Selfridge vs Kelleher: Are Customers Right or Wrong?

The phrase:    “The customer is always right”

is attributed to Gordon Selfridge in 1908. However, Selfridge didn’t make up that phrase out of whole cloth.  Hotelier ‘César Ritz’ advertised in 1908 and used the phrase;  “Le client n’a jamais tort” (“The customer is never wrong”)

Selfridge translated ‘Cesar Ritz’s’ phrase/slogan and gave it a positive twist. John Wanamaker took note, and was soon using that phrase in promoting his Philadephia -based department store chain.

Harry Gordon Selfridge, Sr. (January 11, 1864 – May 8, 1947) was an American-born retail magnate, who founded the British department store ‘Selfridges’. In 1879, Selfridge began his carreer by joining the retail firm of Field, Leiter and Company (which became Marshall Field and Company and finally Macy’s.) in Chicago.

Over the following 25 years, Selfridge worked his way up the commercial ladder. He was appointed a junior partner, married Rosalie Buckingham (of the prominent Chicago Buckinghams) and amassed a considerable personal fortune. While at Marshall Field, he was the first to promote Christmas sales with the phrase:  “Only   ‘X’  Shopping Days Until Christmas”,

a catchphrase that quickly was picked up by retailers in other markets… However, not everyone agrees with Selfridge on this point.  Herb Kelleher (co-founder and former CEO of Southwest Airlines) in the excellent book “Nuts!” about Southwest Airlines, says: “The customer is always right” is wrong. “How about when the customer isn’t right for your business?”           

Herb Kelleher makes it clear that his employees come first — even if it means dismissing customers. But aren’t customers always right? “No, they are not,” Kelleher snaps. “And I think that’s one of the biggest betrayals of employees a boss can possibly commit. The customer is sometimes wrong. We don’t carry those sorts of customers.  “We write to them and say, ‘Fly somebody else. Don’t abuse our people.’”

“The fact is that some customers are just plain wrong, that business is better off without them, and that managers siding with unreasonable customers over employees is a very bad idea, that results in worse customer service. So put your people first. And watch them put the customers first.”

Likewise, Gordon Bethune is a brash Texan who is best known for turning Continental Airlines around “From Worst to First,” a story told in his book of the same title from 1998. He wanted to make sure that both customers and employees liked the way Continental treated them, so he made it very clear that the maxim “the customer is always rightdidn’t hold sway at Continental.

In conflicts between employees and unruly customers he would consistently side with his people. Here’s how he puts it: “When we run into customers that we can’t reel back in, our loyalty is with our employees. They have to put up with this stuff every day. Just because you buy a ticket does not give you the right to abuse our employees . . .”

“We run more than 3 million people through our books every month. One or two of those people are going to be unreasonable, demanding jerks. When it’s a choice between supporting your employees, who work with you every day and make your product what it is, or some irate jerk who demands a free ticket to Paris because you ran out of peanuts, whose side are you going to be on?  “Of course there are plenty of examples of bad employees giving lousy customer service. But trying to solve this by declaring the customer “always right” is counter-productive.”

Most businesses think that “the more customers the better”. But some customers are quite simply bad for business. Rosenbluth International, a corporate travel agency, took it even further. CEO Hal Rosenbluth wrote an excellent book about their approach called “Put the Customer Second – Put your People First and Watch’em Kick Butt.”

Rosenbluth argues “that when you put the employees first, they put the customers first. Put employees first; and they will be happy at work. Employees who are happy at work give better customer service.” “On the other hand, when the company and management consistently side with customers instead of with employees, it sends a clear message that: Employees are not valued.”

Whether Right or Wrong: Customers are the lifeblood of any business. You can offer promotions and slash prices to bring in as many new customers as you want, but unless you identify the ‘right(best) customers’ your business won’t be profitable or even survive for long.

Developing the ‘Ideal Customer’ Profile:  The “perfect” customer just doesn’t exist. The Ideal Customer is a standard that you identify to help you measure your prospects (potential customers) to see if they fit… Why? So you can focus on the good ones, get rid of the truly bad ones, and anticipate problems with those who fall in the middle. So, you’ll take a hard look at your most profitable customer in order to produce the hypothetical perfect customer you’d like to have. This will become the definition of your Ideal Customer.

Step 1: List best and worst. It’s up to you. Start with those companies with whom you’ve done business: Just customers, not prospects. Limit yourself to those accounts where you’ve already done some business. List the best and list the worst. The best will include those that have given you the maximum number of wins and the least trouble. Then list those accounts that are the worst – possibly because even though you’ve closed the deal, either you or the customer feels that you’ve lost. Remember, you set the criteria.

Step 2: Next, list the characteristics of both the best and the worst. Best characteristics may be:

• Willing to pay for “value added”

• Committed to high quality

• Good proximity to my support center

• Size of end user group

• And worst characteristics could be:

• Inflexible on price

• Slow to make buying decisions

• Secretive and unwilling to cooperate

• Outside my industry expertise

Step 3: Now combine the two lists. List the positive characteristics, and then add the opposite of your negative characteristics. For example, “slow to make buying decisions” becomes “has a process for making buying decisions quickly”. You’ve now created a profile of your Ideal Customer. You’re ready to evaluate the account to which you’re trying to sell, against your definition of the best. Measure that account against each of your Ideal Profile characteristics.

The Ideal Customer Profile you’ve just created enables you to sort through the virtually limitless field of potential sale opportunities, to create a personal territory that is actually manageable. Time is money, and creating the Ideal Customer Profile enables you to concentrate on business you can win, and which will create a Win-Win relationship that continues to build your business for the future.

Yin-Yang in Selling: Win-Win…

Underlying every sales engagement must be a commitment to a Win-Win selling philosophy. In Win-Win selling, both the buyer and the seller come out of the sale understanding that their respective best interests have been served; in other words that they’ve both won. Over the long run, the only sellers who can count on remaining successful are those that are committed to balancing the “Yin and Yang” and developing a Win-Win relationship.

In this era of intense competition and sophisticated customers, the success of a sales professional cannot rely, practically speaking, on “taking the order and run”. It’s doubtful that it was ever enough simply to “win the order and leave”, but certainly it’s not enough today. Today, to ensure that your success will last from customer-to-customer and order-to-order the sales organization must have a greater outcome:

  • Satisfied Customers
  • Long-term Business Relationships
  • Solid, Repeat Sales
  • Customer Referral

If you don’t consistently and predictably get these four outcomes from your sales calls, then sooner or later your business will be nothing but a series of one-night stands. You may be writing orders at a record pace, but in today’s market that pace will not last. That’s major paradox of modern selling: salespeople who “take money and run” eventually finds themselves running in-place. The salesperson who knows that getting the order is only the beginning finds not only that he’s writing more orders but that those orders are the foundation for a solid relationship.  In fact, these orders are linking him up to an ever expanding network of future business.

The reason is implicit in the nature of selling itself. In selling, two parties; a buyer and a seller, have to come to an agreement. This means every sales transaction involves a mutual dependence. The philosophy of Win-Win selling or balancing the Yin-Yang recognizes the mutual dependence and gives you a reliable method for building on it for the long term.

“Yang” in martial arts refers to the hard, rigid and aggressive (or assertive) style of action, and “Yin” refers to soft, flexible and receptive behavior… In sales, the traditional aggressive sales person or “Yang” using the old “show & tell the features & benefits”, grab-bag of hooks, lines and clinchers and the time-worn approach of “get the order at any cost” are becoming extinct. Increasing customer demands for sales people to be more attentive to their needs and more responsible for valued results. That requires sales people to adopt a selling process that is customer-focused and fully consistent for developing a Win-Win relationship.

Enter the “Yin” sales person. Unlike the “Yang” sales person who is all about pushing products and services, the Yin sales person is attentive to customer’s needs and strives to fully understand all of their problems, issues, and expectations. The Yin sales person will not suggest any solution until and unless they can fully identify what the needs are, and how they can help package the right solution to meet those needs. In fact, rather than saying this is a sales person; Yin is more like a business partner and actually facilitates buying, so that it becomes an easier and smoother process for the customer. Small wonder that most customers love to work with the Yin personality.

As a martial art, Yin is similar to Aikido (Japanese art of self-defense) which is great for self-defense, but there are no offensive moves. So the Aikido students and the same for Yin don’t know how to initiate an attack, especially in situations where being the first-mover is necessary, and in this situation they are at a disadvantage.  In sales, while being receptive and attentive to customer’s needs are important, the sales person must be proactive and must engage the customer in order to solicit the information required to full understand the customers needs. As such the Yin sales person, who is more passive, may not get the required amount of attention or access to the customer’s important buying influences in order to effectively service their needs.

Ergo: To be successful, you must have “Balance of Yin and Yang in Selling”. The aggressive nature of Yang and the receptivity of Yin provide the combination to effectively engage and service the customer’s needs and develop a Win-Win relationship.

                                              ~~~~~~~~~~~~~~~~~~~~~~~

In Chinese philosophy, concept of yin-yang ([yin –simplified Chinese: 阴; traditional Chinese: 陰;pinyin: yīn] [yang -simplified Chinese  simplified: 阳; traditional Chinese: 陽;pinyin: yáng] sometimes referred to in the west as yin and yang) is used to describe how polar or seemingly contrary forces are interconnected and interdependent in the natural world, and how they give rise to each other in turn.

The concept lies at the origins of many branches of classical Chinese science, philosophy, as well as being a primary guideline of traditional Chinese medicine, and a central principle of different forms of Chinese martial arts and exercise, such as baguazhang, taijiquan (tai chi), and gigong (Chi Kung) and of I Ching divination. Many natural dualities — e.g. dark and light, female and male, low and high, cold and hot — are thought of as manifestations of yin and yang (respectively).

Great Sales Story: Selling– Cross Sell, Up Sell

Cross-selling and up-selling are powerful techniques that leverage your sales resources to drive significantly more revenue. By taking the time to understand the full scope of underlying issues driving prospects to consider new solutions, you’ll uncover previously invisible opportunities to close bigger, more profitable deals with new and existing customers. Here is a Great Sales Story that demonstrates the concept. The author is anonymous.

                                                                ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

A keen country lad applied for a salesman’s job at a city department store. It was one of those massive stores that have every department imaginable. In fact it was the biggest store in the world – you could get anything there.

The boss asked him, “Have you ever been a salesman before?” “Yes, I was a salesman in the country,” said the lad. The boss liked the cut of him and said, “You can start tomorrow, Friday morning, and I’ll come and see you when we close up.”

When the boss looked up the young man the next day at closing time, he saw him shaking hands with a beaming customer. After they parted, he walked over and asked, “Well, that looked good! How many sales did you make today?” “That was the only one,” said the young salesman. “Only one!?!” blurted the boss. “Most of my staff makes 20 or 30 sales a day. You’ll have to do better than that! Well, how much was the sale worth?”

“Two hundred twenty seven thousand, three hundred thirty four dollars and change,” said the young man. The boss paused for a moment, blinking a few times. “H… H… How did you manage that?!?” “Well, when he came in this morning and I sold him a small fish hook. Then, I sold him a medium hook, and then a really large hook. Then I sold him a small fishing line, a medium one, and then a big one. I then sold him a spear gun, a wetsuit, scuba gear, nets, chum, coolers, and a keg of beer.

I asked him where he was going fishing and he said down the coast. We decided he would probably need a new boat, so I took him down to the boat department and sold him that twenty-foot schooner with the twin engines.

Then, he said that his Volkswagen probably wouldn’t be able to pull it, so I took him to the car department and sold him the new Deluxe Cruiser, with a winch, storage rack, rust-proofing, and a built-in refrigerator. Oh, and floor mats.”

The boss took two steps back and asked in astonishment, “You sold all that to a guy who came in for a fish hook?!”

“No,” answered the salesman. “He came in to buy a blanket.”

“A blanket?”

“Yeah, an extra blanket for the couch. He just had a fight with his wife and was sleeping on the couch. I said to him, ‘Well, your week-end is ruined, so you might as well go fishing…'”

Anonymous                                                                                                                                                                              ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

It can cost four times as much to sell to a new customer compared to an existing one. By taking advantage of existing relationships and ongoing contacts with customers, companies can sell more products and services, reduce the cost of sales, enhance customer loyalty and drive revenue. It’s often said that inefficient sales practices leave money on the table. In fact, when you fail to sell smart, it’s worse than that. When you have a solution that your customer should have bought, but didn’t, you not only left the sale on the table: you left the entire customer’s ROI there as well. What if you could make each sale more profitable, and outflank the competition every time?

Today’s top performers embrace cross-selling and up-selling—closing more business at higher profits and capturing market share in the most efficient way possible.

Cross-Selling: Extend Relationships and Create Opportunity

Cross-selling starts with taking a larger view of the client organization: looking at all the possible relationships involved, and where those relationships intersect with the number of relevant solutions for that customer. By expanding the discussion to include additional buyers and products, a top performer can get a better picture of a customer’s enterprise goals, make a better recommendation and create the opportunity for much bigger deals.

Up-Selling: Expand Orders and Improve Customer Utility

A companion method Winning Sales Organizations use to increase revenue is called up-selling. Up-selling means securing a larger commitment: a commitment to buy additional units or a more expensive, premium version of the solution.  In this case, what’s good for the customer is also good for you: the cost and risk of an up-sale is significantly less than that of an original sale. With this in mind, the winning sales person always asks the client, “What else should we be looking at? How can we make this work even better for you?”

The Challenges: Why Salespeople Don’t Cross-Sell/Up-Sell

Selling is ultimately about building “trust”. And that trust is hard-won, often leading to the perception that asking for other relationship opportunities or suggesting a premium product would jeopardize the current position. Of course, it’s not as simple as,

                         MacDonald’s classic:  “You want fries with that?”

For a professional salesperson, the very worst time to start thinking about cross-selling and up-selling is when the customer is placing the order. The time to start is at the very beginning of the sales process — ideally at the qualification stage.

Countless studies report that selling to existing clients is far cheaper than trying to sell to new clients. Yet sales organizations struggle to implement effective cross-selling and up-selling initiatives. With all the documented opportunity to create bigger deals, better customer relationships and secure customer loyalty and market share, why don’t cross-selling and up-selling happen more often?

One of the most common reasons is “fear” caused by the misperception that asking for more raises the risk of losing the existing order. That fear may be accompanied by a feeling that there is not a level of “trust” in the relationship that justifies pitching additional products. These two factors (fear & trust) then lead to delay in asking for referrals.

By taking the time to gather in-depth information about customers and prospects, salespeople can gain a greater insight into their accounts, uncover new business opportunities, and avoid many of the fears that get in the way of performing cross-selling and up-selling activities. Conversely, a lack of quality business information translates into missed cross-sell and up-sell opportunities—and lost business.

Cross-selling and up-selling success comes from the following; understanding your customer’s business, asking the right questions, doing the research, and leveraging quality information.

What Makes a Winner? Secrets of Winning Sales Organizations…

It’s easy to identify the highest-performing sales organizations: Obviously, they’re the ones with the most effective sales process. The real challenge is figuring out how they got there.

How do these sales superstars maintain a consistent, comfortable distance between themselves and their competitors? How do they retain and increase market share? In other words, why do they excel? Exactly what is it that sets them apart from the rest of the pack? What do they do that the others don’t—or don’t do as well?

These are among the questions the Sales Performance Report set out to answer…  To pinpoints the most effective strategies of “winning sales organizations” (WSOs). The study is part of a long-term analysis of sales trends, issues, success metrics and best practices. More than 21,000 sales professionals have participated in the ongoing effort, making it the world’s largest known continuous research project focused on sales performance.

The 3,900+ sales professionals surveyed in the latest study make up a particularly diverse palette of respondents. Participants range from top executives to mid-level managers to front-line account reps, and they work for companies of all sizes in nearly 20 industries. And while most are based in North America, this year’s survey includes, for the first time, significant international influence: Nearly a third of participants represent organizations based overseas.

But researchers were interested in the biggest way in which participants differ, specifically; what strategies “do-the-best” use to set them apart from the rest. What key sales performance issues are facing sales organizations, how are the better organizations dealing with them, and what are they doing differently than the others. Researchers drew the top performers from among sales executives whose companies met three criteria involving significant year-over-year increases: Revenue; Average account billing (revenue per customer); Acquisition of new accounts…

While nearly 80 percent of respondents reported that revenues were up, most fell out of the reckoning because they couldn’t meet one or both of the other two criteria, after winnowing out all those companies, researchers were left with an elite sampling of 8 percent of respondents that they designated as “winning sales organizations” WSOs.

What Do WSOs Do Well? The study found that “winning sales organizations” excel in five critical areas:

Creating and Prioritizing Opportunities. Seventy-two percent of WSO respondents rely on well-defined methodologies for deciding which opportunities to pursue. That’s almost a third better than other respondents. “In other words, nearly half the non-WSOs have no standard system for identifying the best opportunities,” That’s like fishing and hoping that something will bite on your hook”. WSOs also typically use a proactive, well-defined, highly-focused-approach to sales.

They define the ideal customer, 71 percent report that they align sales efforts to that target, and they understand what compels those clients to buy. At the same time, their efforts include creative thinking and problem-solving skills that customers valued highly. And, they emphasize problem-solving rather than product-pushing: WSOs focus on solution-based selling 26 percent more often. As a result, WSOs tend to achieve better close ratios, shorter sales cycles and fewer instances of discounting; all of which add up to more wins and more revenue.

Non-WSOs, in contrast, “seem to waste resources pursuing business that they don’t really have a good chance of winning”.  “Typically, it’s a situation where their products and services are not a good-fit for what the customer is trying to accomplish”.  But because salespeople are wired for tenacity, it sometimes takes strong management to convince them to stop chasing those opportunities.

“You have to create clear criteria indicating that not every piece of business is necessarily a good piece of business for your company. Make sure that you’re putting resources on prospects only if you have a good chance of winning them”. When sales seem unlikely, redirect those resources to deals you’re more likely to win.

Managing Opportunities. Winning sales organizations also make better use of those opportunities, according to the study. WSOs get access to more senior-level executives than their peers, and their sales forces are better at persuading those top decision-makers to buy; succeeding about 32 percent more than non-WSOs do. How do they do it?

Overall, WSOs tend to have well-defined processes for moving through the sales funnel from prospect to close; they make sure the right deals get the right attention at the right time. And they’re savvy about customizing their sales approaches to executives’ decision-making styles, adapting quickly when confronted with several different styles.

Above all, WSOs strategize for every meeting with a prospect or client. Winning sales organizations are 30 percent more likely to have a standard approach to sales calls, whereas about 60 percent of the non-WSOs respondents have no regular format for sales calls. “They fly by the seat of their pants and then wonder why they don’t get the right outcome from those meetings.”

Managing Relationships. WSOs, more than most, recognize the importance of long-term customer relationship management, according to the Miller Heiman Study. They know their customers’ businesses as well as their own, and they monitor trends that are likely to affect those clients’ needs. WSOs are also expert at managing in-house relationships. Fifty-eight percent reported working with people throughout their companies to better serve strategic business accounts; that’s 20 percent more often than non-WSOs.

“Sales is no longer the total fiefdom of the sales function. It’s now the responsibility of a much broader part of the organization, and customer relationships are increasingly involving people from across departments.” Sales organizations are hoping to improve both internal and external relationships with standardization: “Having standard systems and process for managing customer relationships.  Putting everyone on the same page on how you talk to customers and the strategy around key customer relationships”.

Involving their Companies’ Executives. In a related finding, WSOs tend to involve their own corporate leadership in the sales process. Seventy-seven percent of WSOs said their senior-level executives actively promote and participate in the sales process,  which is 20 percent more often than non-WSOs. Highly effective organizations also excel at working with managers of other departments to identify their companies’ most important accounts and develop organization-wide approaches to supporting them.

More than half of WSOs reported working with leaders from finance, marketing, IT, engineering and other departments to accomplish that goal. That means that even though many sales organizations have undergone staff reductions, they can still build strong customer relationships with help from other departments, many of which now directly interact with customers more than ever before. The single most important element in those efforts’ success is strategic coordination. “It requires organization to be organized,”

Account manager have got to make sure everyone else understands the plan and strategy.” The Study credits those cross-organizational efforts with helping sales superstars better understand and more quickly adapt to changing buyer behavior. According to the survey results, WSOs have 16 percent less price pressure in buyer decisions than non-WSOs, and their buyers are less likely to delay their purchasing decisions.

Leveraging Talent. Finally, WSOs strategize around their people. “They put a lot of emphasis not only on finding and retaining the right talent, but leveraging it throughout their organizations as well”. Overall, sales leaders ranked talent maximization as one of their five most pressing issues, second only to ongoing worries about winning and keeping profitable business. But when asked how well they were meeting the talent challenge, participants gave themselves low marks, rating that area fourth out of five in terms of success.

Both responses may correlate to another startling survey result: 24 percent of all organizations surveyed reported an increase in turnover. In delving into the talent challenge, researchers polled respondents about whether and how they maximized use of their top performers, specifically regarding benchmarking, coaching and evaluations.

They asked, “Are you sharing information about what they do? Are you replicating their behavior and processes? Do you profile them, create models and then align hiring standards with them?” People haven’t spent enough time thinking about the natural tendencies or “DNA” of their top performers. That’s an area where WSOs clearly excel.

Sixty-six percent leverage their top performers’ expertise; that’s 25 percent more often than other respondents. They’re also more likely to hire the right people in the first place; 45 percent have what they consider “very effective” processes for hiring top talent, compared with 36 percent of non-WSOs. “You need to understand why your top performers are your top performers”.

 

Taming the Volatile Sales Cycle– Roller Coaster Ride…

Many companies experience wild fluctuations in their revenues: During one quarter, products or services are selling faster than proverbial hotcakes; but in the next quarter, the sales force can’t seem to give those same products away. “It’s either feast or famine,” is the all-too-familiar refrain. To exacerbate matters, these fluctuations are often unpredictable as evidenced by the countless companies that miss their revenues projections, unleashing the wrath of Wall Street. Many corporations have watched their stock price plunge because of a missed sales target.

Of course, every sales cycle has some degree of volatility. A big customer could go bankrupt or a major deal could fall through because of management changes at the firm. Conversely, sales of a new product could suddenly skyrocket because of a serendipitous endorsement. And there are certainly seasonal fluctuations and many other factors, including customer budgets that affect the sales cycle.

Aside from these, there’s another type of volatility that many executives seem to think is some kind of natural law. At the beginning of every quarter, sales tend to falter; at the end, they often surge. This continuous roller-coaster can be a huge problem when big deals fail to materialize at the last minute (that is, near the end of the quarter), leaving a shortfall. Indeed, the fear of that happening has led many companies astray.

Sales Funnel: The typical sales process is like a “funnel” (or “pipeline” or “conduit” or “hopper”, etc.): At the bottom are the deals that are nearest to being closed; in the middle are other prospects in the works; and above the funnel are numerous promising leads that need further investigation. Each of the three stages of the funnel requires different activities… At the bottom of the funnel, the company must remove all remaining obstacles to close those deals (for example, meeting with the final decision maker and ironing out the specific financial terms of the contract).

In the middle of the funnel, it needs to do important background work (for example, identifying the people at the prospective customer who could possibly veto the deal). Above the funnel, it needs to screen the leads to identify which should be pursued (specifically, determining whether there’s a good fit between the customer’s needs and the company’s products). And, of course, it also needs to continue prospecting to ensure a healthy supply of new leads.

Now comes the tricky part. Ask any executive, including those in sales, how to prioritize these three stages of activities and the answer is likely to be that the funnel should generally be worked from the bottom up. At first glance, that strategy seems to make sense. Why not concentrate on the surest opportunities first and leave the less certain stuff for last? But this prioritization strategy is the fundamental cause of the sales roller-coaster.

Here’s what typically results from a bottom-up strategy: The sales organization closes important deals and is busy moving prospective business from middle to bottom of the funnel. This is arduous work and, pressed for time, people just do not get around to generating any new leads. At some point, though, everyone begins to realize they’re in trouble because the funnel is drying up. This then results in panic and a flurry of activity.

Unfortunately, a company can’t instantaneously move a prospect from the top to the bottom of the funnel. Especially for big-ticket products, that process could take months, if not years. Thus, the company experiences a plunge in sales until it is finally able to move the crop of new leads down the funnel, which eventually results in a sales up-tick. But then history repeats itself because, as people focus on the bottom and middle of the funnel, they again neglect to prospect and qualify new leads. And this is why many firms experience the wild ups and downs of the sales roller-coaster.

Ideally, a company should have a continuous flow through its sales funnel, and the surest way to achieve that is to prioritize the three stages of the funnel in the following way: bottom, above and then middle. Note that the highest priority is to still attend to the deals that are nearest to being closed because they offer the quickest return on the future expenditure of a company’s time and resources.

And given the investment that a company has already made to move a potential customer from the top to the bottom of the funnel, it would be foolish to leave that prospective business vulnerable to poaching by a competitor. But the only way to ensure that activity above the funnel receives the attention it deserves is to prioritize it ahead of the work that needs to be done in the middle.

But that’s not to say that any company can afford to neglect working the funnel’s middle. Prospects there must still be shepherded toward the bottom so that those deals can eventually be closed. Somehow, though, people will find the time to work on customer prospects in the middle of the funnel (even when other activities might have a higher official priority as decreed by their company), whereas they always seem to be much too busy to concentrate on finding and qualifying leads above the funnel unless they’re absolutely forced to do so.

Better Funnel Management: And that brings us to the basic problem: Telling salespeople how to manage their individual funnels is one thing; getting them to do so is an entirely different matter. To accomplish that a company must implement various organizational measures. For starters, it needs to have salespeople regularly monitor and track the activity in their individual sales funnels. For instance, one salesperson might be spending 60% of her time at the bottom of the funnel, 20% in the middle and 20% above the funnel, while another salesperson might have a completely different breakdown.

Neither is inherently better than the other and, in fact, the two salespeople could have entirely different ratios for the following week. It is important to remember that the desired prioritization (that is, working the funnel from bottom, above and then middle) is just the static overall goal. Companies have to keep in mind that each salesperson’s time should be allocated in dynamic fashion, given the particular status of that person’s different customer prospects

That said, a company can uncover a number of problems by tracking the overall, combined funnel of its sales force. For example, a general lack of movement through the funnel suggests that people might be incorrectly classifying the different sales prospects (for example, thinking that a potential customer is in the middle of the funnel when it’s actually above it). Or if very few prospects are making it into the funnel, the firm might be having difficulty using initial data to predict whether there’s a match between its products and potential customers’ needs, and the company might do well to consider devoting more resources to above-the-funnel activities.

Institutionalizing better funnel management is admittedly a difficult task.  But such a disciplined process is crucial, especially when a company absolutely needs to have a more predictable sales cycle. The simple truth is that the sales function is a definable, repeatable process that can be tracked, planned and managed, and those that believe otherwise will continue to suffer the many volatile ups and downs of the sales roller-coaster.

Strategic Accounts– Yikes: BIG Trouble without these Customers

In many companies today 80 percent of revenue/profits come from only 20 percent of their customers, and other benchmarks show that 50 percent of a company’s revenue comes from 5 percent of its customers. Whichever the measure, it’s clear that a small and disproportionate number of customers are responsible for a large percentage of a company’s revenue. In fact, these strategic accounts (unique customers) are critically important to a company and must be carefully managed as a valued company asset.

Competitive pressure on companies has never been greater. Sluggish economy, globalization, mergers and acquisition, eroding margins, out-sourcing, the technological revolution, shrinking customer bases; these and other developments are creating unprecedented challenges for business executives, especially for those who manage strategic accounts.  More than ever, maintaining and building relationships with existing key customers has become essential to sustaining the P&L profile that is needed to survive and grow.

There are two approaches to maintaining a healthy P&L. Cut costs or improve revenue. (Ideally, of course, you do both.) By now the first approach, which dominated the last 10 years, is approaching the stage of limited returns, as organizations realize that there’s only so much ‘excess’ any company can eliminate.  As a result the second approach, revenue improvement, is fast becoming a universal imperative. Recognizing that revenue is the lifeblood of their organizations, executives are increasingly following the mantra “back to growth”.

There are two approaches for business intent on growing revenue. Expand into new markets and new customer bases, or optimize the business you have in your existing accounts. These approaches are meant to be complementary, but with global competition severely limiting market expansion, leading firms are focusing on the second option, seeking to develop untapped potential in their existing customer bases.

There are two approaches to improving business with your strategic or large accounts. The old-fashioned methods of try and sell them more and bill them accordingly. Or, a more enlightened method with focus on the development of a long-term, profitable relationship by delivering significant value that improves the customer’s business. In fact the “secret” for business success in the twenty-first century is exactly that; make significant and valued-contributions that ensure the success of your key customers/accounts.

The need for a reliable account management process is more urgent today than it has ever been. If you doubt that, try to find an institutional banker with less than a 30 percent churn rate or a telecom that doesn’t worry about customer retention.

And this brings up a whole new topic: What does it costs to acquire or lose a customer? This is a highly debated subject with answers that vary from; “it depends” to “3 times” to “10 times” to “it doesn’t matter”.  Here are a several opinions:

Calculate the customer life-time value. Calculate the customer asset-replacement cost. Would you be able to replace this account with another of equal value? What is the acquisition cost? Is there 5% or 10% or 20% rule for acquisition: If a customer is worth $10 million annually is the firm willing to invest $500K or $1 Million annually to keep it or to acquire it? What is the return-on-investment (ROI)? Go through a lifetime customer-value exercise. Consider the value you deliver to the account, the replacement cost, and the investment you need to make in the relationship.”

                                                ~~~~~~~~~~~~~~~~~~~~~~

“There is a spurious “fact” that circulates widely alleging that “it costs five times as much to acquire a new customer as it does to retain an existing one,” although sometimes people say it is seven times as much or ten times as much. This fact originated with a Harvard Business Review article a couple of decades ago, which was the result of a general study of retention policies compared to acquisition policies across a range of businesses in different (consumer) categories.”

                                              ~~~~~~~~~~~~~~~~~~~~~~

“The idea that “it costs X times more to acquire a customer than retain one” is an urban myth.  First off, acquisition costs vary by industry. The auto industry needs to spend a whole lot more to acquire a customer than, say, ING Direct who can jack up their interest rates on CDs and acquire a lot of new customers. Second, costs to both acquire and retain customers ebb and flow with economic cycles. In good times, acquisition costs decline.  Third — and most importantly — retention costs are INCALCULABLE. A firm has to first determine what it includes and excludes in the definition of retention costs.

Do you include all the costs associated with providing customer service to customers in your retention calculations? After all, if you don’t service them, you will have less chance of retaining them.  Do you allocate all IT application maintenance and enhancements to your retention calculations? If you don’t continually improve your transaction and interaction service capabilities, your ability to retain customers diminishes. The reality is that no one has the slightest clue what it costs to retain a customer, because no one has defined a standard for what costs to include and which ones to exclude.”

                                                ~~~~~~~~~~~~~~~~~~~~~

And, the debate continues.

Clearly, maintaining what market analyst Frederick Reichheld calls the “The Loyalty Effect” has become a make-or-break proposition for business today.  Whatever their size and whatever their markets, companies everywhere need to protect their key strategic customers as important business “assets”. They need to deliver real customer value or risk being “re-positioned” as a commodity supplier. They need to invest appropriately in the strategic relationship and safeguard against account erosion.

Learning or Forgeting: What’s more important?

One of the key issues facing business isn’t learning, it’s forgetting, according to some experts. Organizational “learning” (i.e., executive management programs, selling techniques and processes, technical skills, and team building, etc.) is one of the hottest management topics, but some say that “forgetting” (i.e., the old traditional ways of doing things) is far more important. “You can’t live without an eraser”.

“The problem is never how to get new, innovative thoughts into your mind, but how to get old (traditional) ones out.” – Dee Hock… “The greatest difficulty in the world is not for people to accept new ideas, but to make them forget about old (traditional) ideas”. –John Maynard Keynes

The old (traditional) image of the salesperson was a mere glad-hander, someone whose only skill is “knowing how to talk to folks”. Think of the phases that come to mind when you think of selling. “A good salesperson is born, not made”, “Selling is 90% luck”, “A real salesperson can sell ice to an Eskimos”. Underlying all these adages is the view that it’s personality, not understanding; temperament, not training; magic, not skill that make the top salespersons what they are. For many people in the sales field, Horatio Alger’s old “luck and pluck” is still the talisman to which we attribute the salesperson success.

In business-to-business selling, the traditional method or old way involves two false assumptions. It assumes, first, that all potential buyers can use your product or service… and second, that if you only “show and tell” the customer about it, they’ll appreciate the “obvious” benefits and rush to buy from you. These assumptions violate a central principle of business interaction: People buy for their own reasons, not yours. Traditional, product-focused selling ignores that fact…

“Strategic Selling”, on the other hand, acknowledges this fact as central, and puts the burden for making the sale on both buyer and seller (it’s a joint-venture). It’s up to both the buyer and seller to move the process forward by mutually encouraging positive information flow. There’s no assumption suggesting that the customer already has a need for the seller’s product or service. On the contrary, the entire interactive process is geared to determine, up front, whether or not there really is a need.

Thus Strategic Selling follows the natural order of decision-making and involves three distinct but interrelated thinking processes beginning with “cognitive thinking” which is understanding the customer’s concept/need, then “divergent thinking” regarding the available options to satisfy the need, and finally “convergent thinking” which is the selection of the best solution. This realization was developed by J.P. Guilford through his extensive clinical research and documented in his book Nature of Human Intelligence.

The immediate benefit of this approach is an alignment between the salesperson and the customer’s decision-making process and gives the salesperson greater control and more flexibility by facilitating the customer’s natural way of thinking and decision-making.  And, in the longer-term, by establishing this constructive dialogue with the customer it enables the concept of No-Sell Selling and a Win-Win outcome. Win-Win means a highly valued and effective solution for the customer, and a long-term, profitable, and reference-able account for the salesperson…

Subtle Shifts in Business, Leadership, Management, Organization, Strategy, Innovation– Bring Big Results…

Translate »