Mastering the Complex Sale_8

PeelingtheOnion 135 That price tag enables customers to prioritize the problem and then make a rational, informed choice between continuing to incur its cost and investing in a solution. In fact, as we see in the next chapter, estab-lishing an accurate cost of the problem is the only path to defining the true value of a solution. Cost is also the surest way to shorten the customer’s decision cycle. Think of the customer’s pain as the decision driver and the cost of the pain as its accelerator. The higher the cost of the problem, the faster the decision will be made to solve it. Salespeople tend to shy away from quantifying the actual financial impact of their customers’ problems. Some-times they honestly believe this work is the customer’s responsibility and that their customers don’t need help to understand financial impacts—this is, after all, the common underlying assumption of the sales processes they are taught to use. Many other salespeople complain that it is too difficult to uncover financial impact and quantify the value. They base this conclusion on their experiences asking customers about costs. However, they typically ask cost questions that encompass too many elements. You know this is happening when customers respond by saying, ‘‘That’s a tough ques-tion; that would be really hard to determine.’’ The real problem is not that the cost is too difficult to quantify, but rather that salespeople do not have a proper formula for calculating it. The number one reason salespeople avoid quantifying their value is that they have not been equipped by their companies to do so. The best sales professionals embrace the measurement of value and realize that the starting point for determining 136 DIAGNOSE COMPLEX PROBLEMS value is calculating the cost of the problem. They know that there is always the possibility that the cost of a problem will not be large enough to motivate the customer to change. They also know that such an outcome is entirely legitimate. If the cost of a customer’s problem does not justify the solutions being offered, the professional will acknowledge that reality and, in the spirit of always be leaving, move on to a better qualified customer. (Of course, if this happens too often, salespeople and their organizations might very well have a larger problem. Their solutions may be too expensive in terms of the value they offer customers.) Another common objection to the cost of the problem calculation that I hear from salespeople is that their offer-ings are not meant to solve problems. They tell me that their solution creates new opportunities for their customer; therefore, there is no problem to fix a cost to. This is not a valid position. If something is happening in a business, it can be measured in financial terms. There are risks and costs present in every decision. Even when a solution offers a new capability, there is still a cost if the customer chooses not to adopt it. It is the cost incurred in the absence of the value your solutions provide. KeyThought IfYouDon’tHaveaCostoftheProblem, YouDon’tHaveaProblem. All businesses measure their performance in profit and loss; therefore, any problem they are experiencing, or opportunity they are missing, must be expressed in fi-nancial terms. Until you quantify that impact, you are dealing with a highly speculative issue. PeelingtheOnion 137 When salespeople seek to establish the total cost of a problem, they need to use a combination of three types of figures: 1. Direct numbers: Established or known figures 2. Indirect numbers: Inferred or estimated figures 3. Lost opportunities: Figures representing the options that customers cannot pursue because of the resources con-sumed by the problem When I talk about the total cost of the problem, I am not saying that you must establish a precise figure. Rather, the resulting number must be believed by the customer. This requires that the customer recognizes that the formula you provide is valid, and when used with the customer’s numbers, will provide a credible outcome, that the cus-tomer is part of the calculation process, and that the cus-tomer is willing to ‘‘own’’ the outcome. With these prerequisites in mind, calculating financial impact is a process similar to the navigational method known as triangulation. By sighting off of three points— direct numbers, indirect numbers, and lost opportunities— you can arrive at a financial impact that is believable to your customer (see Figure 5.2). This is accomplished in two steps. First, we need to provide a formula that is conceptually sound. Second, we must ensure that the numbers plugged into that formula are derived from the customer’s reality, not industry aver-ages, past experiences with other customers, or other more questionable sources. We know we have successfully com-pleted these steps when our customers are willing to defend the validity of the cost among their own colleagues. Let’s take a look at how a cost of the problem conver-sation should go. This is based on a cost of the problem 138 DIAGNOSE COMPLEX PROBLEMS FIGURE 5.2 Cost of the Problem conversation we designed for one of our client companies, a provider of shoplifting detection equipment to drug-stores, which was finding it difficult to sell to stores in affluent communities. The sales professional engages the manager of a drug-store with revenues of $1.5 million, who is experiencing the industry average inventory shrinkage of 3 percent. This tells the salesperson that the store is losing $45,000 annu-ally to some combination of customer theft, employee theft, and/or sloppy inventory management. The manager, however, does not believe that the store is experiencing any significant customer theft because the store is in a ‘‘better part of town,’’ and therefore, is not interested in the sales-person’s detection equipment. The salesperson agrees with the customer (creating an atmosphere of cooperation), and then asks an indicator question, ‘‘Do you ever notice empty packages on the floor?’’ The store owner replies, ‘‘You have a point there, but it’s not enough to be worried about.’’ ‘‘Probably not,’’ the salesperson replies, and then asks the next question to PeelingtheOnion 139 establish an indirect number. ‘‘Out of every 100 people in this community, how many do you think would shoplift?’’ The now-curious owner replies, ‘‘Oh, I suppose one per-cent, 1 out of 100.’’ The salesperson now asks for two direct numbers—the average sales per day ($4,100) and the amount of the aver-age sale ($16). This yields the number of buying customers (257). He then asks the manager for an indirect number— the number of browsers in the store who don’t buy. The manager says. ‘‘About the same number as those who buy.’’ That yields a figure of 514 people in the store each day. The salesperson then asks for another indirect number: ‘‘What do you think the average loss from a shoplifting incident would be?’’ The manager replies, ‘‘$15 to $20.’’ From this information, the salesperson calculates that there are approximately five (1 out of 100) shoplifters in the store each day and the average daily loss is $75 ($15 5). Further, the store is open 365 days each year, making the annual loss $27,000—a believable figure in light of the store’s $45,000 annual shrinkage. The detection equipment costs $12,000 to install and $2,000 per year for activated price tags. Subtracted from the cost of the store’s problem, this yields a posi-tive return of $13,000 the first year and $25,000 in sub-sequent years. Over three years, the lost opportunity is $20,000 per year. This example is a condensed version of an actual sales engagement drawn from our client files. The salesperson made his initial contact, taking a compelling value hypothe-sis to the CFO of a national retail chain. He set up a diag-nostic agreement with the CFO, his executive sponsor, to visit several of the chain’s locations, and held similar cost of the problem conversations with the store managers in each location. Then, he returned to the CFO, described his find-ings, and extrapolated them for the entire chain. He won a ... - tailieumienphi.vn