Do you mind if I ask you something? How many years have you been in business?
OK thanks. Now in that time, how many serious recessions have you been through?
In that case here’s something to scare you a bit: Less than half of the business-to-business salespeople -just like you- who are selling today, have ever sold in a serious economic downturn.
Think about it. One of the down-sides of the longest ‘bull-market’ in history is that a whole selling generation has grown up without ever having experienced ‘seriously hard times’. They have no experience which enables them cope effectively. Even for many of those of us who do remember a previous recession, the memory is now so foggy that it’s a mild discomfort rather that a shiny box of chromium- plated coping tools.
It gets worse though. The majority of middle level sales managers – and very often senior management as well – are seriously lacking experience when it comes to the vital job of leading their sales force through these very hard times.
So, in that case, how DO you navigate successfully through the present, fragile, plateau-phase which is variously described as, “bottoming out”, “soft landing”, “economic heart-attack recovery” or whatever other term lets you avoid saying ‘Recession’ or even ‘Depression’ ?
As I travel the World training and advising business leaders, I see that most companies are implementing sales approaches that failed in the previous mild-recessions and are likely to have the same spectacular lack of success with this once-in-a-century slump.
The useless sales approaches can be put into four clearly defined groups:
1) Something will turn up
2) Knock on more doors
3) Cut the prices
4) Fiddle with the advertising
The first approach [Something will turn up] would be recognized by the 19th Century Author ‘Charles Dickens’ “Mr Micawber” who was eternally – and for no good reason- expecting ‘something to turn up’. There are already reports that banks around the World are recruiting highly bonused executives as if they are expecting the ‘good-old days’ to return any time now. Governments from USA to Europe and Asia are warning that any return to ‘normality’ is going to be very drawn out. Indeed the current plateau-phase may last for several years. Not only that, but the ‘new normal’ when we get there, is going to be very different from anything that any of us has experienced before. Old style sales pitching (often called Death by Powerpoint in which the seller’s main objective is to give his/her canned presentation, then sit back and wait for the contract to emerge by osmosis) just doesn’t work when your customers are being much more careful with their money.
The second most popular strategic sales approach in Hard Times is: ‘knock on more doors’. Work harder: more calls, more demos, more proposals. I recall this strategy being implemented by my first sales company for whom I sold copying machines in London in the early 1970’s. “Go down each street on your sales territory rubbing your elbow against the wall. Every time your elbow ‘goes in’ it will probably be a door. Enter that door- who knows what customers may be lurking behind it !” The trouble with this ‘numbers game’ strategy – “the more doors you knock on the more orders you get”- is that the vast majority of today’s sales mangers truly believe that this is the reality of the sales profession. They are wrong. The net result of ‘knock on all doors and cold-call all every name’, is that most of the time the seller is talking to people who are simply not and never will be clients. The only outcome is shorter and shorter sales meetings, constant rejection and a thoroughly disillusioned sales team. There are much more effective and efficient ways to find customers in the 21st Century. Even if it worked in the good times it most certainly is not working now!
Price cutting is the third most popular approach. Yet there is no evidence that cutting your prices increases your business. If you are truly stuck in the price sensitive /heavy discounting groove – which most of my customers seem to believe they are- you are probably going to go out of business soon.
For example if your selling price is $ 100 per unit and 80% of that price consists of fixed and variable costs then offering your customers a 10% discount on that price is effectively slashing you 20% profit margin by 50%. If your business can get by on half pay for another two years I may need lessons from you in creative accountancy. The truth is that your customers will endeavor to get price reductions because, as all successful sellers will tell you, ‘price is always an objection’. But your customers WILL pay your full price provided you sell correctly and remain in-tune with the sales realities of a recession.
Despite what I’ve heard recently at a couple of guru-led ‘rah-rah’ sales seminars in London it is highly unlikely that you will be able to, “Double Your Sales in 3 Months!” whatever they tell you. Academic analysis shows that, for most companies, the ‘buying cycle’, in hard times, takes up to 40% longer than normal because of things like budget freezes and more approval and purchase justification steps. And there is not a lot that your salespeople can do to shorten this. Any attempt by your company to pressure or speed up the decision, will upset your customers and make you seem over anxious simultaneously it will bring in in very little extra in terms of sales.
And finally there’s ‘Fiddle with the Advertising’. Advertising budgets, like training budgets, are the easy ones to cut. Many companies who were regular advertisers cut back on it violently during a recession. The problem with that is their potential customers then believe -not seeing them about any more- that they have gone out of business. Other companies believe the opposite; they think that ‘advertising’ could be the way to find more customers and generate more enquiries. So they suddenly start advertising. Well, as the founder of Bloomingdale’s store in New York said over 80 years ago: “Half of all the money I spend on advertising is wasted…the problem is I don’t know which half”. So if you think that increased advertising is the right way, do it very carefully. The strong likelihood is that you are about to lose much more money than you make. If you do generate a lot more enquiries most of them are likely to be from people and companies who are simply not prospects for your product or service; more disillusionment on the way.
OK now I’ve worried you sufficiently …so what’s the most effective ‘hard times’ approach?
The first step towards ‘Hard Times’ success is that you must focus your selling activities where it counts. During the hard times experienced in the late 80″s I was living in the USA. While I was there a local research team carried out some work which looked at the differentiators between successful and not so successful sellers working in tough competitive high-end business-to-business markets. They discovered that the not-so-successful sellers, focused on trying to open more accounts during a recession. They went after every suspect opportunity, however small. They created a lot of busy-work but they were largely ineffective. The average value of their sales dropped and their overall sales volume dropped as well. By contrast, the successful sellers concentrated their activities on their best opportunities. They spent much more time in developing their call and account strategy rather than rushing about making more and more calls.
During the research mentioned above, they also interviewed customers to find why they bought from a particular seller. From the customer point of view ‘seller confidence’ was frequently mentioned as the decisive factor. So the next question is, ‘Why should confidence be so important in a recession?’ As discussed earlier in this article there is much sales folklore that says that ‘in tough times your customers will buy on price alone’. There is no evidence to support this. The facts show that in hard times, customers buy safety and reduction in risk more than anything else. In fact the American research showed that customers actually paid an average of 12% more for equivalent equipment from market leaders and suppliers they trusted, than they did from cheaper suppliers. Why is this? There were two primary answers. Firstly, in difficult markets, decisions are generally taken by committees and lower risk solutions are generally favored when groups make decisions. And generally it was found that, the lower risk solution carried a higher price tag. Secondly, buyers were very aware that their decisions (and jobs!) would come under more scrutiny and they would be blamed -personally- if equipment didn’t come up to scratch.
So how can all this be summarized ? First You must concentrate on your best opportunities; don’t go chasing every ‘suspect’ just because he shows some little sign of life. Spend much more time and effort on planning and preparation. Be confident. Ask more questions about problems you know your product can solve. Questions about problems are a top seller’s friends! Sell the safety and reliability of your products and services and don’t get stuck in the mental groove that you have to compete on price alone.
If you don’t do this I WILL steal your customers away from you and they will pay me more.
Yes I will.