P1: Consultative Selling – Increasing Profits

P1: Consultative Selling – Increasing Profits

“We make computers, but we sell customers growth by applying them.” – Thomas Watson, Jr.

If you ask sales leaders how their teams engage customers, they often say: “We practice consultative selling,” “We sell solutions” or “We sell value.” However, when you hear and see them in action, many sellers are still leading customer conversations with products and features. The result: Their companies are forced to heavily discount deals to win business because they cannot differentiate themselves from the competition. When two products are similar and price is the primary difference, customers pressure sellers to discount price; thus, reducing margin.

Consultative selling helps to address these issues. Consultative selling is partnering with customers to improve their profits and competitive advantage. Improved profits mean increasing revenue and reducing costs. Improved competitive advantage means strengthening the customer’s overall position in the market. The primary measure of customer improvement is dollar values, including a positive return and fast payback (not features or benefits). The customer’s performance then becomes the competition, not other vendors.

In contrast, vendor selling occurs when sellers push products and features to customers without knowing the their business or the critical issues that they are working to solve. Customers interpret product sellers as “vendors,” not partners. Thus, the customer’s primary goal with vendors is to minimize price. In fact, customers see the price of products as a “cost” and costs are negative. As a result, customers compare competitive products feature-by-feature, often cancelling out the similarities and devaluing the differences when negotiating for discounts.

Instead of pushing products, consultative sellers partner with business managers who are concerned with making a positive contribution to profits (vendors target the purchasing department). These business managers can be from either profit centers or cost centers inside the organization. If profit centers (e.g., services), consultative sellers focus on increasing revenue. If cost centers (e.g., IT), consultative sellers focus on reducing costs. A consultative seller must compare the customer’s current performance with a future improvement. The future improvement is their value add.

To improve profits and competitive advantage (i.e., add value), consultative sellers must know the customer’s critical business issues (CBIs). CBIs are the 20% of challenges or opportunities that impact 80% of the organization’s immediate future. When the business manager’s CBIs have been identified and quantified, consultative sellers position a profit improvement proposal (PIP) for how to address issues and solve problems. PIPs also sets forth the customer’s expected return in dollar values. Price is always positioned as an “investment” to customers, not a cost.

Business managers evaluate PIPs with three questions: What is the value add (dollar value)? How soon will value be added (profits exceed investment)? How certain is the value add to occur (sooner the payback, greater the certainty; and success rate with similar companies/issues)? The value add must be greater than the customer’s current performance and the industry average. Delivering results higher than the industry average is the consultative seller’s competitive advantage. Higher results also better position the customer for market leadership within their industry.

P1: Consultative Selling – Increasing Profits

In Part 2, positioning ROI, payback and certainty to customers will be discussed. As set forth above, consultative sellers position the price of products as an investment. Investments return money to customers while costs take it from them. When positioning ROI, payback and certainty, consultative sellers increase the customer’s sense of urgency by making time their enemy. That is, what is the customer’s opportunity cost for not increasing revenue or reducing costs right now? What could the customer be earning and when? How much is a problem costing them in lost profits?

All contents copyright © 2012, Josh Lowry. All rights reserved.

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