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©2009 Neil Rackham Some Difficult Issues in Selling Today Milano June 22nd, 2011 ©2011 Neil Rackham Neil Rackham.

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Presentation on theme: "©2009 Neil Rackham Some Difficult Issues in Selling Today Milano June 22nd, 2011 ©2011 Neil Rackham Neil Rackham."— Presentation transcript:

1 ©2009 Neil Rackham Some Difficult Issues in Selling Today Milano June 22nd, 2011 ©2011 Neil Rackham Neil Rackham

2 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

3 What’s Happening in the USA ©2009 Neil Rackham Unique Products/Services Substitutable Products/Services 3 years ago 10987654321 987654321 Today 10987654321 In 3 years 6.4 4.5 3.7 SSI Data: 47 corporations 773 sales executives

4 ©2011 Neil Rackham Horrid rumors The average company has more than twice as many competitors as it had five years ago. Customers today can access more than 20 times as much data on competition than they could five years ago.

5 Station Break ©2011 Neil Rackham What does decreasing differentiation mean for the way we sell?

6 ©2009 Neil Rackham The Better Mousetrap Business Model Create a mousetrap that is unique or highly differentiated The value lies in the mousetrap The role of sales is to communicate the value of our mousetrap So sales is value communication

7 Sales becomes value creation, not value communication So the role of sales is to add value to our mousetrap There’s not enough value in the mousetrap to differentiate us from competition Our mousetrap is one of many ways to kill mice ©2009 Neil Rackham The Alternative Business Model

8 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

9 Two Customer Value Types ©2010 Neil Rackham Value = Benefits – Cost Consultative customersTransactional customers Know what they want Treat you as a commodity Buy on price and convenience Have a problem Value your time Buy on expertise and trust

10 ©2010 Neil Rackham Three to Five Years Ago TRANSACTIONALCONSULTATIVE Advice focus Expertise decision Want meetings 10% were transactional $ 10% were consultative Most customers would pay a little extra for some advice Cost focus Convenience decision Don’t want to meet

11 ©2010 Neil Rackham Customers Today TRANSACTIONALCONSULTATIVE Advice focus Expertise decision Want meetings More clients buy transactionally $ $ $ The middle is going away. Cost focus Convenience Decision Don’t want to meet More want deeper consultative relationships

12 ©2009 Neil Rackham The Transactional Problem A face-to-face transactional sales force costs too much in a market that, by definition, buys on cost. Transactional customers don’t want and don’t need face-to-face salespeople. The talking brochure is cumbersome, costly and inconvenient. More than one third of the average sales force are talking brochures.

13 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

14 Station Break ©2010 Neil Rackham Most sales forces have hybrid salespeople who pursue both transactional and consultative business. Does it work?

15 Mixing Transactional and Consultative: ©2010 Neil Rackham A Great Truth No sales force can be effective if the same salespeople are chasing a mixture of Transactional and Consultative opportunities.

16 Why Transactional and Consultative Don’t Mix: ©2010 Neil Rackham Any salesperson who is talented enough to make Consultative sales is too expensive to use for Transactional opportunities where customers don’t want, don’t need and won’t pay for high-level sales talent. Economic Reason

17 Why Transactional and Consultative Don’t Mix: Psychological Reasons ©2010 Neil Rackham 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.

18 A Case to Show it Works ©2010 Neil Rackham Oracle’s sales force sold database products [transactional] and applications [consultative]. Predictably, sales of database products were good; sales of applications were failing. Despite initial sales force opposition, Oracle took database sales away from the sales force and sold them through Oracle store, telesales and internet. Sales of applications rose dramatically, database sales remained at the same level with lower cost of sales.

19 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

20 Station Break ©2010 Neil Rackham Why are selling cycles getting longer?

21 ©2009 Neil Rackham Why Cycles are Getting Longer More complex product / service offerings. More customers involved in the decision. The need to invest earlier in the cycle [the end of RFP selling] Customers expect much more from the sales process. Customized solutions.

22 The Customer Decision Process ©2010 Neil Rackham Recognition Of Needs Recognition Of Needs Evaluation Of Options Resolution Of Concerns Negotiation Of Terms DECISION RFP Earlier entry is essential for success By the time the RFP is issued: your value creation opportunity is limited 80% of the decision has already been made

23 ©2009 Neil Rackham Another Changing Business Model Understanding & scoping the problem PRE-CONTRACT Delivering the solution POST-CONTRACT The OLD Model... Developing the solution

24 ©2010 Neil Rackham Another Changing Business Model Understanding & scoping the problem PRE-CONTRACT Delivering the solution POST-CONTRACT Developing the solution... the NEW Model

25 Station Break ©2010 Neil Rackham With selling cycles starting earlier, extending longer and involving more people, how much does it cost to pursue a typical complex sales opportunity today?

26 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

27 ©2009 Neil Rackham Sales Costs: some facts It costs IBM Global Services an average of $480,000 to pursue each opportunity. The “Big 4” accountants spend upwards of a million to try to get an audit. Very few companies know what it costs them to chase an opportunity.

28 Station Break ©2010 Neil Rackham So what can organizations do to control these skyrocketing costs?

29 Five practical suggestions Over-resource the best opportunities Take opportunity selection out of the hands of salespeople Involve marketing and marketing tools in opportunity selection Push transactional opportunities to cheaper channels Upgrade the consultative selling effort

30 ©2009 Neil Rackham More nasty thoughts What if we don’t create the kind of value the customer wants? Or worse, what if we create expensive value and – once we’ve solved the problem – the customer goes to a cheaper competitor?

31 What is Value? ©2009 Neil Rackham Value is something the customer is prepared to pay for Value = Benefits – Cost

32 Customer Value Survey We asked 1,100 buyers from US Companies: ©2009 Neil Rackham “ H as 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?”

33 Where Clients See Value ©2009 Neil Rackham 98765432101 Change of strategic direction Problem solving & customized solutions Client advocate Time-stamped info on industry/competition Talking brochure: negative value added

34 Station Break ©2009 Neil Rackham This was a general study of business-to-business buyers. Do professional services clients see advisors’ value in the same way?

35 ©2009 Neil Rackham How do Advisors Create Value?* Objective/challenging point of view 4.8 Useful frameworks to see problems clearly 4.6 Play trusted advisor/counselor role 4.5 Bring new ideas 4.3 Solve problems we’re not equipped to deal with 4.1 Help spot trends 4.0 Bring approaches from other industries/companies 3.9 Prevent re-inventing the wheel 3.9 Dedicated resources without ‘run the business’ pressure 3.5 * Adapted from John DeVincentis BAH study

36 Station Break ©2009 Neil Rackham How much of the value we create happens before the contract is signed?

37 ©2009 Neil Rackham Before? During? After?... All 3? Objective/challenging point of view Useful frameworks to see problems clearly Play trusted advisor/counselor role Bring new ideas Solve problems we’re not equipped to deal with Help spot trends Bring approaches from other industries/companies Prevent re-inventing the wheel Dedicated resources without ‘run the business’ pressure

38 ©2009 Neil Rackham Where We Create Client Value BEFORE DURING A significant amount of the value we create occurs before the contract is signed It’s unpaid and clients increasingly expect it It’s costly [IBM Global Services spends $480,000 on each opportunity] It’s risky when low cost competitors can undercut us on solutions and approaches we’ve created during the sales process AFTER

39 Station Break ©2009 Neil Rackham How do we avoid the value trap of aiding competitors by creating expensive value for clients who then don’t contract with us?

40 ©2009 Neil Rackham Three Ways to Avoid the Value Trap Better opportunity selection Up-front and frank value discussion Trust-based relationships

41 Station Break ©2009 Neil Rackham How effective are most companies at selecting which sales opportunities to invest in? How could they do better?

42 ©2011 Neil Rackham Seven Nasty Issues The end of the better mousetrap model The death of f-t-f transactional selling The unsustainable hybrid sales force The ever-extending sales cycle The decline of RFP selling Skyrocketing costs of chasing an opportunity The need for new selling models

43 ©2011 Neil Rackham Three Sales Model Milestones Circa 1890 The Producer / Collector split July 1925 E K Strong’s Psychology of Selling 1975 - 1985 Consultative Selling Models

44 ©2011 Neil Rackham What’s New in 35 Years? So what kind of research do we need to reach the next milestone?

45 Five Profiles for Sales Performance* ©2011 Neil Rackham *Source: Integrated Sales Executive Council 2009 Challenger Lone Wolf Problem Solver Relationship Builder Hard Worker

46 ©2009 Neil Rackham Comparing High Performers with Core Performers* Different view of world Business understanding Love debate Push clients “Challenger” *Source: Integrated Sales Executive Council 2009 Core performersHigh performers 23% 39% “Relationship Builders” Build strong client advocates Help others Give time freely Get along with all 26% 7%

47 4% 54% Relationship BuildersChallengers HIGH Complexity ©2009 Neil Rackham Performance and Complexity of Sale* Percentage of High Performers *Source: Integrated Sales Executive Council 2009 11% 20% Relationship BuildersChallengers Low Complexity

48 ©2011 Neil Rackham Most Important Challenger Skills* Offers unique perspective Two-way communication skills Prepared to push/pressure client Knows client value drivers Can identify economic driversComfortable discussing fees *Source: Integrated Sales Executive Council 2009

49 ©2011 Neil Rackham Why Challenge Matters Without challenge, we slide lower down the customer organization and become less important to the client agenda. Without challenge, the customer’s perception of us narrows, so our capabilities are seen as increasingly limited. Without challenge, we are consulted later in the client’s decision process, when ideas have already been defined by competitors.

50 ©2009 Neil Rackham The “Big Four” of Challenge Challenge starts with ideas that are: BIG – more comprehensive and further reaching than ordinary ideas. RISKY – both ourselves and our client are taking a bigger risk. INNOVATIVE – pushing the envelope with new, often untested and unique approaches. DIFFICULT – hard to implement because of scale, uncertainty or politics.

51 The “BIG 4”: 1 SIZE ©2011 Neil Rackham 12345678910 S mall B ig Bite-sized Large-scale Contained Short-term Organization wide Extended timeframes

52 The “BIG 4”: 2 RISK ©2011 Neil Rackham 12345678910 A chievable O utperforming Familiar Unknown Modest Low-risk Ambitious High-risk

53 The “BIG 4”: 3 INNOVATIVENESS ©2011 Neil Rackham 12345678910 F ollowing L eading-edge Responsive Proactive Tested methods “Me-too” New/untested methods Unique

54 ED Difficulty asyifficult The “BIG 4”: 4 DIFFICULTY ©2011 Neil Rackham 12345678910 “In your sleep”Significant stretch Assured outcomeUncertain outcome Confident team/clientApprehensive team/client

55 S E F A B L D O O D L B S E F A Difficultyasy ifficult ollowingInnovativeness eading- edge Riskchievable ut performing Scalemall ig SAFE or BOLD? ©2011 Neil Rackham 12345678910 123456789 123456789 123456789


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