Selling At Multiple Levels for Maximum Impact
INTRODUCTION
Bowers begins the program with a review of the model from his initial presentation:
Any product or service fits along a line. In some of our markets, people may see you as somewhat unique. They perceive that what you are bringing them has added value, and they will pay you a premium for that added value.
Over time, all of your products/services will move from the right-hand side to the left-hand side of that line. Sooner or later, your product will move from being perceived as unique to being perceived as basically the same as other products in that market.
That movement probably has nothing to do with what you are doing. To your product. It’s the transference of one very important item that causes that movement: knowledge from you (the seller) to the customer (buyer). Once the market perceives they understand your product, they will reposition you from being seen as an engineered product to a commodity product.
The bad news is it’s an inevitable evolution. The good news is that there are other places you can go if you don’t want to be in a commodity market. Many companies find themselves on the left side of the line and decide to abandon that market because they can’t afford it. The reason they can’t afford to be in those markets is that they don’t adjust their sales or tactical approach.
As you move forward through time, it takes less time for your product to make the transition from engineered to commodity product. You have less time to occupy a proprietary role.
COMMODITY VS ENGINEERED MARKETS
A commodity market has certain characteristics. Price is the dominant factor. The buyer has total control over the price that gets paid. Any added costs in the process don’t drive more revenues, they just lower profits. When you bring a commodity product to market, you can’t take it anywhere else to get a better price. A commodity product is perceived as having only one fixed price.
A commodity market has a large number of competitors as well as a big demand for the product. Margins are low, and everybody that buys the product sees the large number of competitors as the same. You may think you’re different, and you may be doing things that you perceive the market should value as different, but if the market is unwilling to accept that, then you are perceived as the same.
An engineered product is perceived as having added value, and you get paid accordingly. Tom Peters and all the management gums say that if you aren’t positioning your product as value-added, then you are not doing a good job. That’s not necessarily true. It may not be possible to do so. In a specific market, once your product has reached the left-hand side of the spectrum, you can’t ever bring it back to the right.
An engineered market has high margins, a small number of competitors, and you’re seen as unique. The hard part is that demand is low. Most sales people would like to have all these conditions except for the low demand, they would like to have a combination of the two markets, but that never occurs.
You go from being seen as an engineered product to a commodity product when your client utters one word: budgeted. That happens as a result of a perceived transference of knowledge form your hands to the client. Once they think they know all they need to know about buying your product, they put you in the budget. If they don’t know that, you remain unbudgeted. Budget is that point in time where the client takes control of the sale and the salesperson loses it.
At any given point in time in the same market, you can have clients who see you differently. You can even have people within the same company see you differently. You can go to whole new markets who see you differently, even when you are carrying the same thing.
COMMODITY MARKET:
- The buyer is in control.
- Demand already exists (the buyer wants to buy from someone what you sell).
- The buyer thinks they know all there is to know to make the decision.
- The ultimate commodity status is when you deal with a purchasing agent.
The reality today, no matter what market you are in, is that you will mostly be selling to these commodity market characteristics. And you are often selling to someone who wears the mantle of “purchasing agent” even if they do not have the specific title.
A purchasing agent is someone who has been given the responsibility to buy something for which the decision to buy has already been made. They decide who to buy it from, not whether or not to buy it. The biggest mistake is to approach these people as if they are trying to buy. They have already made the decision to buy; they just don’t know from whom. Keeping that in mind will change your presentation.
Left-hand (commodity) side people come in many disguises. They can range from the owner of the company on down the line, but certain conditions must be in effect:
- They have already decided to buy.
- It is already in the budget.
- They have the knowledge and the need.
The only think they do now know is who to buy it from. They will always go with the cheapest price. This is a hard concept to grasp, and it does nothing but make companies less competitive. Because of the costs involved in the sales process.
Plant managers and project managers are common purchasing agents in disguise. In fact, selling into the project manager environment is probably the toughest of all because all the decisions have already been made. All the project manager cares abut is meeting specs and getting the lowest price.
ENGIT.~EERED MARKET CHARACTERISTICS:
- Client has a problem they do not know how to solve.
- They did not even know they had a problem but you can show them they have a problem.
You can recognize this when clients start saying things like, “I don’t know,”, “I don’t understand,” or “I have a problem.” the only person you can sell an engineered solution to is the manager who directly has that problem. The biggest waste of effort in selling is sales people who have knowledge, who understand the company has a problem, who know how to solve that problem, and then try to sell to the purchasing agent.
Purchasing agents don’t buy engineered solutions. Engineered solutions are only bought out of unbudgeted dollars. That’s the hardest thing to realize. Purchasing agents cannot buy new things. If you want to sell something new to a company, you must go out of purchasing.
At this point, Bowers gives a detailed example of a temporary services company that went from the right-hand side to the left-hand side. The point of his story is that it is inevitable that a client or customer will learn from you, and it is inevitable that they will take control and put you in a commodity position. But there are some things you can do to slow that process down.
Four CATEGORIES OF clients: No matter what type company you run, your clients or customers fall into one of four categories:
- Existing products in an existing market. Odds are very good this is a commodity market.
- Existing products in new markets.
- New products in old markets.
- New products in new markets.
If you have identified the 20-40 biggest users of your product in your market, you have identified 20-40 commodity buyers. In order for a customer to be a non-commodity buyer, they have to be a current non-user. You have to sell them on the idea of using your product or service.
The quickest way to turn your product into a commodity product is to sell it to a purchasing agent. The purchasing agent can’t buy something new because it’s not in the budget. You have to go to someone who can get it budgeted.
Don’t try to sneak around a purchasing agent. If you are going to take a new product to an existing market, be up-from with them. Tell them what you are doing, and hopefully they will look you in the eye and tell you that isn’t part of their buying plan. Then its clear to both of you that you need to go to someone else.
Here is an example of a company that took an existing product to a new market. This company was the first in Aslant to introduce nice landscaping to apartments. For a while, they were able to get a premium for their apartments. Soon, everybody was landscaping and it became a commodity market. Their margins went down because the price of landscaping became the price just to get to the table.
Since they had learned how to do landscaping well, they decided to take that skill into a new market. They approached newer office developments and sold them on the idea of landscaping. For a while, that was an engineered market. Soon, every office park in town was landscaped. Their next approach was to go to gas stations, convenience stores, and smaller business units.
The strategy for this company was to continually find new markets for their existing products and services.
APPLYING THIS MODEL TO SELLING STRATEGY
At this point, Bowers passes out a handout for members to use when planning strategies in their own businesses.
Your largest account probably came in the door fairly early in your business cycle. Over time, that account has gone from an engineered to a commodity basis. Once you reach the commodity stage, you will survive in that account based on your service, quality, added value, or price. If you aren’t reacting to that, you will eventually make this famous statement, “I don’t know how they (your competitor) got the bid for that price. We couldn’t even afford to deliver for that rate.”
You find out later your competitor made a fortune with that account because of lower cost of selling, lower cost of service, and lower cost of value. This is a difficult thing to look at because all the management experts, like Tom Peters, keep saying you have to add more value. But when you keep adding value, you keep adding to your costs, and your margins go down. Soon you add so much value that you become uncompetitive and someone takes the account away.
Take the opposite approach. On the right-hand side, sell people on buying solutions. On the left-hand side, people are buying. You think you are selling, but you are not; the people are buying, the two sides require two different sets of skills. On the right-hand side, you need selling skills. On the left-hand side, you need negotiating skills. This becomes a tactical model to sell all accounts – existing, prospective, transitionary, and past.
You deal with four important variables in all accounts:
- Some brand identity
- Different levels of people
- Different buying motives
- Different relationships
Most sales people would give nearly identical sales pitches to every person in the same organization. They would use the same brochure and same materials. You can’t do that. To be successful, you must have three very distinct sales presentations, ideas, materials and concepts.
The three levels of people to concentrate on are:
- Buyers
- Users
- CEO/Owner mentality
These three people see you as a vendor, very differently and will treat you very differently. If you want to position your product or service as an engineered, high-margin, high-value, problem/solution oriented product, you have to start your selling process with that group of people who have one very important thing: problems.
If they have problems and you have solutions, they don’t know about you… In the 80’s, we quit making those kinds of sales calls. Everybody focused on chasing existing demand. But if you are going to be chasing these new accounts, you have to deal with the fact that these people don’t know who you are and why they should be talking to you. They don’t know why you are calling on them. That’s a starting point.
Users are people who will directly use your product. If they have already made the decision to use your product, and it is already part of their natural scheme, you are already to the buyer. If your product has already made the transition from the user to the buyer, you will have to sell the buyer.
Users are people who use your product in such a way that it solves a problem for them. CEOs and owners don’t use your product. They evaluate it. They decide if their buying decision was worthwhile, and base their decision on whether it does or does not make them money. They don’t see it any other way. Buyers don’t use and don’t evaluate, they just buy. This is a very difficult concept for salespeople to grasp.
In order to deal with these three levels, you need three different and distinct sales pitches. If you make the wrong pitch to the wrong person, you will always end up back at the buyer.
You have to understand that these groups have three very different motivations. Users want answers to three problems: too much work, to few people, and not enough time. When you call on a user, you had better address one, two or all three of those problems.
All users are measured on production, how many units they get out the door. The biggest mistake you can make is to assume they want to exceed production. They want to make or just come under production goals. If you tell them you have a way to exceed their production, you will turn them off. They already think they are being forced to do too much.
Another common mistake is to tell users you can find a way to get rid of people. Their biggest fear is that their boss is going to raise their quota and ask them to do it with less people. That’s the way they live, but we don’t talk to them that way. We go in the door and tell them everything they don’t want to hear. All users worry about is what they have to get out the door that day.
The user has a budget mentality. They are concerned at spending right up to the limit. If they don’t spend all their money, their budget gets cut. If they spend too far over, they get cut. They have too much work, too little time, .and too few people. If you don’t talk to them about those three problems they will turn you off.
Most of them don’t see a lot of salespeople. They are easy to sell to if you address their problems. But users can’t make the decision to spend unbudgeted dollars. They don’t have the power to sign the order unless it gets budgeted. And once it gets budgeted, the next person to sign the order will be the buyer.
To get a user to buy ahead of budget schedule, you have to move up in the organization. The biggest mistake is to go down, which is what most sales people do. Your user will not go upstairs to make the sale for you, so you have to do it yourself. But when you get upstairs the owner doesn’t want to hear that it’s going to make life easier for the user. You have to translate it into dollars. Show how your solution will increase dollars and/or profits. The CEO will then buy out of unbudgeted dollars.
For a period of time, you are now in an engineered market. As long as you can keep it up at the top, you can keep it as an engineered product. They will pay you based on the return on investment. But sooner or later you will get down to the buyer who will rate you on cost compared to other vendors even though you are still bringing in the return on investment.
When you are at the top level, you have the capability to be seen as very superior to competitors. You can actually form a business partnership with your client. The buzz word of the 90’s is called “partnering,” but it’s a very misunderstood and misused word.
“Business service” is another misunderstood term. We keep thinking people will pay added value for good service. That’s incorrect. People expect all their vendors to give good service. The biggest trap to fall into is the belief that your competition doesn’t deliver good service. If they didn’t, they wouldn’t be in business.
Doing all the little things we think of as business service is actually business servicing. That’s a requirement of the sale. Business service is providing a solution to a problem.
If you are in a commodity market, your odds of selling at the user or CEO level are nil. This goes against what many sales “experts” say. They will tell you there is some magic that will take you back up to those levels. That’s not true. If you want to sell at that level, you have to be unbudgeted, unknown, and not in demand.
Buyers are looking for one thing only – to meet specs at the lowest price. They get rewarded for spending fewer dollars than have been budgeted. Yet, we keep thinking that the buyer has some other motive. Instead, evaluate your sales pitch to make sure what you are seeking meets the job description of the buyer.
Normally, we try to convince buyers that our quality is better, our service is better, etc. but, “better” is not in their job description, they are not told to find better products; they are told to find minimum expectations. Every time you show a buyer something better, they will call the other bidders and ask if they can add the same thing. Everything they do is designed to force you back to the lowest price. All that does is drive up your cost of sale.
There are two good questions to ask the purchasing agent:
- What is the maximum amount of dollars you can spend on this product?
- How much would you like to come in under that amount?
Buyers are only interested in finding those vendors that are equal to each other at minimum spec. They can do that only through a technical ~valuation of your product. The buyer is the only person who cares about your product on a technical basis.
The only way to differentiate yourself at this level is to reach the technical minimum the buyer needs and show how you can reduce their pain of buying. Pain reduction in the buying process is the primary motivation of the buyer.
There are three different pitches you need for each level:
- Buyer: We are equal, we meet spec, and we reduce your pain.
- User: You can see us as different because we have answers to your business service needs.
- CEO/Owner: You can see us as superior because we can increase your ROl and be your business partner.
To develop the right pitches, you have to evaluate where you are on the continuum and level of potential for that client.
At this point, Bowers breaks the group into smaller groups to do an exercise. They select a client for each type of market and see how their sales pitch applies to that client. Then they decide what people they know in the client’s organization and what level they are on, whether they are chasing existing or new business, and what strategy they currently have to chase that business. The small groups then report to the group as a whole, which then discusses the strategy for pros and cons.
It’s possible for users and CEO/owners to operate on a different level. On some occasions, both can act as a buyer, in which case you need to use the pitch for that level. The buyer will never operate out of any other level.
Don’t make the mistake of thinking you can keep margins high in a competitive situation. They will always shrink. But very often, margins don’t include the cost of selling. Look at what costs are involved in maintaining an account that is not being included in the margins. Sometimes, unbundling your services is a good strategy to keep profits up in a competitive situation. If you can cut costs in other areas, you may be able to live with lower margins.
Starting at the very top with the CEO is one of the biggest myths of selling. You can’t go straight to the top person and say, “I’m not sure what product you have, I’m not sure what’s going on in the company, and I’m not sure what you’re thinking about. But if we ever figure it out, I’m here for you.” You will not get a good reaction from most CEOs. It’s better to start lower in the organization, get a handle around a very meaty situation, come up with a solution and good scenario of what it would cost the company if they don’t make the changes, and then take that to the top.
SUMMARY
The most important actions to take are:
- Take a hard look at your market and see if your conditions are left-hand side or right-hand side. Look at your client base to determine where they fall on the line.
- Look at your current prospects and current list of accounts you are pursuing. If every single account you are going after is current product to current users, then chances are almost 100% you are in a commodity market. Take a realistic look at the market, but consider that a real danger sign. Start to strategically determine where you can go to get into new markets.
- Look for new products and services to take to new or old markets. If you decide to pursue those markets, make sure you have the sales materials and pitches to properly approach them.
- Look at your materials, presentations and sales strategies. Do they allow you to sell at all three levels – buyer, user, CEO/owner?
- Look closely at the skills and capabilities of your sales and marketing people. Can they sell to both sides? Are they capable of selling at all levels? Do you empower them to sell on the left side? Do they have the negotiation and technical skills to sell on the left side?
TEC – Selling At Multiple Levels for Maximum Impact – R. Sam Bowers Jr.