissected into multiple components. Repayment risk was decouple from credit risk, which was decoupled from interest rate risk, which was also decoupled from base asset value risk. Now under the mathematical laws of associative commutation, the whole is just the sum of the parts, and hence nothing related to the underlying base transaction is affected by this dissection.

The first notice of caution should have arisen at this point. Specifically, the reason for the dissection was that the parts could be sold for more than the whole (this is due to different risk / return profiles of the different buyers of the parts). One should ask at this point, whether there is a financial equivalent to the Second Law of Thermodynamics, the conservation of energy. Ask yourself a simple philosophic question. I take a pie and if I cut the pieces just the right way, I end up with more pie. Don’t think so, but this is a philosophic argument. The actual math of valuing structured investment vehicles does work and I don’t want to get into that here. It is the system dynamics regarding feedback which are broken.

What essentially happened is that by dissecting the base transaction, we decoupled the parts from the information flow about the whole. Information about the underlying asset could not be so precisely partitioned. Hence, each part had a market but it did not have relevant information feedback, because the information market was not and could not be partitioned and parsed along the same mathematical rule of the SIV.

In addition to the lack of relevant feedback, the partitioning of the base asset resulted in large time delays in information flow between that which effected the base asset and its parts. Part of this was due to the loss of information relevancy, context and fidelity and also because of the long and many hands that the parts had passed through. Image you are at an open air market negotiating for a hand woven rug. Each time you counter offer, your offer is broken in different pieces of information and each piece of information has to go to another city for an answer. Your counter price goes to a city 10 miles away, your delivery desires yet to another city and the warranty yet a third. Not only is this highly inefficient, the lack of relevancy and context of each information piece is likely to cause valuation problems.

The last aspect of broken feedback is amplitude. The strength of the feedback signal declines both because the signal is divided into parts and secondly because it begins to dissipate and lose its strength as it travels the long distances to the owners of the various parts.

The subprime and other Structured Investment Vehicles were designed to fail because they were engineered in a manner that seriously compromised the necessary feedback that systems rely on to be stable.

The amount of correction is a function of the three broken variables. As the time delay gets longer, the amount that the part values can diverge from the base asset’s value grows exponentially. As the relevancy of the information declines, the feedback declines in inverse proportion of the loss of relevancy. Lastly the reduction in amplitude, due to signal loss, reduces the feedback by the gain factor of the system which is proportional to the risk adjusted (almost a oxymoron in this context) compounded rate of return over the maturity of the base asset. Stated in somewhat mathematical terms, a structured investment vehicle such as subprime mortgage backed securities can diverge from its correct or feedback stabilized value by the following equation:

dV = 1/ a RIR * (TD)**et*(1/(A)**eM)

Where:

dV = diverged value of parts compared to base asset.

a = proportionality constant

RI = Relevant Information Ratio (Less than one)

TD = Time delay. This is a multiple of market trading speed.

t = time between initial investment and calculation.

AL = Amplitude. This is always less than one because of signal dissipation.

M = time to maturity.

In a perfectly free market with transparent information and almost instantaneous transactions, the calculated dV (divergence value) is unity. Or the sum of the parts equals the whole. In feedback compromised systems, there can be considerable value divergence. However, like quantum mechanics, this probabilistic divergent value function must eventually collapse to unity at either maturity or upon inspection. Hence the “created” value must collapse to zero. Welcome to the now.

A second principal for effective and successful capitalism is the need for an educated consumer. Adam Smith’s capitalism assumes that consumers will act in a rational manner and attempt to maximize individual utility. Rational buying behavior requires an educated consumer, knowledgeable with regards to the domain and specifics of the transaction.

Unfortunately the practice of “educating” the consumer is more notable in its breech than its practice. The sub prime mortgage market is great example. The consumers lured into purchasing homes they could not afford were certainly not educated by the mortgage bankers. People need to attend school and pass exams to earn the right to drive an automobile, but no competency is required to go into debt for hundreds of thousands and risk one’s economic future. Capitalism cannot nor should it protect people from their own stupidity, but neither should it take advantage of it. An uneducated consumer should be helped and educated, not seen as a target market and exploited.

This goes back to the founding principal of Adam Smith’s “Wealth of Nations”. Capitalism must be build upon a solid foundation of cultural morality. Many notorious rip-off’s have hidden behind the defense of “the free market”. But think about it. Like selling mortgages to people who could not afford them, should be we marketing pharmaceuticals or health savings accounts directly to consumers that have no medical training. Watch advertisements and see if the seller is trying to educate you or overtly keep you from being “rational”.

The freedom to decide is a strength and virtue of our society and economy. However, along with such freedom comes responsibility. Do the right thing.

I am perennially concerned when management list’s growth as both a corporate objective and strategy and certainly there is tremendous pressure from Wall Street to show growth. However management must be cautious because growth is a metric, an indicator of the effectiveness of a strategy, not an objective. The important task is to define and manage a strategy which achieves the market and business objectives related to the unique strengths, assets and value proposition of the firm. If you focus and effectively manage strategy, then the growth metric achieved. In this context, growth is an indicator of the effectiveness of both the strategy and the execution of same. If the growth is below expectation, management must the analyze and contemplate 4 things:

1. The growth metric.. Is the growth metric consistent with a well executed strategy? Or are we trying to achieve something which the strategy cannot support.

2. Is the strategy sound.

3. Execution. Assuming the strategy is sound, are we executing effectively.

4. Time frame. Are we measuring on a time scale inconsistent with the effective execution of a sound strategy. Effective execution of a sound strategy might take longer than the measurement period.

The trap that many companies fall into is attempting to manage growth directly rather than using it as a metric and guidance. If growth rates are below expectation, immediate action is taken to achieve that growth, which might be both at odds with and disastrous to executive strategy execution. Specifically, compromises and inefficiencies are made to manipulate the metric rather than to address either the ineffectiveness or the mismatch between the metric and the strategy.

While these maneuverings may achieve the metric in the short run , because they ineffectively apply or divert resources and de-focus management from the primary mission, that of strategy development and execution, the growth even if obtained will not be sustainable. More importantly, focusing on the metric rather than understanding what the metric is telling you about your strategy and execution, will permanently weaken the firm and the market opportunity will be ceded to the competitor that stays focused on strategy and execution.

Many executives believe that growth is the elixir of success. That growth will protect them and their companies. Growth, used inappropriately, as an objective rather than a metric, can result in the opposite.

Growth is not an antibiotic it can be anaesthetic.

I am concerned that too many companies and executives take a mechanical view of capitalism. Just because something is legal, it sells and is profitable, does make it ethical, right or moral. It is instructive to go back and reread the original doctrine of Adam Smith.

Adam Smith was a philosopher and not an economist as most people believe. A major prerequisite for the success of his economic philosophy; “the invisible hand”, was that capitalism must be built upon a strong foundation of cultural morality. The engine that keeps capitalism vital and productive, is integrity and ethics, which form the framework and scaffold by which investment and resource allocations are made.

In many ways, Adam Smith’s capitalism contained a strong flavor of market paternalism.

Today’s capitalism often appears to be based on the philosophy, that as long as it not explicitly illegal, then anything goes and let the market decide. These shadow capitalists even use the US Constitution in defense. “Freedom of Speech” etc. Bust ask yourself, Does the economy really need sex and violence on television? Violent and disgusting movie trailers during prime time family viewing? In a country with an epidemic of childhood obesity, do we really need to be pushing nutrition free, sugary breakfast “foods” directly to children? How about marketing pharmaceuticals directly to consumers that have no medical education? What about companies that market totally ineffective nutriceuticals and homeopathic remedies? The economy is filled with products and services that are ineffective and destructive, but profitable.

It’s not just the sellers of goods that should take a moment and reflect. Media companies, talk show hosts and even news reporters tout “stories” that help to market products that are wasteful, fallacious and in fact down right dangerous. This is not capitalism, but exploitism. Capitalism is the engine of productivity and productivity is the only way in which a society, economy and an individual attains greater wealth. By allowing and encouraging consumers to spend resources on ineffective and destructive products and time wasting endeavors, the entire economy suffers. I am not advocating legislation, governmental control on any other “anti-free market” intervention. I am simply asking for business leaders to simply be leaders and stand up and defend true capitalism.

The business press is awash in books on leadership. One of the most important aspects of leadership is doing the right thing when under pressure to make the numbers, and focus on the wealth of the shareholders. Business leaders should constantly be asking themselves; “does this product or service really benefit the consumer and society”, not simply, “will it increase earns per share”.

Just because something is legal does not mean it is right. Just because you can sell something, does not mean the world will be a better place because you produce it. Have some backbone and lead. Say, “I could, but it’s not right, therefore, I won’t”!

My favorite quote and a personal guiding thought is: “Manners are more important than Law”.

Respect the consumer, the economy and the core tenet of capitalism. Do what is right.

I recently received an email regarding the article on Solution Selling, asking me to comment on Customer Centric Selling. First, Customer Centric Selling is just the most recent and renamed version of Solution Selling, so there’s not a lot to talk about. Solution Selling was coined by Michael Bosworth in his book of the same name. He later sold his stake in the Solution Selling company he founded and subsequently repackaged “Solution Selling” into “Customer Centric Selling” (now CCS because I am tired of typing the entire thing). While I lambasted the lack of definition for Solution Selling in a previous article, CCS as a name at least contains some semantic logic. If you consider the 3 words, and acknowledge there are just two parties to a sales transaction, the seller and the buyer,;then CCS merely means that in selling you should focus on the buyer. No great revelation there. I guess the reason we need to be reminded of this is because “sales people” are too self centered and egotistical to focus on the customer. Wise advice and such reminders are always welcome and helpful, although they shouldn’t be necessary.

Other than reminding sales people to focus on the customer, CCS is just the newest revision of Solution Selling. It contains some minor refinements and additional tips, but nothing truly new. I find the book CCS incomplete regarding managing the entire sales process. The book lacks useful information on prospecting, which is the most important aspect of sales. The most successful sales people are great prospectors.

CCS assumes that “asking questions” is prospecting. While asking questions is very important and powerful in determining a buyer’s needs, pains and goals; you just can’t start pummelling an executive with questions. It’s disrespectful. You first need to present a clear and concise value proposition that is meaningful to the executiive and addresses something urgent  on the executive’s radar screen. If you do not have a compelling value proposition for the target executive that can make a substantial positive impact on his P&L or Balance Sheet, or some other item on the radar screen, you will be delegated down.

The other weakness in CCS is the lack of meaningful help in lead and account qualification. Understand that a sales person basically sells their time. They cannot afford to waste time selling to people who aren’t going to buy. Solution selling is about selling a vision of a better future against the current state of the present. The future is unknown and risky, but there is always tomorrow to make a decision. The present is known, and they know how to deal with it. Unless something really bad is going to happen if they don’t consumate the sale, then the sale is unlikely to close anytime soon. One of my favorite qualifying questions is “What will happen if you don’t do this project”? If the answer isn’t something really bad, such as “I will get fired”, “I will go to jail” or something similarily catastrophic; the sale is likely to take a nauseatingly long to close, if ever.

Also, don’t fall into the ROI trap.  ROI’s don’t sell. They are a gate to get through after the decision has been made. The ugly fact is that a company typically has 8 times more investments opportunities with acceptable ROI’s then they are capable of or desire to implement. It is not for a lack of capital, but organizational bandwidth, alignment with strategy or the executive just doesn’t care. Business investment doesn’t work like investment portfolio’s or MBA Corporate Finance. Addressing an urgent need and avoiding a painful consequence is more important than ROI.

Customer Centric and Solution Selling are power and important sales techniques. I personally use, manage and teach them. But because they are incomplete, I caution organizations adopting them to make sure they fill in the gaps regarding prospecting and qualifying.  To fill in the those gaps, I recommend “Value Forward Selling” by Paul DiModica. www.digitalhatch.com

Thank you for your comments and I look forward to your response.

One of the greatest attributes of marketing is the creation of words and phrases that sound great and instill a feeling of virtue and professionalism, yet are undefined and often meaningless. Solution Sales is one of my favorites. Ask a professional sales person to define a solution sale and he or she will define it either by exclusion, “it is not a commodity sale which is based on price”, or define it recursively, “it is when you are providing the complete solution” (obviously a solution is a solution; just as A=A) or by adjectives, qualitative or relativistic descriptions such as;
Complex
Network
Encompasses both product and services.
Difficult
Long sales cycle
Etc.
You see the problem! No one seems to be able to define a solution sale. For example, how complex does it need to be to qualify as a solution sale? It is interesting to note, that we have entire libraries of books and training classes on solution selling, yet can’t define it. This is not to say that those books and training classes are worthless, quite the contrary, as a sales management quack (oops, I mean consultant) I even teach this stuff. But it really bothers me that it is undefined…..Until now.

So here is the definition of a solution sale. “A solution sale is when the sales person has greater domain knowledge than the buyer.”

This has some profound implications. It implies the following:
1. Any sale can be a solution sale or a commodity sale based on the circumstances.
2. The type of sale, whether solution or commodity, is a sales tactic that can be determined by the sales person.

Ok you are probably scratching your head about all this. Let’s look at an example.

A 200 ohm ¼ watt resistor. Most people would say that this would be a commodity sale, since it is a commodity product. It is cheap, there are many suppliers and can be picked up off-the-shelf. Certainly to an electrical engineer designing a circuit, he knows exactly what is required. To him, it is a commodity sale, because he possess the greater domain knowledge, having designed the circuit. Now let’s consider someone holding a wire. They have a problem. Everytime they plug this wire into a device, it smokes and damages the device. They are not an electrical engineer, do not know about resistors, voltage and current. What do they need? A resistor! This is a solution sale, because the domain knowledge rests with the sales person. Ok this is a silly and possibly nonsensical example, at least to us engineers (yes I was an engineer), but it illustrates the point that the type of sale is not determined by the product or service but by the circumstances and the strategy of the sales person.

Consider a manufacturing automation sales person. He is selling automation to the engineering manager of manufacturer whose strategy is to be the lowested priced player in the market, runs on razor thin margins and whose business success depends on highspeed automated manufacturing. This conversation is likely to be very focused on specifications, features and price. Basically a commodity sale. Later this same sales person visits the manufacturing engineering manager of a pharmaceutical company that has product gross margins of 94% and whose business success depends on research and marketing. This conversation is likely to be completely different, with the sales person possessing more manufacturing automation domain knowledge than the customer. Hence a solution sale.

So a sale cannot be categorized as solution or commodity aprior. While the circumstances initially define the sale type, the sales person may elect to change the sale type in order to improve their selling position. To shift a commodity sale to a solution sale, the sales person needs to expand the scope of the conversation and deliverable to the point where they posses greater domain knowledge than the prospect. This is particularly effective when you are in a price competitive situation and cannot be the lowest priced player.

Conversely, if you are the lowest priced supplier, you might want to “commoditize” a solution sales situation if you are competitively weaker, by convincing the prospect to reduce the scope of the domain to the point where your competitor is no longer the domain expert.

OK, I hope I have convinced you that there is a definition for Solution Sales. Now throw it out the window. If a solution is the resolution to a problem, then any sale is a solution sale. Your tactics simply depend on how you and the prospect mutually agree to define the problem.