Successful Sales Management

What Sales Managers Can Learn From Lance Armstrong

2013-01-28T03:21:00.001-08:00

Lance Armstrong at the 2005 Tour de France. (Photo credit: Wikipedia)

More precisely, what can sales managers learn from what happened to Lance Armstrong?

Is it don’t be a winner? Perhaps, don’t be a cheat? Maybe, don’t lie? Certainly, don’t get caught. And when you do get caught, carry the can, walk away. Fighting for your corner will just get other people hurt.

You are just another cog in the money men’s machine. Disposable cannon fodder. A tool to be used, abused and discarded. You’ll get well paid of course. For a while you’ll be a hero, but ultimately, you’ll get the blame.

What does this have to do with managing sales? Ultimately it’s all about money.

Sales manager’s jobs are all about money - bringing in deals for a cost less than the budget.

When times get tough, the sales manager is always expected to magic rabbits out of hats. If that means cutting a few corners, so be it. Break a few rules. Rules don’t count, but results matter.

That’s how the money men think.

It’s what caused the entire melt down of the world’s financial system, and ultimately the global economy. Since 2000, we’ve seen a stream of industries and institutions exposed for malpractice. Staring with Enron, and more recently, in the UK, with a distasteful alliance between politicians and the press and the police. We’ve seen drugs companies caught bribing doctors to prescribe ineffective drugs to children. We’ve seen miselling in mortgages, and insurance. We’ve seen price fixing in energy and interest rates. We’ve seen speculators manipulating commodities, including food prices.

All lying and cheating, driven by the money mens’ insatiable desire for more cash, so they can use it to manipulate even more markets.

Where the rubber hits the road, that’s where sales managers work. They’re the ones who turn the money mens ambitions into results.

Returning to Lance, he’s being pilloried for winning by cheating - taking drugs - in sport.

The press are having a field day. The public are in uproar. Lance Armstong is being painted as the devil incarnate. He cheated. He took performance enhancing drugs. He lied. He’s no longer the hero everybody thought he was.

According to the Oprah interview, he’s claimed to have only been interested in leveling the playing field. By implication, other riders with chances of winning were doing it. For him to win he had to do the same. His only crime was in doing what others were doing, so he could compete, and in winning.

Cyclists taking performance enhancing drugs shouldn’t be news to anybody. That was the way the sport worked. There’s even a slight hint of authorities condoning it by omission, with a lax testing regime. Not everybody was doing it for sure. And equally for sure, not only Lance was doing it.

Thinking about it, why did it take so long for what was pubic knowledge to turn into public outrage.

Maybe too many people were making money out of it?

Maybe, just like subprime mortgage selling, everybody was doing rather well out of it until the music stopped?

There’s outrage coming from cyclists themselves right now. A stream of competitors who didn’t win, in part because they were clean, now complain they were cheated from achievement. Their case is obviously valid. They knew about it, but wouldn’t or couldn’t, do the same.

But that didn’t stop them benefitting from the huge amounts of sponsorship drawn to the sport by Armstong’s achievements. Let he who didn’t win, or make money because of the public interest, cast the first stone.

Everybody in professional cycling, all of the companies selling cycling gear, and all of the money men fixing sponsorship deals, made money out of the fairy tale.

A cancer survivor defeats the disease, and goes on to win the world’s most grueling physical and mental challenge 7 times.

Maybe it happened, and maybe it didn’t, but what do you think the money men would have said if Armstrong had told them winning was impossible without cheating?

Would they have insisted he raced clean, to protect the reputation of the sponsors?

Or would they have insisted he do what others were doing?

Armstrong was of little value to anybody if finishing in the pack. He only made them money when finishing up front.

The money men would have said do whatever it takes, but don’t get caught. Win without getting caught and you’ll earn millions (and so will we). Get caught and you’re on your own. Your sponsors can’t be associated with cheating.

Which brings us back to sales managers.

Next time you’re faced with a dilemma. When you can’t meet the revenue recognition rules, or quite meet the customer’s expectations. When your integrity says don’t do it, but your sales target tells you there’s no choice. It’s bend the rules, or miss the number.

Go to your CEO and explain. You can’t do it, without cheating. Ask what should you do.

My guess is you’ll get told the same as the guys in the sub prime mortgage business, the sales managers in pharmaceuticals, and Lance Armstrong himself.

Do whatever it takes, but don’t get caught. If you do, you’re on your own.

A New Role For Sales Managers

2013-01-17T09:41:00.000-08:00

There's a new role waiting for sales managers, provided they're ready to lead their businesses in driving innovation.

Markets, in just about every industry, are more chaotic now than they've ever been. In business, very little of what we used to know remains true today, and it'll be worse tomorrow. In the flatter faster world of the 21st Century, innovation just keeps coming.

It seems everybody out there is intent on changing the rules, so they can spoil somebody else's party. New thinking, in terms of business model, product, marketing and distribution and sales models, has become the point of competition.

Nobody's job is safe. Everybody's under threat of outsourcing, disintermediation, technology, or just plain irrelevance. It's no longer enough to work hard at doing what the boss says. Anybody not contributing to the innovation is risking redundancy.

Meanwhile, a great deal of what happens in sales organisations stays the same. Little has changed in 200 years. It's the same old mix of reps, territories, targets, punters, pitches, proposals and closes.

It's still about persuading people to buy what the business wants to sell. It hasn't yet changed to the new world, where its selling what people want to buy that works.

This will quite definitely not last. For sales guys, just like everybody else, it will be a question of change, or get changed. And that applies to sales managers as much as it does to reps, if not more so.

There is no future for selling the old fashioned way, or managing sales that way either.

But there is a more important role waiting for sales managers, if they choose to reengineer their thinking, embracing and leveraging innovation, as opposed to denying its relevance.

When market dynamics change, the impact is first felt at the customer interface. Prospects are the first to be told by competitors when there's something new coming. That information gets picked up the sales team. If the sales manager takes responsibility for collecting it, extrapolating impacts, and testing competitive responses, he or she transforms from luddite to leader.

The single most important process in any business is the one generating revenue and cash.

When the manager in charge of that critical function also becomes the scout for changing market dynamics, the architect of competitive response strategies, and the leader in the very innovation driving the chaos, s/he adds a value the business can't get anywhere else. S/he evolves from follower to leader, from technician to architect - critical to business success.

That sounds a whole lot more attractive than the engine driver finding ways to turn the handle faster, which is what most sales managers are doing now.

Why doesn’t the traditional approach to selling and sales management work so well any more? What can the modern sales professional do to stay relevant in today’s customer driven markets? Check out our eBook Reengineering Sales Management for ideas on how to embrace the new order of customer driven buyer/seller relationships.

Why Are Sales Forecasts So Difficult To Get Right

2012-12-21T11:23:00.000-08:00

Sales managers face lots of different challenges in their work. One, if not the, most difficult is the tricky business of sales forecasting. That's why articles addressing the subject are amongst the most popular in our blogs. And why it features prominently in our eBook Reengineering Sales Management.

The reason sales forecasts are so nerve wracking to make, and so difficult to get right, is the traditional sales model, which most organisations use in one way or another, assumes a confrontation between buyer and seller.
The seller wants the customer to buy what she's offering, whilst the buyer wants the seller to offer what she's buying. Sometimes this works well for both parties, but mostly the buyer ends up disappointed, receiving something different to what she expected. The obvious problems for finance and customer service to sort out naturally follow, which is an entirely different topic.

Once bitten, twice shy, customers are less likely to get fooled again, and that makes it difficult to predict whether they'll buy, or not, and that makes any deal impossible to forecast. They've been fooled already, by somebody else.

In the Information Age, businesses basing their sales strategy on the naivety of prospects had better have a lot of them, because they're only going to close a very small percentage.

On the other hand, anybody understanding how their value add is unique, targets their proposition at prospects willing to pay for that uniqueness, and collaborates with them in a process which assures mutual satisfaction, will win a high proportion. Sales forecasts are easier to make, and get right.

When customers are more careful with their money, when competition is everywhere, when a business needs certainty in its planning, and when sales people want to win more times than they lose, the traditional sales model must be reengineered.

Instead of product and service people deciding what they want to build, instead of marketing creating aspiration which can't be fulfilled, instead of CEOs wanting to forecast what analysts will approve of; sales managers need to figure out which unique value customers are buying, and persuade their colleagues to offer that. Following which they need to deliver, with a combination of skills and processes which brings in the sales.

And if this is all too difficult, the customers won't care. They'll just buy what they want from somebody else.

Weighted %age Probability Sales Forecasting Explained

2012-12-20T11:20:00.001-08:00

Weighted probability, or percentage probability, is a technique sales managers use to manage the uncertainty inherent in sales forecasting. It's a complicated concept. Most people have trouble understanding why it works, which means they can't figure out how it works.

After all, winning a deal is a bit like getting pregnant. Either it happens, or it doesn't. There is no half right. That's why experienced sales professionals hate making sales forecasts. There are always 12 ways of getting it wrong, and only 1 way of getting it right. No sales pro worth the title wants to lose a deal which is in the boss's forecast.

Sales managers don't have a choice. The forecast is part of the job. Probably, the most challenging part of the job. Weighted probability helps them write more accurate forecasts, not for individual deals - that's more about qualification and sales process - but for the pipeline, as a whole.

So how does it work?

The concept recognises not every proposal will end in a sale, and assigns a probability %age to each estimated value. It calculates the %age by weighting particular characteristics of the deal. When the estimated value of each deal is adjusted by the weighted probability, the total value of the pipeline is a better estimate of what the out-turn will be than any other method.

A simple example helps set the scene.

The sales manager might calculate his team, as a whole, wins 3 of every 10 proposals. If there are 30 proposals for next quarter he can forecast to win 9 of them. If the average sale value in the pipeline is $5,000, he might forecast for the quarter 9 deals at an average of $5,000. That's $45,000.

In this example, every deal is assigned a weighted probability of 30% at $5,000, that is $1,500.

Working with averages can be surprisingly accurate, if the pipeline is large enough, but there is one obvious problem - the outliers. Some very large deals, or some very small deals, or both, can really throw out the averages. In our example, a single deal worth $100,000 will really throw out both the average deal size, and the forecast as a result.

Calculating a weighted probability for each individual deal, in part, solves that problem.

Instead of adding up the entire pipeline and calculating averages, the sales manager applies a probability, based on confidence, to each sale value. If she thinks that $100,000 deal is 25% likely to come in, she'll add $25,000 to the forecast. Another deal might be $50,000 at 50%. That goes into the forecast at $25,000, as well.

Just like the average method, the confidence technique can be surprisingly accurate, even when there are large outliers in the pipeline. Not perfect, but better than anything else, for some businesses. When there are enough deals in the pipeline, and the combination of sales manager and sales rep are experienced in their market, weighted probability based on confidence is a more accurate technique for estimating the total sales for the period.

Experienced professionals working in a familiar market with a typical deal can be quite good at estimating probability. But confidence can only be a subjective assessment, and still granular. The confidence will usually turn out to be 75% ( which means feeling good) or 25% (which means not comfortable). And for inexperienced sales people the confidence factor is close to useless. They have nothing to measure against, are probably keen to please the manager with a high number, and may even be bluffing, covering up their failings. We've explained this in detail in the Good, Bad, and Simply Ugly.

It does sounds dreadfully technical and complicated. The theory will impress the bean counters. But is it more accurate than simple guesswork.

Yes, but maybe not by a lot. There are still too many variables, and the assessment is subjective and can't be calculated.

And that's where Sales Probability Process Management enters the picture. We'll explain how this theory turns a black art into a science in a later article, but it's one of the fundamental principles of Reengineering Sales Management.

Sales Forecasts 12 Dimensions To Get Right

2012-12-19T10:44:00.000-08:00

Sales Probability Process Management

Forecasting sales is tough. Actually forecasting anything is tough, but sales is particularly difficult, because of the number of variables. Most sales are multidimensional and in each dimension there's a degree of uncertainty. And then there's the overall risk of something going wrong - the ubiquitous Sods Law 'if something can go wrong it will'.

How many dimensions are there to each sale? In this list there are 12, but surely a lot more could be added if anybody wants to make it even more complicated.

The Customer

The customer's ability and motivation to take some action. Without the customer writing a cheque, signing an order, or handing over the credit card, there's no sale. The ability to take that action is likely to be fixed within tight parameters, but the motivation to take that action is a different matter. It's a combination of aspiration and risk.

It's easy to see the likelihood of the customer taking action is itself a combination of authority, capacity, aspiration and risk aversion. A buyer might have the authority to buy up to a certain value, provided she can justify it with a business case. But be reluctant to make a choice without considering the boss's preference. She might be excited by the particular value in an offer and the plaudits to come from a brave choice. But at the same time, nobody ever got fired for buying IBM, or that's what they used to say. The risk of a brave bad choice are just too horrible for most buyers to contemplate.

The Sale

The sale itself isn't as simple as some might think. The deal is made up of a product or service, or even a combination. Precisely which SKU and which service could be another two dimensions. There's the price to be paid, more often a feature of the buyers capacity to buy than the sales guys ambition to sell. And then there's the time frame. Precisely when will the customer sign the contract, and when will delivery take place. Every sale is a product at a price at a time.

The Sales Rep

Another category of dimensions is the sales exec. In most sales teams there's a range of skills, from exceptional to not very good, and another range of tenacity from won't let go to not very bothered. The relationship between sales rep and buyer is another infinitely variable factor, which can easily change over time. Lastly there's the sales reps instinct. Ultimately the only judge of how likely a sale is will be the sales rep. How confident is she, and how reliable a judge is she?

The Rest

Finally, so as not to labour the point, there's those external factors. The influences nobody can do anything about. The buyer might get promoted, or fired. The business might get taken over, or go bust. The world economy might implode. Who knows what disasters are waiting around the corner.

That's 4 customer dimensions, 3 product dimensions, 4 sales rep dimensions, and the overarching external events - all to get right for an accurate forecast.

Even keeping the concept relatively simple, we can see there are possibly 12 different dimensions. Get 11 right and 1 wrong and the forecast is still wrong.

No wonder sales forecasting is so difficult.

That's why sales managers use weighted probability forecasting. When each deal in a pipeline is assigned a %age probability, used to factor the estimated sales value, each individual sale forecast might be wrong, but the total adjusted value of the pipeline will be much closer to what actually happens.

Quite how they calculate that weighted probability forecast is another subject.

Getting Sales Forecasts Right For The CEO

2012-12-18T11:00:00.000-08:00

Well, that's a relative term. Nobody gets sales forecasts right, but there are ways of getting your sales forecasts more right than wrong. And, perhaps more importantly, there are ways of explaining to the people who rely on your forecasts just how you deal with the complexity of your situation.

The CEO has a number. To be fair, the analysts don't cut her a lot of slack. In that job missing one number might be bad luck, missing two suggests you aren't in control. Missing three means you aren't up to the job. This is an unforgiving world, and the further up the tree you climb, the less forgiving it becomes. Control is everything, and if you aren't in control, what are we paying you for?

That means the sales manager has three roles (at least). The first is playing nanny to the sales team. The second is driving revenue. The third is keeping the CEO in her job, and keeping yours in the process.

I know that sounds familiar :-)

Typically what happens is the CEO is disappointed with the first number the sales manager comes up with, whatever it is. Good news, if it'll meet the analysts expectations, but bad news if it won't exceed them. Worse, if there's no room in the number to make up for the deals which go bad, and there's always some which do exactly that.

The boss demands more. She knows you're probably holding something back. It's a quarterly ritual - the same every time. She pushes for more. The sales managers job is getting more, right. Crack the whip on the sales guys, be more demanding of the customers, cut some deals, make me happy.

And the sales manager does, or tries like crazy, anyway. Agree to an increase in the number, and then try to make it happen.

But this is a train wreck waiting to happen, if not this time then some quarter soon. One day the cupboard will be bare, and then disaster strikes.

Chasing unrealistic numbers has consequences. Margins go down because of buy it now discounts. Operational costs go up, because of inaccurate specifications. Customer experience deteriorates as reps just won't go away. Sales guys lose confidence in their offer, and businesses lose confidence in their sales guys.

There is another way - not an easy option but ultimately the right one.

When the sales manager manages her management into understanding the world the way it is, as opposed to the way they want it to be, good things happen.

Product defects get fixed. Marketing messages become more realistic. Prices get brought into line with the market. Realistic expectations get set, and met.

There was a time when sales was all about persuading the customer to buy what the company was selling.

But that rarely works in today's flatter, faster world where customer reviews and comparison sites tell prospects stuff the sales rep would rather they didn't know, and competition is everywhere.

In the Information Age success in sales can only be achieved by selling what the customer is buying.

That's the secret to getting sales forecasts right for the CEO - getting the CEO to offer what the market is buying, and doing that better than anybody else.

Unfortunately, the Nirvana of the perfect product with perfect pricing, backed up by perfect customer service, is a situation few sales managers ever achieve.

For those who aren't that lucky, we suggest a well thought out sales strategy, a proven sales process, forensic sales reviews, and Sales Process Probability Management.

Simply Sales Management for Business Owners

2012-12-14T11:15:00.000-08:00

Sales management is a tough job. There are too many challenges, and not enough helping hands. When things go right somebody else gets the credit. When things go wrong, the sales manager gets the blame. The CEO wants the sales forecast to guarantee revenue. Sales reps don't want to make promises. The sales manager, in the middle, somehow takes up the slack, and carries the can.

What is it that makes sales management so hard? What makes a great sales manager? Where can business owners, worried managers, and aspiring reps go to find out what's the best of best practice for the role?

The Internet is full of pages offering to help. But there's a problem. It's all so complicated.

The consulting, software, and training businesses promotes better ways of doing the traditional things, offering a bewildering array of advice.

At one end of the scale there's the old fashioned crack the whip crowd. It's all about confidence, tactics, and Three Letter Acronym titled philosophies. Send reps out to pitch at prospects, and close as many as they can. Don't ask how they do it. Just make sure they bring home the numbers. Make sure they do the same thing every time, only harder and faster. Give a bonus to the guys who make it, and termination notices to those who don't.

And at the other, there's the systems and analysis crowd. These guys wants everything analysed. The sales manager should know his Revenue and Margin by Rep, by Quarter, his Days Sales Outstanding by territory, his Calls per Day, Ratios of Proposals to Calls, and Wins to Losses. He'll know which reps are busy, which customers are profitable, and which products sell easily while others need discounts to move.

Somewhere in between are any number of shades of grey, including ourselves of course.

In our articles we tread a fine line between the values and value argument. We believe skills and integrity are vital to success in sales. We also believe in strategy, and processes, and systems, and tools.

And unfortunately, in trying to make sales management simple, we fail. Like everybody else, our ideas can seem complex and confusing. So it's our responsibility to offer a simple solution, to complement the intellectual alternatives, and here it is.

"Sales management is simply a question of making sure customers will like what you do for them, and then doing it very well."

Any sales manager focusing on this simple concept will fix those things which stop her doing it. She'll rewrite the strategy, improve the value proposition, implement processes, and impose quality across the business.

And that's what our theory of Reengineering Sales Management is all about.

Sales is no longer about persuading customers to buy what their business is selling. In the 21st Century its about selling what the customer is buying, in the way the customer wants to buy it. Reengineering is about changing all the factors which influence that process, including strategy, tactics, and processes and tools.

The rest of the story is as complex as you want to make it.

The Sales Manager Review Process Explained

2012-12-10T08:37:00.000-08:00

The sales manager's review is the most important part of the job. It's the quality control over the critical business process - creating revenues, happy customers, referrals, publicity case studies. It's the management control over the life blood of the business - cash flow. It's the best source of market intelligence. It's where anything going wrong gets noticed first.

Back in the old days, sales managers didn't need a review process to check on their reps sales deals. They went on the important calls, and did most of the serious selling.

Businesses could afford to be inefficient. Reps would park in the centre of business districts, walk around calling in every office and asking who the contact should be. Next day would be follow up on the phone, trying to set a date for an introduction call. If the contact showed interest, the sales manager would show up, make the pitch, ask for commitment to the next steps, agree a buy/sell process for the rep to work on.

He'd come back when things got serious, play the heavy hitter, make the pitch, and close the deal. The sales manager was the closer, making money for everybody. The sales rep was at the bottom of the food chain, the prospect acquisition function, the hunter.

Outputs from Sales Reviews

In the 21st Century it doesn't work like that.

Sales reps cost too much to get paid for walking the streets. These days, they need to produce revenues, themselves. Sales managers' jobs are more complex too . They need to make sure what's in the forecast is real, without calling on every prospect. They need to find ways of improving the performance of sales operations.

They need to find ways of achieving more, with less.

The sales manager's review is the single most important part of the job. It's the quality control over the ultimate business process - creating revenues, happy customers, referrals, publicity case studies. Most important, its the management control over the life blood of the business - cash flow. Reviews result in more accurate sales forecasts, improvements in plans for winning sales, and real time market intelligence.

Forecasts are no longer based on guesses, but on milestones achieved - objective, measurable, progress against the plan. There's no need to rely on a sales rep's instinct, to calculate weighted probability.

Milestones show how well the sale is progressing, and how likely it is to succeed, highlighting any need for additional action.

Changes in market dynamics - competitor strategies, customer sentiment, external influences - show up first in what customers say, and reported in reviews.

Template for Sales Reviews

No two businesses are the same, and there's no single recipe for an review process, but this example offers a template for sales managers to use in developing their own.

Our sales review is when we'll qualify with the hard questions like:

Why will this prospect buy and when?
Is there a budget and a business case to keep the accountants happy?
Who will make the final decision?
What, and who, are the alternatives to our offer?
How do we persuade the prospect we're the preferred solution and vendor?
Bid or No Bid - this is a deal we want to invest scarce resource in chasing?

Then we'll be able to plan the sale.

What will we do, and when? Who will be scheduled to do it?
What will the prospect do, and when?
Which milestones make sense?
Which actions achieve those milestones?
Who will be responsible for the those actions?

Along the way we'll make notes, collect correspondence and other documents supporting our decisions.

By the end of the review we'll know what we know, what we don't know, what we need to find out, and what we need to achieve in our process. We'll have a plan, and we'll have something to measure our progress against.

Next review we'll check back against that plan, find out if something which was supposed to work didn't, and decide what to do about it. We'll amend the plan, and collect new information in the process. And we'll have a file of everything in one place we can refer to whenever we need.

Our chances of winning the sale will increase, and our risk of wasting resource by losing the deal will decrease. We'll walk away when it seems we can't win.

Reviews for You

In this blog, and our other site, we're in danger of boring readers with seemingly endless comment about planning, and the management theory Plan, Act, Review.

We'll make no apology for that. The sales manager review is the perfect example, demonstrating the why and the how.

You might think this is an awfully complex approach to managing something as simple as a sale. But even in the context of the simplest proposition, there are major benefits.

Evaluating what works and what doesn't gives you the chance to get better.
Collecting information from prospects tells you what's going on in your market.
You now have a management process you can improve as you learn more.
You'll know when what you're doing doesn't work, and have an idea of what to do about it.

And even more understandably you'll think you just don't have the systems support to make it work. That's why we built Front Office Box, and why it works the way it does.

Front Office Box is the ideal tool for small businesses to use in reengineering their sales.

The Right Sales Model For Your Business

2012-12-05T10:25:00.000-08:00

Which is the right sales model for your business?

Most organisations struggle to define how the sales function should work, especially now the Internet offers both choices and challenges.

In the old days it was simple.

A manufacturer would build a factory, make products and send people out into the world to offer them for sale. That's how the concept we today know as sales began. In the original sales model, the representative would knock on a door, introduce the product, reveal the price, and ask for an order.

It was simple - anybody could understand it - and successful - it worked. But today's markets are more complex, and sales models have to evolve for the 21st. Century.

On the one hand we see industries destroyed by new entrants using technology, and changing the cost dynamic. Amazon might be the best example. It changed the market for books and drove Borders out of business.

Another is how consumer insurance has changed. A decade ago, virtually all consumer insurance was sold by High Street brokers. Now its sold on-line. In house sales, real estate agents still have offices in prime locations, but it's their on -line presence which brings in most customers.

In books and magazine, in insurance, and in house sales, the traditional sales role has all but disappeared.

On the other hand we see manufacturers offering custom versions of standard products, selling them using the expertise of people.

Automobiles is a good example. Does anybody buy an off the shelf Mercedes any more? I doubt it. Choosing from the models available, preferring a particular colour, adding those extra features to make this one individual and special. That's all part of the customer experience.

It can be done on-line, but is so much more fun when a sales associate facilitates the decisions. In luxury cars, the individual sales role is fundamental to the value proposition.

Those are extreme examples of course.

Most businesses aren't that clear cut. But nor were books and wheels, until somebody decided to challenge the old order of things with an engaging new proposition to customers. Henry Ford would have been overjoyed at the prospect of selling on-line, when you could have any colour you wanted, as long as it was black. Meanwhile book sellers, including Amazon, struggle to personalise the buying experience.

In each of these examples, somebody made the decision. They chose a customer demographic, decided on a value proposition, and constructed a sales model to suit.

That's where most businesses find themselves stuck. Is the business model maximum volume, minimal value add, and low prices? Or is it about customer experience, with high prices and margins, but at low volume.

Which is your choice? Somewhere in between, no doubt.

Both models are valid in most markets. Either will work, more or less, depending on execution. But ultimately the choice has to be focused on clear blue water. That's the only way to stand out from the crowd. Customers have to understand the unique proposition, and the trade off between price and personal service.

If your choice is the volume option, forget about a direct sales force. The Internet does a much better job, at lower cost.

If your choice is customer experience you'd better get focused on delivering it.

You need a sales force capable of fitting in with what the customer wants. You need a management structure capable of turning itself inside out for one customer. You need marketing to explain what customers will get, provided they pay the price.

Probably you'll be somewhere between the two - most businesses are.

You'll need an on-line presence, maybe with order processing options, or not, depending on other decisions. Your web site makes a big contribution, regardless of whether you choose to sell from it.

It helps customers find you, understand something about your proposition, and find the particular information they want. That's why the site should offer as much as possible, in terms of product and service options, features and what they mean, and corroboration from testimonials, case studies, configuration tables.

Anything which draws the customer into a conversation is valuable - even if its just the prospect interacting with web pages. These days a web site isn't a nice to have - it's fundamental to your sales model, the way that brochures used to be. Your site is your opportunity to make sure every prospect gets the very best practice presentation of your value proposition. It also saves time in the sales process.

You'll need a prospect acquisition function, which may or not include formal marketing, but will certainly be promotion of your value add to the selected markets. There's a lot of noise made these days about social media - Twitter, Facebook, Linked In etc. In some cases claims made by 'consultants' wanting to sell you services are entirely valid, but certainly not all, and probably not many. If you're a band selling music downloads social media is right up your street, but if you're into B2B that'll be a different story.

Inbound marketing, particularly with blogging has its place. So does direct mail, or one of its variations such as leaflet drops.

But if the proposition is more complex, most likely you'll need sales people on the ground, doing what they've always done. Seeking out prospective buyers, and engaging them in an 'awareness to order' process, is what sales guys do. It isn't easy, which is why they get paid a lot for doing it.

If your business needs sales people you'd better have enough margin in your prices. Businesses using direct sales in their model, typically spend 40% of revenues paying for it.

Life gets exponentially more complex when you need to employ sales professionals.

These guys cost a lot to run - like luxury cars - but mostly waste their time chasing rainbows. In days gone by, when prices were high, and customers were gullible, businesses could afford the cost inefficiency, paying reps to sell to people who weren't going to buy. That was yesterday. Do that today and you'll go bust before you know it. The biggest risk, the most likely unproductive cost, is cost of sale when the prospect doesn't buy.

In which case you'll need a sales process.

Research your target customers. Choose the ones most likely to do business. Talk to the decision maker early. Qualify both the inclination and the ability to purchase.

Negotiate a buy/sell process and then deliver it. Walk away when the prospect defaults on his side of the bargain. Stay with it when the genuine prospect needs help. Act like a business. If it looks likely not to work, don't do it. Save cost of sale investment for a better opportunity.

So what's in a sales model? Here's a list you can use as a template,

but not literally. No two businesses are the same, and no two sales models are the same. You need to find the one which works best for you, and that may, or may not, include:

Researching - identifying targets who precisely meet the demographic you've chosen. Those for whom your proposition is the stand out leader.
Prospecting - reaching out to those targets who make the grade, introducing your new ideas and ways they'll advantage buyers.
Qualifying - making sure the prospect has both the ability and motivation to make a decision to purchase.
Resourcing - allocating the support needed - technical to get the spec right, management to get the relationship right, admin to get the paper right.
Collaborating - working with the prospect to agree a buy/sell process in which you'll both make sure the business about to get done will work out for both parties.
Negotiating - cutting the deal, on price, on terms of contract, on delivery, on risk management.
Closing - the part everybody wants to do - signing the order, buying the lunch, and the office celebration. Get all of the wood behind the arrowhead.
Account Maintenance - staying with the customer once the deal is done, arranging delivery, ensuring quality, finding new ways to add even more value.
Leveraging - finding ways to build on your success with testimonials, referrals, introductions, contributions to user groups.

This is an awfully big concept. You can easily see how it might apply to other, more complex businesses, but does it really apply to you? Yes it does.

My mother ran a successful business for 40 years, making curtains (or drapes if you prefer), never employing more than 2 people. She wouldn't have recognised the model described here as anything she did, but its exactly what she did.

It made sense to her, simple common sense.

Make sure the customer will like what you do, and then do it well. Everything else naturally follows.

How To Hire A Sales Manager

2012-12-02T06:49:00.000-08:00

Hiring a sales manager can feel like playing Russian Roulette. Get the selection right, and the business could fly. Get it wrong and the risks are too frightening. A bad choice might drive an exodus of customers, and sales staff, before anybody spots it, and can stop it.

Why Is It So Difficult?

For large organisations, recruiting a sales manager, who's guaranteed to survive and succeed, can be difficult. For smaller businesses, its close to impossible. And its not much fun for the sales manager either. In fact, the downsides for both employer and employee are scary.

Larger businesses have advantages. Candidates are often selected by guys who've been successful sales managers themselves, who have insight, knowing which bits of the story to test. Who know which essential skills to look for. Who know which questions to ask, and how to rate the answers.

Candidates will be more comfortable, too. Big businesses already know how to succeed, even if they could do a better job some of the time. New hires are likely to hit the ground running, not spend months educating colleagues in the way sales works. An experienced manager joining an established business is as good as it gets.

Smaller businesses aren't that lucky. They find attracting quality candidates difficult, don't know which questions to ask, and can't make sense of the gobbledygook answers.

There's a world shortage of great sales managers. Good ones don't leave secure jobs, and when they do, it's for more secure, higher paying positions with better prospects of promotion. They don't interview at small businesses without a very good reason. Which means, most often, the candidates aren't great, they probably aren't very good, and sometimes they're downright dangerous.

A smaller business hiring failed, or inexperienced, sales managers is as bad as it gets.

What's a business owner supposed to do? She's built the operation from the ground up, developing her value proposition, making the product, delivering the service, keeping the books, and probably making the coffee, too. The company isn't going to achieve its promise, unless there's a way to leverage the track record into profitable growth. That takes sales management.

Like it or not, the successful business owner will face the dilemma at some point. How to hire a sales manager.

Which Are The Options

The simplest answer is do what the big guys do - poach the best people from the competition. It isn't easy, and certainly isn't cheap. Persuading a top performer to switch horses will take a pay increase, a vision of a brighter future, a lot of assurances and maybe even a promise of equity. Not easy and not cheap, but the best chance of bringing in proven skills, and with a collateral benefit - weakening the competition in the process.

Next best would be hiring experience from similar markets. It's easier to head hunt from a different industry. There's less loyalty, and more comfort during the negotiations. There's more chance of improved career prospects for the candidate. Skills are often transferrable from one market to another, provided there's some common factor.

Offering the competitor's sales rep a promotion to manager can be a good move, but risky. The very best sales people don't want to be managers. They make more money and have more fun selling. Ambitious sales professionals do want to be managers, and will often take a chance on moving to get the promotion. But they won't stay around long. And past performance as a sales rep doesn't guarantee success in management.

Hiring friends, or friends of friends, in such an important role is another option fraught with danger. Working with a sales manager is a business partnership, not a drinking partnership, or a golf partnership. Neither boss nor manager can afford the luxury of accepting the other's foibles. There are times when tough talking is what makes a business better. The last thing anybody wants is the sacrifice of business results because of sensitivity to a friends personal preferences.

Social media might prove a useful source of candidates. Linked In particularly offers ways for owners and employees to find each other. It's also overflowing with pretenders. Posting an open position is obviously attractive - low cost, impersonal, no commitment, ready to listen, no promises. It can certainly be worth a try, but with caution When it comes to the Internet, what is says on the tin isn't necessarily what's in the tin.

Professional recruiters are awfully expensive. They do have experience in selecting candidates to suit client requirements. Some even offer guarantees. If the candidate chosen doesn't work out, they'll find another for free. The professional recruitment firm can do stuff the company boss can't. It can make impersonal approaches to the best people around. It can present the opportunity in the best possible light. It can manage the advertising, sort through the responses, validate references, arrange interviews, play the middle man in negotiations. Using the right firm of recruiters is the preferred option for businesses with a lot of hiring to do. But with fees at up to 25% of first year earnings, it might be just too costly for the smaller business.

Last but not least, there's always the cheap, fast, simple,approach. Put an ad in the paper. More often than not, the resumes will flood in. Unfortunately, most won't be suitable. That's the disadvantage of advertising jobs. Sorting through hundreds of letters sent by people who didn't read the ad properly, couldn't write the application clearly, and are obviously desperate for a job, is depressing. Replying to them is a chore. And there's no guarantee of attracting the right candidates. The best people rarely spend evenings and weekends with the help wanted sections.

Selecting The Right Candidate

Whichever of these less than ideal options the hopeful employer chooses, the biggest problem is still to come. Interviewing is a challenging, time consuming, frustrating task. It's about finding the best candidate from a list of suitable candidates. In the case of sales managers, its a search for value add - the right skill set, with the right philosophy, compatible culture, and credibility.

Credibility is a question of track record, references, aspirations and manners. A mixture of personal characteristics and measurable results. Compatible culture is a question of fit with the rest of the business. Will the candidate work easily with everybody else.

The focus on the interview should be skills and philosophy. That's where the value add will be. But value added to what. Does this candidate, who's going to cost a lot, offer promise of what the business needs? Will the business be stronger. Will the opportunity be more likely achieved.

No two businesses are the same. There is no silver bullet to guarantee successful sales operations. There is no substitute for on the ground, buried in the trenches, experience of markets and customers, of what works and what doesn't. The interviewer needs to have that, of course. She's looking for somebody to add value to what she already knows. She's looking for somebody to add experience of turning the handle, to her expertise in creating happy customers, serviced by a happy team, in a profitable business.

The value add she's looking for is in strategies, models, processes, and tools - the factors which leverage what works sometimes into something which works lots of times. Testing those skills requires more than a passing familiarity with the folklore. It takes an understanding of best practice.

Anybody looking to hire a sales manager should already have a good idea of which people buy what and how. The successful sales manager should be able to explain how that experience can be turned into a self sustaining sales organisation.

There's good news for the boss who knows the questions to ask, and how to evaluate the answers. Quality sales managers will know they're talking to somebody who's got it. They won't be risking their career working for a pilgrim. The pretenders will slink away, looking for an easier slot.

Is Failing to Plan a Sale Planning to Lose a Sale

2012-11-27T11:26:00.000-08:00

Why is sales management all about planning? Surely its about talent, activity and commitment? There's no point in getting too sophisticated with anything so mercurial as the relationships between prospects and sales people. It's obviously about bringing the right tactics into play, at the right time. There's nothing scientific about it. It's a black art which some have and most don't. And we perhaps won't broadcast it, but there's always a healthy dose of luck involved as well.

Agreed. That's the way its been since the first bible sellers knocked on doors and used moral blackmail to get the orders. Forget the clever stuff. Just knock on more doors, present more positively, and ask for the order more confidently. The sales will take care of themselves.

Agreed that is, except for one question. If you don't plan an activity to deliver the best possible result, how do you know whether its going down the way you want, and how to fix it when its not?

Most of the things you do in life you plan ahead of time. Got a meeting? You need to plan travel. Which route? Departing from where and when? You'll need an hotel. You'll need to reorganise your schedule so as not to miss other appointments. You'll plan your trip, and when delayed by traffic, or a missed flight, you'll know who to call, apologising for late arrival.

The fact is if you don't plan how you're going to get there, you're unlikely to get where you want to go, when you want to be there.

If you're going to plan your travel, it might make sense to plan your sales call - what insight will you want to get, and what impression will you want to leave?

And if you're going to plan your travel and the call, it probably makes sense to plan the sale.

First you'll need to qualify the prospects inclination and ability to buy. There's no point in selling to somebody who doesn't want to buy, or have the budget.
Next you'll need to agree some kind of buy/sell process in which you and the prospect collaborate, agreeing how particular products will meet her aspirations, at a price she things is fair value, and makes you a profit.
Paperwork is always the stumbling block sales reps forget. Who's contract will you use - buyers or sellers? And who needs to approve the choice?
When will you decide to cut your losses and walk away if the deal starts to go wrong?
Once you've won the deal, how will customer satisfaction be guaranteed?
Once the customer is happy, how will you leverage your success into even bigger wins?

If you don't plan all this, how likely are you to get what you want? Who's in control of the sale when you don't have a plan, but your prospect does?

The sales rep with a plan stands a much better chance of winning the deal than the competitor flying by the seat of his pants. Unfortunately, sales reps are usually long on optimism and short on detail. That's why sales managers need to be paranoid about planning, to make sure the sales guys get serious about it too.

The sales manager with a plan is much better placed to help the team. Review meetings are targeted on what needs to be done, and weighted probability forecasts are more accurate when milestones show how the sale is progressing.

And of course, if the sales manager is going to get paranoid about sales plans, then she probably ought to be planning a lot of other things too.

It might be a little harsh, and more than a little trite, to suggest failing to plan is planning to fail.

But failing to plan is certainly failing to plan to win.

Measure The Sales You Lose To Stop Losing Deals

2012-11-27T11:10:00.000-08:00

Sales managers can achieve a step change in team performance when they look at outcomes from a different direction. Numbers of calls and presentations, totals of opportunities, weighted forecasts, revenue and margin are the typical measures. These numbers help with the sales forecasts we all have to make. They can tell us how well the team is performing against plan. But not how to improve results. In fact they can point us in the wrong direction.

And management should be about improving results, shouldn't it?

We can find out how to improve results by measuring the opportunities we don't win. Losing sales is good news. Understanding why we lost helps us figure how not to do that again, provided we take trouble to work it out.

If this sounds a little crazy, stay with me. Take the time to understand the business dimension.

Every lost sale is money wasted. Money which could pay for higher salaries, better benefits, more support. That's what economists call the opportunity cost - what could we have done if we hadn't done that? And what would it have been worth.

For every sales deal there's an opportunity cost. Understanding the concept of opportunity cost helps us make decisions, because we realise there's another side to the coin. The business dimension is both sides of that coin. Every sale we chase incurs a cost, but only those we win deliver a reward.

Spending less time on deals we're going to lose allows more time to spend on deals we're going to win, making a successful result more likely.

Why doesn’t the traditional approach to selling and sales management work so well any more? What can the modern sales professional do to stay relevant in today’s customer driven markets? Check out our eBook Reengineering Sales Management for ideas on how to embrace the new order of customer driven buyer/seller relationships.

CRM Is Yesterday's Answer To The Wrong Problem

2012-11-26T11:03:00.000-08:00

Why doesn't CRM work? Because its an answer to the wrong problem. Another heretical thought from the people who suggest sales managers need to change just about everything.

Of course, that's nothing to do with the technology, and everything to do with the way its used. It's the bean counters' tool for controlling sales people.

The original sales pitch for CRM was really quite innovative, and engaging, and very attractive to the big software companies who'd max'd out the ERP market with solutions for the Millennium Bug problem. The consultants loved it too. It was a new way of keeping the gravy train running, with big companies spending even bigger budgets on software to fix problems they didn't understand.

Understand more about your customers. Get on top of sales. Make your business more predictable. CRM is the answer.

In all too many cases CRM has been simply about collecting information from the sales team about how hard they were working, and where they were getting it wrong. And that's why it's yesterday's answer to the wrong problem. Today's problem is the sales people don't have systems to help them do a better job in the new paradigm.

In today’s flatter, faster world, prospects are smarter and better informed. They’re suspicious of claims made by sellers, more demanding of personalised offers, insistent on controlling the relationship. Vendors must know what will make the customer happy, prove how they’ll deliver it, and do it at a price which can be paid.

Sales managers need to evolve from lion tamers into engineers, with resources, strategies and processes which can be continuously improved.
Sales people need to evolve from robotic drones into intelligent capable entrepreneurs – business people who can develop value adding and sharing relationships with customers.
The sales model needs to evolve, targeting the right prospects, defining a scope of delivery, planning and executing a process through which both buyer and seller agree what will work for both parties, and how that will be achieved, and paid for.
Businesses need to evolve. Instead of simply making product because they can, they need to offer value propositions customers want, and can be delivered. They need a sales strategy to decide which offers are put to which potential customers, and how. They need a sales process which minimizes the cost of sale, by not selling to those unlikely to buy.

They need ‘business people’ sales guys who can collaborate, negotiate and manage. And they need to measure the results, and find ways to improve the efficiency of the process. They need a continuous cycle of improvement – just like the engineers in the factories.

And the sales people need systems to help them do it, not software which helps beancounters measure the wrong numbers.

Why doesn’t the traditional approach to selling and sales management work so well any more? What can the modern sales professional do to stay relevant in today’s customer driven markets? Check out our eBook Reengineering Sales Management for ideas on how to embrace the new order of customer driven buyer/seller relationships.

Sales Management Needs To Be More About Planning and Less About Activity

2012-11-22T10:18:00.000-08:00

That can't be right. Sales management is all about execution, isn't it. Planning is what the CEO does. Making it happen is what the sales manager does, isn't it.

At least that's the way the CEOs see it. They've got the brains and just need to employ people with the brawn to make it work.

And that's the way it used to work.

The CEO had beancounters who used CRM to figure out ' conversion rates on prospects. The analysts told them each rep, on average makes 100 calls in a month, and from that wins 10 deals. Once they have that metric, figuring out how to grow the business takes care of itself. More reps calls means more sales. It's a numbers game.

When times are good, the product is hot, and competition is weak, the strategy is employ more reps. There's money to spare for the expenses. But times are tougher when the product is stale and the competition is fierce. The answer isn't more reps. Its each rep making more calls. And the sales managers job is making it happen.

But it doesn't work so well anymore. Times have changed. When target customers won't take the calls, sales reps can't make the extra calls.

And the reason it doesn't work so well anymore is the market dynamics have changed. Prospects have less budget to spend. Competition is rampant. Buyers are too busy keeping their own jobs, executing their CEOs plans, to listen to new ideas, even if there are any, which usually there aren't.

In a market where opportunities are restricted, there's more competition for the buyers $, and CEOs are under pressure to deliver results they can't, the only answer for sales managers is make each call more effective. Not doing the same thing every time, in the hope that sometimes it works.

So what does that have to do with planning? How about an example? Lets start with a simple Sales Plan.

We'd really like to do business with ABCD Inc. We can organise a sales call with the CEO. What will we say at that meeting? What will we want to be the next step? Which barriers will the CEO put in our path, and how will we overcome them?

Figuring out that little lot takes a lot of work, and is hard. It's planning, as opposed to doing, which always feels more productive.

But without the plan we'll go on the call with nothing more than our standard pitch, and that isn't going to work. Our opportunity will be wasted.

Far better to spend some time upfront, figuring out what ABCD Inc will buy, why they'll buy it, how they'll buy it and when they'll buy it. Then we'll know if there's a realistic chance of some business, what we'll need in our proposition, how we'll resource the sale, and when to walk away if the deal isn't going to happen.

If that's true of one prospect, and it must be, is it also true for the market?

When sales managers spend more time planning, sales people are more effective with the execution.

When You're Short of Sales Support Stop Wasting It

2012-11-21T09:50:00.000-08:00

English: Business Process Reengineering Cycle (Photo credit: Wikipedia)

What is the sales team's biggest problem? Prospects who don't buy.

What is the sales team's second biggest problem? Not enough support resources.

Where can sales managers most improve the efficiency of sales operations?

Stop investing scarce support resource on customers who don't buy.

That sounds nice and simple. Unfortunately it isn't.

Saving support resources for the prospects who are going to buy would be a good idea, if only we knew which ones they were. That would be nice, wouldn't it, but we won't hold our breath waiting for that day to come around.

The entire concept of the sales funnel is based on compiling a list of people who might buy, and then pushing the same story at them, in the hope that some of them actually will. And that means spending scarce sales, and support, resource on people who aren't going to buy.

Maybe the answer lies in reengineering the thinking?

How about we figure out which prospects will buy with Qualification, and then invest our scarce resource on making sure they do?

That can't be too difficult, provided we've worked out our strategy, and processes, and a feedback loop telling us where what we're doing isn't working so we can change it, so it does.

Inevitably, the reengineering needs to start with sales managers who have to unlearn what they know about sales operations and learn about management.

Then the reengineering needs to change the bosses, so the business can start selling what customers are buying, instead of telling the sales force to get customers buying what the business is selling.

Last, but far from least, the sales team needs to do things differently. The guys need to evolve from hunters into traders - not gunslingers with an attitude, but business people with a proposition.

Sales Managers Need to Focus More on Management and Less on Sales

2012-11-20T09:02:00.000-08:00

English: A business ideally is continually seeking feedback from customers: are the products helpful? are their needs being met? Constructive criticism helps marketers adjust offerings to meet customer needs. Source of diagram: here (see public domain declaration at top). Questions: write me at my Wikipedia talk page (Photo credit: Wikipedia)

We all make the same mistake. As sales managers we're supposed to manage, but it's always easier to do the selling instead. When we're short on the number, or that particularly important deal isn't going as well as we'd hoped, or when that new rep needs some help, we step in and take over the selling.

Probably because our own expertise got us the job in the first place. Probably because what little training we received focused on sales techniques. Probably because we never had a formal business education. The way we can make the biggest difference is by turbo charging the sales effort, doing it ourselves. So that's what we do.

Back in the days when the Industrial Revolution saw factories mass producing things people wanted to buy, business owners hired the first sales people to knock on doors, pitch their wares, and ask for orders. The most productive sales people were promoted to managers, and they coached the new guys in ways which had worked for them. Success was simply a question of knocking on more doors, making better presentations, overcoming objections, and being more persuasive.

That's how the role of sales manager came into existence. In most cases it hasn't changed much since.

But the rest of the world has changed a lot. The Information Revolution changed everything, for ever.

Manufactured goods had been in short supply. Prices were high and quality and service were low. Henry Ford got away with telling customers 'You can have any colour you want, as long as its black.'

But it isn't like that anymore.

As Tomas Friedman explained the world became flat. Anybody could sell anything anywhere, and they did. Competition in almost any market exploded. Prices were driven down, and customer choice, quality and service improved. The old ways somehow didn't work so well anymore.

Prospects knew more about products than the sales people. They found out about alternatives and customer experience from the Internet. They wanted added value and lower prices, and got both, from new players or from old players who adopted the new rules of business.

From out of nowhere the simple business of selling changed. Now customers were in charge. And selling needs to change, responding to the new reality.

That isn't going to happen until sales managers spend less time selling, and more time managing - more time managing not only sales operations but also support services like marketing and customer service, and the accountants, and perhaps most importantly the bosses.

The father of management thinking Henri Fayol, as far back as 1916, explained the role of management is (1) planning; (2) organizing; (3) leading; and (4) controlling. He could just as easily have said 'find out where what you're doing isn't working, and then find ways of doing it so it does'.

That's what Reengineering Sales Management is all about - strategy, organisation, operations. Its about value proposition, sales model, sales process.

And ultimately, its about managing your management - getting the business to do a better job of selling what the customer is buying, as opposed to getting the customer to buy what the business is selling.

Management's Role in Everything - Plan, Act, Review

2012-11-19T08:43:00.001-08:00

Henri Fayol (Photo credit: Wikipedia)

Management should be about making things better. Unfortunately it seems to be about making them more difficult. Managers just have to interfere in the smooth running of organisations, to prove they're important. Meanwhile the guys actually doing the job know more about it than their managers. That's the whole point of engineering's Total Productive Maintenance.

For most, management is a step on the career ladder the corporate types see as a right rather than a responsibility. Wanting to be a manager isn't the same as wanting to manage. They probably don't know the basic principles of management.

Like virtually everything we know about how business works, the concept of management evolved during the Industrial Revolution as the owner's command and control structure. The boss told the manager, and the manager told the supervisor, and the supervisor told the guy making the machine go up and down. That gave the manager lots of status, and not much responsibility.

Unfortunately, even in the 21st Century, there are lots of people (and organisations) who still think this way. That explains why there are so many corporate cock ups, the most recent of which has been the farce at the BBC.

And that's despite a whole industry devoted to teaching management as a skill, based on the original work published by a French industrialist in 1916. For more than 50 years consultants have been explaining to clients how it should be done. Books on the subject fill shelves in stores. Careerists impress each other with the titles they've read. But little changes.

Managers still (mostly) don't understand the role isn't about being a manager with all the privileges. Its about managing to make things work better.

Henri Fayol became the father of management thinking when he published his theory on the subject.

He explained the functions of management as:

to forecast and plan,
to organize
to command or direct
to coordinate
to control (French: contrôller: in the sense that a manager must receive feedback about a process in order to make necessary adjustments and must analyse the deviations.).

For emphasis - the manager must receive feedback about a process in order to make necessary adjustments and must analyse the deviations.

It's usually shortened to the simpler Plan, Act, Review.

Plan what's supposed to happen, execute the plan, review what worked and what didn't, change the process to make sure it works next time.

It's all about finding out why stuff doesn't happen and then fixing the way it works so stuff does.

Management shouldn't be about being the boss, it should be about making things work better.

Sales Management for the 21st Century

2012-11-12T11:57:00.000-08:00

What should be the sales manager's role in the new world of the 21st Century? Markets and customers have changed out of recognition from the earliest days of the Industrial Revolution, but sales management hasn't. Does it need to? And if so how? To What? Do sales managers need a new strategy, and if so how can they decide what it should be?

Whereas markets used to be local, and products expensive, and hard to get hold of, they are now global, and awash with competition.

Customers used to be desperate to get hold of the new manufactured goods. They'd happily waited for delivery, tolerated products which didn't really do what it said on the tin. They suffered poor customer service in silence, and paid outrageous prices for it.

Not anymore they don't. Today's customers are smart, informed by the Internet, about anything. They're sceptical after so many stories about rip off companies getting found out, and brought to book by the authorities. And they don't have a problem finding things to do with their money. Nowadays they have problems finding the money to do things.

And here's where the sales management problem shows its ugly head.

Most sales managers, and virtually all of their bosses, think sales is a numbers game. Regardless of the product, the answer in sales operations is always the same. Pitch more prospects. The more prospects you pitch, the more customers you'll get.

In some industries this neanderthal thinking still works. But not many, and not for long.

In the other businesses the competitive landscape changes almost daily. What worked yesterday is a recipe for disaster today. The competition has changed the rules. Customers know more about what's available, at what prices, than the sales people. They know what works for others like them, and aren't going to get suckered.

Examples are always helpful when trying to understand something new. In this case Amazon is vendor to watch. The site has found an entirely new value proposition - knowing of customers' interests, finding the most engaging offers amongst its partners, and listing the comments of people who've bought it.

Amazon has found a way to own the customer - not as a supplier, but as an agent. It knows what interests each buyer. It persuades vendors to offer best prices, then asks customers to review what they bought. It shows the reviews alongside the sellers pitch. Now you Ms. Customer have the best price going for the product, together with reports of people like you who decided to buy it.

And that's going to be, more or less, the model for all selling in the 21st. Century.

Most sales managers won't have the sort of power Amazon wields - brand, access to customers' attention, lowest cost supply of products or services, insight as to customer's interests and infinitely scalable information technology. They can't do a selling job the way Amazon does a selling job.

But they can do the things it does, in their own way. Instead of pitching more prospects harder and discounting prices deeper, sales organisations can own the customer with their own version of the sales model.

They'll have to figure out precisely how to do it. Every business is different, after all. But there are some basic principles they'll need to build into their model.

Understanding the customer
Offering the very best value available
Managing the customers' risk

The role of sales people has to change.

Instead of delivering information in sales presentations, they need to collect information, about the customer, the competition, and where things could go wrong.

Instead of asking for the order they need to ask their bosses to organise the business resources so as to deliver outstanding value.

Instead of discounting the price, they need to manage the risk.

And if they can't come up with a more attractive, transparent, proposition than their competitors they need to find another job.

That's the sales model every manager should be looking for, and the sales professionals with the skills to execute it.

Saga Pet Insurance - No Thankyou

2012-11-11T02:07:00.000-08:00

We all understand, or at least should, insurance companies are in business to make money. In their case that means paying out less in claims than taking in premiums.

OK, so insurance is there to cover the possible, not probable, disaster. We understand. And there's a compact, implied at least, between us insured and those insurers. We play fair with each other, and everything works out fine.

But it turns out at least one insurer doesn't believe in the play fair bit. We've given them a bunch of business in the past, but won't anymore, because they only understand one side of what's fair.

We've been paying Saga Pet Insurance up to £500 each year for the last five, without a claim in sight.

Recently, our pet Bouvier de Flandres developed some skin problems the vet recommended should be investigated.

We agreed of course. He's been part of our family for more than 10 years, and we're insured.

Except it turns out we weren't, to the extent we thought, at least.

The vets bill came to £661.00.

We discovered to our horror the insurance only covered 75% of any claim. That was bad enough. Having paid out £500 in premiums we were looking at a cost to us of £165.

If only we'd been that lucky.

By the time Saga Pet Insurance had sliced, and diced, the treatment into pieces, and disallowed any item with an individual cost less than £75.00 we knew we'd been screwed.

Out of the total bill of £661.00 we find ourselves paying out £393.50. Saga Pet Insurance had decided to pay £266.00 out of our £500.00 premium.

We won't argue. We're sure this is all covered in the terms and conditions, in the small print.

But we won't be spending any more money on premiums with Saga Pet Insurance. And we'll look closely before renewing any of our other Saga Insurance policies.

There's a lesson here for all sales people. You can fool people some of the time, but you won't get away with doing it every time.

Why doesn’t the traditional approach to selling and sales management work so well any more? What can the modern sales professional do to stay relevant in today’s customer driven markets? Check out our eBook Reengineering Sales Management for ideas on how to embrace the new order of customer driven buyer/seller relationships.

Case Study Developing A Sales Strategy For A Medical Device

2012-11-08T11:52:00.000-08:00

Sometimes the effort developing a sales strategy comes to nothing, because it proves there isn't a business opportunity. That seems bad news for the entrepreneur. The exciting idea really doesn't seem too interesting anymore. On the other hand its great news. If it avoids all the costs, losses and disappointments of a failed startup, that's a bullet dodged. The owner survives to start something with a better chance of success.

We have our own case study, which illustrates how the exercise of defining a sales strategy uncovers a lot of risk factors which might not otherwise come to light, until its too late.

We've recently been involved in a new venture - a consortium with external funding to develop an electromechanical device for diagnosing Parkinsons Disease. We had an opportunity to be the exclusive distributor. At first glance this seemed a licence to print money, but once we'd done the hard yards researching, and validating, and planning, it didn't appeal so much. Our failure to find a plausible sales strategy stopped us in our tracks, and saved us a great deal of money and time and effort in the process.

Just how we go about developing a sales strategy is explained in Reengineering Sales Management. There's even a template people can use to get themselves started. But here we'll summarise the theory, to save time and get on with the story.

First the market background.

The global market for medical devices is eye wateringly profitable, and growing like crazy. As populations age, the number of neurological disease sufferers automatically expands. Health services can't cope with the numbers now - a situation which can only get worse. There's a world shortage of specialist clinicians to diagnose patients. High profile charities work hard at increasing awareness of the diseases. There's a lot of interest in Parkinsons Disease, it's sufferers and its treatment.

That sounds like fertile territory for an ambitious sales organisation. Now we know something of the market, lets figure out how we might sell the product. To do that we need to define the unique value proposition, who will buy it, why they'll buy. and how they'll buy it. That sounds easy enough, but is it?

We've got a sort of value proposition, but need to work out a lot of other stuff before we can make it unique, and meaningful. Our first questions are who will be the customer? Who is going to benefit? Who will have the budget? Who will have the authority to sign a contract?

Here's where the problems start.

Who is going to benefit from use of the device to achieve a diagnosis? Perhaps the patient? Perhaps the specialist? Perhaps the hospital administrator? Potentially each might benefit in a peripheral way. If the clinicians can cure the problem early, they'll improve quality of life for the patient, increase the efficiency of specialist clinicians, and reduce the hospital administrators costs. That sounds OK. We might persuade patients to insist clinicians use the technology, but the patient isn't going to buy it. We might persuade the clinician its a useful tool to improve patient care, but she doesn't have the authority to buy it. We might persuade the admin people there's a business case to support the clinical case - more efficient use of scarce resource frees up assets to treat more patients - but they don't have the money to buy it. And they won't find it, unless the clinician convinces them of savings elsewhere.

This is starting to look awfully complicated. But that gets worse when we find out there is no cure for Parkinsons Disease. The doctors can only treat the symptoms, so the diagnosis is less relevant than it might seem. Who is going to spend money on equipment for diagnosis when the symptoms are the problem which can be treated, not the cause?

As if that isn't bad enough, we then find out most clinicians prefer to delay the only available treatment as long as possible, in some cases until 80% of the patient's normal function has been lost. They delay treatment because it has significant debilitating side effects, and ultimately makes the patient more sick than they would otherwise be. At this point our unique value proposition - early confirmation of Parkinsons Disease - might be valid, but its not interesting. Who cares?

To cut a long story short, we don't have a meaningful unique value proposition, we can't identify a customer, and we can't find a reason why they would buy the product if we could.

Then we get to the question of how they'll buy it, which really seals the deal as far as we're concerned.

In the medical devices business sales reps call on clinicians (who are mostly busy seeing patients) in order to persuade them to want the technology and ask the administrators to buy it for them. Then the rep calls on the administrator asking for the order. Then the administrator asks the clinician to justify the cost, which is impossible, because nothing will change as a result of the investment.

The medical devices industry is awesomely profitable, because the barriers to entry are so high. One of those barriers is cost of sale, because of the need for personal calls by sales rep. Another barrier is the capital required to fund regulatory approval for the product, expensive marketing and a high quality sales team. A stand alone product can't generate enough margin to cover the cost of sale. That means every sale is going to lose money. There is no business case to justify any investment in this opportunity, let alone the $20 million we figured was the minimum required.

We're sales guys, not doctors. We aren't experts in medical devices, and we have no specific knowledge of neurological diseases and treatments. Everything we discovered came from researching the internet, and talking to experts wherever we could. Once we developed the full picture, we shared it with consortium colleagues and asked them to correct any errors. They didn't.

You'll understand why we decided to walk away from this opportunity, and save our money for more interesting ideas.

Developing A Sales Strategy - Bikes Case Study

2012-11-08T09:47:00.000-08:00

We get a lot of interest in our articles on sales strategy. It's a topic people want to know something about. That's why we've dedicated a whole section in Reengineering Sales Management to the what, why, and how of sales strategy. We've even included a template readers can use as a starting point for developing something of their own, to suit their particular business.

Templates are very useful for getting all the thoughts in the right places, but sometimes a real life example can bring the subject to life. So here's one from our own businesses. This is work in progress, right now.

We've decided we want a business in bikes. Why bikes? We're fervent believers in the benefits of cycling. We love the machines. We really like cyclists. And we think there's a successful business to be built, provided we get it right of course. So how do we do that?

Well, we obviously have to walk our own talk.

A fundamental element of any business plan is the sales strategy, and that needs to clearly explain our unique value proposition, who will buy it, why they'll buy it, and how they'll buy it. Once we've figured that out, we can go on to worry about resources and organisation, and then add up the numbers.

Here's an outline of how we're developing that strategy.

First of all we need to explain the market, the competition, and any barriers to entry. Luckily we don't have to do too much research, since we spend far too much time in bike shops already.

The advantages of cycling are easily understood. It's fantastic exercise, in the outdoors, and often in great company. It's a lot of fun. It's accessible - anybody from 8 to 88 can do it, provided they have the right stuff. It can work wonders for people suffering with obesity, diabetes, depression, and lots of other health concerns. Its healthy for the environment too. And whilst it can be expensive, it needn't - especially when compared with most other leisure pursuits.

As more people get to understand those benefits, the market for bikes and associated gear is growing, fast. With excitement created by the pro sports teams, and examples set by people cruising the lanes, a new demographic has emerged - Middle Age Men In Lycra - MAMILS for short.

There was a time when building, supplying, and servicing bikes was a skilled trade offered by professional craftsmen. But that's changed, more's the pity. Since the market exploded, the supply side has been driven down to commodity status. Manufacturers spend a fortune on marketing, and discount heavily for the trade - all chasing volume. The biggest and best known suppliers are Internet businesses. They'll sell anything, at very low prices. The bike stores have been driven in the same direction. Quality service, with valuable advice, and the long term relationships of the past, have been been forsaken in favour of volume, at discount.

Between these two dynamics lies the paradox, and our business opportunity.

At precisely the time when cycling has transformed from merely a cheap mode of transport to a lifestyle, the services which actually enable that lifestyle have disappeared. Cycling only gets to be healthy friendly fun with the right bike and equipment, properly fitted and maintained, and as part of a community. Anybody buying a bike, based on the marketing and from a discount retailer, is making a mistake. Without the insight and support of an expert, that cheap bike will be awfully expensive when it stays in the garage, because riding it just isn't fun, or it doesn't work properly, or both.

We could, of course, pick out a position as a full service bike shop, but lots of businesses went bust doing that. It just isn't possible to compete on range, availability and price with the discounters. So that's a non starter.

We've decided to do something scary and counter intuitive. We don't want to sell bikes. We want people to buy their shiny new bike from the discounter, at the lowest possible price, then bring it to us. We'll make sure its got all the right bits, we'll make sure it fits, we'll make sure it works, and we'll make sure it works at what the customer wants it for. And we'll get paid handsomely for doing it, of course. More than we'd make selling the bike.

Our unique value proposition is we'll evangelise cycling, helping people understand all the benefits on offer. We'll make sure they get what they want - being healthy, feeling and looking good, having fun on their bike. We'll promote and maintain communities so they always have somebody to ride with. And we'll provide locations where they can hang out, drink coffee, eat pies, buy fashion, play games to compete with friends old and new.

We'll turn the promise of cycling into reality, and do our bit to save the planet in the process.

That's the unique value proposition. It's all about the experience.

Who will buy it? The MAMILS, their families and friends. They aren't buying because they want a bike. They're buying because they want a lifestyle! And they want to enjoy the experience of buying it.

Why will they buy it? Because we fill the gap between the discounters and the promise. We make cycling work, for you Mr. Customer.

How will they buy it. They'll come to our destinations in search of the answers. What could cycling do for them, how, and how much? Our experts will help them understand their capabilities, their objectives, their constraints, and help refine their aspirations. Then offer to make it all work.

Is this rocket science? No, of course not. The answer is obvious. Fill the gap between what the customer wants and what the market offers.

That's a sales strategy surely anybody can understand. It's all about the aspiration - what customers want for themselves.

How Sales Strategy Could Fix The Economy

2012-11-06T11:25:00.000-08:00

We have a lot of ideas in this blog about how a sales strategy can make selling, in particular, and business generally, a lot more fun. Just a little thought, and a little more logic.

All anybody has to do is figure out who will be the customer, what s/he'll buy, why s/he'll buy it, and how s/he'll buy it. With a clear understanding of the answers, marketing, prospecting, selling, and delivering, are all so much easier.

Of course the problem right now is the economy. Selling, even with a great strategy, is tough. Both sides of the Atlantic, and even in Asia, the developed economies are stuck. Maybe applying our sales strategy logic can help find a way of unsticking them?

First, we need a clear picture of where the problem lies. That's not difficult. The early 2000s saw unrealistic bubbles in just about every market, fuelled by easy credit, and fed by cheap product from the far east. Ever increasing house values encouraged consumers to borrow money they couldn't afford to repay, to buy toys they didn't need. The bankers were the winners, and governments did pretty well too. Before the crash, bankers laid the foundations for a massive transfer of value from Main Street to Wall Street. They got immeasurably richer, whilst everybody else got poorer, without noticing it. Governments reaped the dividends through taxes on illusory profits, which later would disappear, and voters feeling good about rising living standards, which weren't rising at all.

And then the bubbles burst. Governments needed to borrow horrendous amounts, to loan to banks and shore up the entire financial system. They needed to simultaneously reduce public spending, in the process slowing the economy, and increase taxes, slowing it even more. Consumers were left stranded, earning less and keeping even less of what they earned, fearful for their jobs, and nervous about collapsing property values. Meanwhile those bankers used their ill gotten gains to exploit commodity markers, driving up prices of energy and food. Collapsing asset values, burgeoning debts, risks to future earnings, and increasing prices for basics, aren't the ideal background for shopping sprees. Consumers also have houses full of cheap junk, which they'd bought during the party, but now just takes up space. Understandably, spending collapsed, taking our economies with it.

Meanwhile, companies have been doing very nicely. Management have retrenched, outsourced, disinvested - held back businesses so as to conserve cash, just in case they needed it someday. The big companies bank accounts are overflowing with cash earning nothing. Companies aren't hiring, because consumers aren't spending, and it just keeps getting worse.

This is the ultimate, unavoidable, result of capitalism. Eventually, returns to capital overtake returns to labour, and keep growing. Ultimately, all of the wealth is in the hands of a small number of people, and economic activity just stops. There are no customers, because the majority don't have any money.

Forget trickle down economics - it doesn't work, as is now plain for everybody to see. When the transfer of wealth, from the poorer to the richer, passes the tipping point, only governments can reverse the trend. Unfortunately, politicians always make the same mistake. Instead of resetting the basics of the market economies, they prefer to tax and spend, maintaining living standards through government largesse. Things just get worse when the government is the ultimate capitalist. The big companies sitting on all the cash, not employing people and driving down wages when they do, are little better.

If somebody were to put a sales manager in charge there would be an entirely different perspective. She would understand the problem. Developing the sales strategy, it would become immediately obvious. There are no customers.

What we need is customers, wanting to buy things (made by people wanting to work and get paid), with the money to do it. And we need businesses wanting to provide those things, and hiring people to do it. If we could only get that ball rolling, the virtuous cycle would start, and things would get better in a hurry.

That's what governments should be doing - getting the ball rolling. How they should do that is get that money out of those company bank accounts, and into the pockets of consumers, who can spend it on stuff the company's can make.

The way to recreate spending consumers is double the minimum wage, increase tax free allowances on low earnings, reduce sales taxes on locally produced goods, and subsidise innovation and recycling. Drive the unproductive money held by companies into the hands of people who'll do something with it. Help consumers increase standards of living through subsidised innovation, and protect the environment with enforced recycling, which would in turn create employment.

Make companies pay employees more, so they buy stuff, to replace and recycle the junk they bought before, with innovation which improves health and happiness.

And we come to that conclusion using the same philosophy we'd use to develop a sales strategy. Figure out who will buy, and why and how. The rest of the story is simply about making it happen.

Unfortunately, governments listen to economists, not sales managers. Just like most business bosses, more's the pity.

Three Essential Skills For Successful Sales Managers

2012-11-05T10:36:00.004-08:00

What's different between successful sales managers and the rest? Are there characteristics they all share? Are there behaviours they all display? Are there particular and unique skills they have? Do they know something the others don't? Or are they merely lucky?

The easy answer, of course, is luck. They get lucky when recruited by great companies, with exciting products, and sharp sales teams backed by excellent marketing. Who wouldn't be successful with all that going for them?

There is some justification for this view. Nobody needs to be very good, with all those advantages. But this is the easy answer, not the right answer.

Most companies do not have exciting products. They don't have sharp sales teams, or excellent marketing. They aren't 'great' as businesses. And yet, even with a playing field tilted against them, some sales managers find ways to succeed in most businesses.

That's because they bring to the job a flexible, assured personality, together with a vision everybody can follow, and a method of developing a successful sales model. These are three dimensions in which successful sales managers are more capable than their peers, regardless of industry, company, or territory.

Personality

Just like successful sports coaches, over achieving sales managers are a complex combination of Leader, Coach, Friend, Nanny, and Ogre. Just like sports stars, sales people can be optimistic, pessimistic, diligent, lazy, smart, dumb, easy going, and difficult. Successful sales leaders match the appropriate management style to the individual reps' shifting moods. CEOs, CFOs, COOs, and Presidents can all need help to understand sales, and how to get the best out of sales teams. Managing the management is every bit as important as organising the sales team, and probably more difficult. Contrary to popular myth, sales managers aren't successul in ways they used to be - hard driving, aggressive, demanding, task masters. Today the job is about leadership, from behind - skilfully directing sales teams, customers, and management towards what works. It's about being much more friend than foe. It's about leading the team.

Philosophy

By philosophy we mean something they really believe in - something the leadership, and coaching, and managing, can explain to everybody. That something might for example be integrity, or customer value. It's the 'what are we about?' vision, or insight, which everybody can follow - a value proposition.

Process

Whilst the personality wins the friends and influences people, and the philosophy offers everybody a vision to follow, its the process which gets them where they want to go. That process starts with researching and choosing a sales strategy, and then develops a sales model, a sales process, sales tools and sales management systems. The sales manager figures out how to make the whole thing work, and then finds ways of doing it even better.

Regardless of industry, or geography, or market,or even luck, the sales manager who brings these skills to the job will be more successful than others who don't.

How Much Is Your Cost of Sale

2012-10-31T12:46:00.000-07:00

Does cost of sale figure in your sales strategy, or operations model? Unlikely! But should it? And if so how would you calculate it?

Sales managers typically don't get too involved in cost management. It's the revenue number which works for them. Make it, and they're readily forgiven a few extra expenses. Miss it, and no amount of savings in expenses will keep their job. But an understanding of cost of sale can be a very useful tool in the sales manager's kit bag.

Accountants, CEOs and stock market analysts can get very excited about costs. As one CEO said "you know Steve, I can't control revenues, but I can control costs" which probably explains why didn't last too long in the job. CEOs see cost control as their primary tool for managing profit. Naturally they're very interested.

Accountants very existence depends on bosses wanting to control costs. They can tie themselves in knots measuring one type of cost versus others.

Stock analysts are the ones who really get into cost of sale. They understand its the one ratio revealing how appropriate the business sales strategy is in the current market, and how well its executed by sales operations. Of course they want to see increasing revenues and earnings each quarter. They also want to see the cost of sale reducing, quarter by quarter. That shows the management is getting the business model right.

So, understanding cost of sale helps the sales leader relate to his executive team in terms they understand. Which has to be good news, especially when times get tough.

Familiarity with the concept helps the manager do a better job choosing his sales strategy and operations model, as well, which is more interesting.

Quite how the various combinations of volume, margin, product or service variations, customer demands, and competition influence cost of sale, and which decisions are best in which circumstances might justify a whole book on its own. But for now we'll offer a taster, and come back to the subject in more detail, sometime in the future.

The cost which catches the attention of CEOs, analysts and accountants will be what you'd expect - real, measurable, cash spent, costs for the sales team, technical support, and maybe even marketing. Divide the total by the number of sales to get an average $ cost for a sale. A very helpful number when making decisions about products and pricing, discount and pre-sales consulting.

Express the total costs of sale as a proportion of total revenue for a number the analysts want. They might be happy with 30%, depending on the industry, whereas 40% suggests there are problems with the market, or the business model. On the other hand 20% is a sign of a very hot proposition.

Accountants have a different type of cost they like to measure. They call it marginal cost, and its a very interesting number for sales managers. The marginal cost of any sale is that cost which directly relates to the deal. Assume the sales team and support will be paid whether or not this deal is won. If there are no other costs directly arising, then the marginal cost of this sale is zero. A deep discount might be justifiable, but only if all the fixed costs (payroll etc.) are already covered by better deals.

Be careful. Marginal cost is a powerful tool to help with difficult decisions, but in the hands of the wrong people it can be extremely dangerous. Make every decision based on marginal cost and the business won't survive long.

Economists are very fond of opportunity cost, a complex theory enabling comparisons between unrelated decisions. The question posed by opportunity cost is "what value would you have achieved with that resource if you'd decided to deploy it in other projects. Which of the two opportunities would have achieved the highest return?"

The smart sales manager is familiar with the dilemma - choosing between sales projects for one to get technical support while the other goes without. But does she stop to think about assigning sales people to individual deals? Is this deal worth me committing a sales rep, or would we do better by walking away and focusing on one with a higher chance of success?

In the days when customers were around every corner and product was in short supply, the traditional model for sales management worked rather well. Margins were high, sales people were cheap, and customers were naive, sales leaders could focus on driving calls per day, presentations per week, proposals and closes. That doesn't work too well now the customer is better informed and competition is everywhere.

Understanding complex theories about cost of sale helps the modern sales manager refine her approach to driving more results from fewer resources, just like everybody else in the business. That's what Reengineering Sales Management is all about.

The Opportunity Cost In Any Sale

2012-10-29T03:24:00.000-07:00

Opportunity Cost (Photo credit: maxymedia)

What is the opportunity cost of a sale, and why should sales professionals know, or care?

Every modern sales professional should understand the concept. It's fundamental to sales strategy, sales process including sales forecasting, selling tactics, and sales management. Opportunity cost is why sales needs reengineering. It's why the old ways of selling stuff don't work so well anymore. Its the new conversation with customers, which transforms their competitive relationship with sellers into collaborative.

So to help anybody who hasn't come across the theory before, or the many who will have heard the words, but not really understood their meaning, we'll explain the theory, and give examples of how it works in real world situations.

A good starting point is our article - Learning Business Lessons From The Golf Caddie. This explains how caddies know a great deal more about business theory than anybody would think. The particular relevance is every business has limited resources. The golf caddie only has two shoulders, two legs, and 24 hours in each day. The only chance of growing revenues is making better use of them.

And now for the theory. (We can blame economists for this, although here is one case where they all agree.) The opportunity cost of doing something with your scarce resource is the maximum value you could have achieved by using that resource in another way.

A simple example. Joe gets lucky, inheriting $50,000 from a distant aunt's estate. He decides to buy himself a treat. His aunt would want him to do that, wouldn't she? He buys a new sports car, the cost of which is $50,000. But was that the right decision? The opportunity cost of spending the money on the car is the original amount plus all the interest he would have made over the rest of his life, had he decided to put the money in a savings account. That interest gets compounded of course. The opportunity cost of buying the car works out at $169,319 after 25 years at an average interest rate of 5%.

Applying this theory to selling, we can see the sales rep who spends her time chasing one particular deal, with one particular customer, attracts an opportunity cost amounting to the value of the other deal she could have won had she chased that instead. Assuming her deal comes in, making her a commission of $1,000, her opportunity cost might be zero if there are no other deals to chase, or might be $10,000 if she could have spent that time winning her dream client. Given the best scenario, she gives up $10,000 in order to make $1,000. An opportunity cost of $9,000 its simple for any sales guy to understand. Assuming the deal she decides to work on fails, and she makes nothing, that opportunity cost is $10,000.

This is why Reengineering Sales Management is paranoid about chasing deals which aren't going to come in. Qualification, and strategy, and process are the tools which help new order sales people figure out the good deals from the bad, and make sure the good ones come home.

An exciting, and somewhat counterintuitive, philosophy. Enough to get any diehard activity focused, hard closing, 800lb sales gorilla thinking.

But wait. That's only part of the story.

The other side is about the customer's opportunity cost.

Every prospect has the same constraints on resources - money, and people, and time, and energy. The sales guy wanting to close this prospect needs to understand, whatever the prospect says, there is always some alternative decision. Always an opportunity cost. Every prospect can decide to buy from the competition, or decide to buy something else, or decide not to do anything at all.

The ultimate competition in every deal is not Fast Closing Fred with the flexible price book and questionable customer service. It's the opportunity cost.

And here's the red meat slide. Sales people wanting to close prospects need to persuade them that opportunity cost is negative. An alternative decision will actually cost them money, or value in some way.

That's hard to do, unless the rep really understands the customer, and can offer credible evidence of unique value together with built in risk management.

Try doing that, by telling rather than selling. Pitching an exciting story and closing hard won't work, with prospects who are already faced with the dilemma of how to get the biggest bang for their buck.

What does work? Really understanding the customer's aspirations, proving an ability to deliver, offering a program to manage risk, and a unique capability to add value.