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© 1999 Neil Rackham, John DeVincentis
Station Break . . .
In one sentence: What’s the purpose of a sales force?
© 1999 Neil Rackham, John DeVincentis
What’s the purpose of a sales force? Some answers . . .
“The reason for a sales force is to ensure that the customer has the right information about the advantages of your products at the right time, so that the purchasing decision is influenced in your favor.”
… Regional Sales Manager Printing Equipment Company
“The sales force convinces the client to buy from you rather than from a competitor by showing how your services are superior.”
… Senior Consultant Systems Integration and Software Company
© 1999 Neil Rackham, John DeVincentis
What’s the purpose of a sales force?
“The sales force exists to show customers that you have something worthwhile to offer that meets their needs.”
… Salesperson Office Products Company
“The sales function is like a translator: its job is to take your products and services and translate them into language that the customer understands.”
… Sales Manager Control Systems Manufacturer
“The purpose of a sales force is to communicate to customers the value of your offerings.”
… Senior Vice President Sales and Marketing, Large Regional Bank
© 1999 Neil Rackham, John DeVincentis
The common factor: Each definition is about © 1999 Neil Rackham. John DeVincentis .
The shifting marketplace Unique products/services Substitutable products/services 10 ● ● 9 8 7 6 5 ● 4 3 2 1 no competitors buyer has no alternative source perceived uniqueness numerous competitors buyer has many options/choices no perceived uniqueness ● ● ● © 1999 Neil Rackham. John DeVincentis .
Where are you? Unique products/services Substitutable products/services 10 9 8 7 6 5 4 3 2 1 3 years ago 10 9 8 7 6 5 4 3 2 1 Today 10 9 8 7 6 5 4 3 2 1 In 3 years © 1999 Neil Rackham. John DeVincentis .
What’s happening in the USA Unique products/services Substitutable products/services 10 9 8 7 6.4 6 5 4 3 2 1 3 years ago 10 9 8 7 6 5 4 4.7 2 1 In 3 years SSI Data: 47 corporations 773 sales executives © 1999 Neil Rackham. John DeVincentis .5 3 2 1 Today 10 9 8 7 6 5 4 3 3.
Station Break . John DeVincentis . Why are products and services in most markets becoming less unique? © 1999 Neil Rackham. . .
internet. John DeVincentis .) ● ● ● Corporate Strategies ● ● New products/services Value-added services and support Product bundling & pricing Customized options Create Differentiation ● ● © 1999 Neil Rackham. etc.Market Forces Decrease Differentiation ● Products/services look more similar More of them (Increasing competition) More demanding clients New Technologies (quicker time to market.
Communicating value Unique products/services Substitutable products/services 10 ● 9 8 7 6 5 4 ● 3 2 1 Product/service creates the value Selling process must create value for clients Market Forces ● Salespeople communicate product benefits Salespeople succeed through value communication ● Not enough for salespeople to communicate value Salespeople must become value creators ● Corporate Strategies ● © 1999 Neil Rackham. John DeVincentis .Creating value vs.
…and customers are changing too. .Station Break . John DeVincentis . . What’s the biggest difference in how major customers behave today compared with 3 years ago? © 1999 Neil Rackham.
John DeVincentis .Most people agree that • Customers are getting tougher to deal with • They treat you more like a commodity • But they also demand more expertise and support than ever before • They are using new purchasing techniques to force greater concessions from their suppliers © 1999 Neil Rackham.
Buying strategies in the new purchasing world high Leverage Strategic importance of product/service Partner Shop Manage Risk high low Difficulty of obtaining substitute product/service © 1999 Neil Rackham. John DeVincentis .
Define “value” © 1999 Neil Rackham. John DeVincentis . . .Station Break .
© 1999 Neil Rackham.What is value? Value = Benefits Practical test: Cost Value is something the customer is prepared to pay for. John DeVincentis .
Station Break . John DeVincentis . . What things do we do for our customers during the sales process that are so valuable that customers would be prepared to pay for them? © 1999 Neil Rackham. .
100 buyers from US companies: “Has anyone ever made a sales call on you that was so valuable you would willingly have pulled out a check book and written them a check for the call?” © 1999 Neil Rackham. John DeVincentis .Customer value survey We asked 1.
© 1999 Neil Rackham.Bringing Value in Face-to-Face Sales • Talking brochures add no value. • Acting as the customer’s advocate creates value. • Problem solving and customizing solutions add high value. John DeVincentis . • Helping customers change strategic direction adds most value. • Information on customer relevant trends and issues adds minor value.
John DeVincentis © 1999 Neil Rackham. John DeVincentis .Where customers perceive value • Change of strategic direction • Problem solving & customized solutions + - • Customer advocate • Time-stamped info on industry/competition • Talking brochures: negative value add © 2004 Neil Rackham.
John DeVincentis .The value map High cost offering (Y) can compete with low cost Cost offering (X) if it has more benefits. VALUE VALUE DISADVANTAGE DISADVANTAGE Y X VALUE VALUE ADVANTAGE ADVANTAGE Benefits © 1999 Neil Rackham.
John DeVincentis . Cost VALUE VALUE DISADVANTAGE DISADVANTAGE Y X Y VALUE VALUE ADVANTAGE ADVANTAGE Benefits © 1999 Neil Rackham. .but . Y can’t compete at higher cost without additional benefits. .
John DeVincentis .Value map in selling VALUE VALUE DISADVANTAGE DISADVANTAGE SALES COST Y VALUE VALUE ADVANTAGE ADVANTAGE VALUE CREATED IN SELLING PROCESS © 1999 Neil Rackham.
Value selling strategy VALUE VALUE DISADVANTAGE DISADVANTAGE OPTION 1: Create more value in selling process 1 SALES COST Y 3 2 VALUE VALUE ADVANTAGE ADVANTAGE OPTION 2: Slash sales costs OPTION 3: Hybrid of options 1 & 2 VALUE CREATED IN SELLING PROCESS © 1999 Neil Rackham. John DeVincentis .
VALUE VALUE DISADVANTAGE DISADVANTAGE Which option has the highest success rate? 1 Y 3 2 VALUE VALUE ADVANTAGE ADVANTAGE © 1999 Neil Rackham. John DeVincentis .Station Break . . .
very difficult with many failures © 1999 Neil Rackham. John DeVincentis .The toughest strategy to execute VALUE VALUE DISADVANTAGE DISADVANTAGE 1 • • Y 3 2 VALUE VALUE ADVANTAGE ADVANTAGE Most people believe hybrid should be easiest Very.
COST “a cheaper. better tasting pie” Strategic value buyers “a balanced diet” © 1999 Neil Rackham. no-hassle pie” Extrinsic value buyers “a bigger. John DeVincentis + Enterprise Assets .The 3 customer value types Intrinsic value buyers VALUE = BENEFITS .
John DeVincentis .Intrinsic value customers • • • • Understand the product Perceive product/service as readily substitutable Focus on the cost Resent time/cost associated with sales people © 1999 Neil Rackham.
John DeVincentis .Extrinsic value customers • • • • Focus on how product is used Interested in solutions and applications Value advice and help Willing to invest time and money with sales people to create solutions © 1999 Neil Rackham.
Strategic value customers • • • Focus on leveraging suppliers’ core competencies Prepared to radically change current process to get best from suppliers Connection between supplier and customer so close individual roles are blurred © 1999 Neil Rackham. John DeVincentis .
Selling models for value creation COST OF SALE Enterprise model Consultative model Transactional model VALUE CREATION POTENTIAL Intrinsic Extrinsic Strategic • Convenience • Problem solving • Business process changes • Cost • Customization • Leveraging total enterprise resources • Availability © 1999 Neil Rackham. John DeVincentis .
I don't want to waste time/effort" "I don't know the answer.The 3 selling models Transactional Value created through cost reduction and ease of acquisition "I know what I need. I need help/ expertise" Consultative Value created through advice. I'm willing to change my organization" © 1999 Neil Rackham. John DeVincentis . and customized solutions Enterprise Value created through leveraging enterprise capabilities beyond products "I need a partner. problem analysis. problem identification.
John DeVincentis 1999Neil Neil Rackham.Consultative and transactional sales on the value map Enterprise Sale VALUE VALUE DISADVANTAGE DISADVANTAGE Consultative SALES COST Consultative Sale 1 Y 3 VALUE Transactional VALUE ADVANTAGE 2 ADVANTAGE Sale VALUE CREATED IN SELLING PROCESS ©© 1999 Rackham. John DeVincentis .
John DeVincentis 1999Neil Neil Rackham.Positioning the sales effort . John DeVincentis .the change Transactional Transactional Customers Customers Consultative Customers “sweet spot” captures most customers ©© 1999 Rackham.
the change Transactional Transactional clients clients Consultative clients Transactional clients become even more transactional due to: • segmentation strategies • internet • perceived commoditization ©© 1999 Rackham.Positioning the sales effort . John DeVincentis . John DeVincentis 1999Neil Neil Rackham.
Positioning the sales effort .the change Transactional Transactional Customers Customers Consultative Customers Consultative clients up the bar: • up-front investment increases • client expectation is higher • winners over-invest in attractive opportunities ©© 1999 Rackham. John DeVincentis 1999Neil Neil Rackham. John DeVincentis .
John DeVincentis . John DeVincentis 1999Neil Neil Rackham.The “sweet spot” vanishes Transactional Transactional clients clients Consultative clients sweet spot A sales force positioned here will fail • • unable to compete transactionally too little and too late for winning the consultative business ©© 1999 Rackham.
Optimizing the selling investment 1 WASTE Investment by Supplier BALANCE RISK Investment by Customer © 1999 Neil Rackham. John DeVincentis .
Optimizing the selling investment 2 ENTERPRISE create extraordinary value CONSULTATIVE create new value strip cost TRANSACTIONAL Investment by Customer © 1999 Neil Rackham. John DeVincentis Investment by Supplier .
John DeVincentis .Optimizing the selling investment 3 ENTERPRISE ENTERPRISE Investment by Supplier X CONSULTATIVE CONSULTATIVE TRANSACTIONAL TRANSACTIONAL Most sales forces are here Investment by Customer • too expensive to succeed • transactionally under-resourced and underskilled to succeed consultatively © 1999 Neil Rackham.
.Station Break . Is this for real? Are these things happening to our industry? If so. . what should we do about it? © 1999 Neil Rackham. John DeVincentis .
© 1999 Neil Rackham. The winners shift transactional business to cheaper channels. They put more resources into the opportunities where they can create most value. John DeVincentis . We must put our sales resources where we can create most customer value.Using sales resources We can no longer afford to put the most resources to the biggest customers: this is the era of lean selling. especially in transactional sales.
Station Break . John DeVincentis . Can the same salespeople sell both Consultative and Transactional business and be successful? © 1999 Neil Rackham. . .
Mixing Transactional and Consultative Rackham’s Law No sales force can be effective if the same salespeople are selling both Transactional and Consultative products. Why? © 1999 Neil Rackham. John DeVincentis .
John DeVincentis .Why Transactional and Consultative don’t mix Economic reason Any salesperson who is talented enough to make Consultative sales is too expensive to use in Transactional accounts where customers don’t want. don’t need and won’t pay for high level sales talent. © 1999 Neil Rackham.
Why Transactional and Consultative don’t mix Psychological reason When salespeople have both Transactional and Consultative opportunities. they always pay too much attention to the low-margin transactional business at the expense of higher margin [but longer sales cycle] Consultative opportunities. John DeVincentis . © 1999 Neil Rackham.
. by problem solving and by customizing solutions. See products & services as tools. Ask yourself.that’s how you know if you’re a value creator not just a value communicator. © 1999 Neil Rackham. Create more value through understanding customers more deeply than ever before. John DeVincentis . So what do I do about it? 1 2 3 Talking brochures can’t survive. “would the customer write a check for this call?” -. . not ends in themselves.. So don’t be caught in the vanishing middle. up the bar and aim for bigger consultative sales.
Station Break . . The more votes.] © 1999 Neil Rackham. . Let’s spend a few minutes thinking of questions we have about selling [Before I answer a question I’ll get a vote on how many people are interested in it. John DeVincentis . the more detailed the answer.
John DeVincentis . John DeVincentis © 1999 Neil Rackham.CONFIDENTIAL © 2002 Neil Rackham.