“Our salespeople don’t know how to sell value”

I can’t tell you how many times I’ve heard this complaint from product and marketing managers during my career. But in most cases, it just isn’t true.

What is true, is that any lack of value selling is usually driven by the conspicuous absence of two very important types of information:

1)   The economic reasons why the customer should buy a product in a particular situation vs. a competitors’ product, and

2)   Proof that the economic reasons are real, in the form of hard data, information, and customer testimonials that support the sale of the product

In the semiconductor equipment business, for example, Company A’s etcher might etch films faster and more uniformly than Company B’s. A’s etcher might use fewer or less expensive spare parts, require less frequent and less expensive maintenance, and even last longer than B’s because it can be upgraded in the future.

But while these sound like good reasons to buy, they might not be enough to convince the customer unless the economics behind the product have been fully developed. If A offers only weak and subjective support (“look at this chart from a customer we can’t name”, or “look what we did in our lab once under perfect conditions”) for the claims being made, who can blame a customer for being skeptical.

I worked with a client who kicked off our first meeting by blaming the sales force for the client’s revenue and profitability problems. When push came to shove however, the marketing director himself was unable to clearly articulate the reasons why customers should buy his products. He talked about how long his company had been in business, and how much experience they had, but he never backed this information up with specifics regarding exactly how the company’s longevity and experience translated into superior products.

Marketing’s main role is to build a solid, defendable, easy-to-understand case for purchasing a company’s products and services. If marketing can’t do that, there is something wrong with the products or with the marketers.

The lesson here: before criticizing salespeople for their inability to sell or sell value, make sure that there is real value to sell; that the value is crystal clear; and that you can prove that the value exists.

Posted by Don Maher in Uncategorized

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Raise your profitability today! Price your specialized services based on what they’re worth (not on how long it takes you to deliver them)

If you work for a semiconductor capital equipment company, chances are that your employer prices many of its’ field services by the hour. While this method may be adequate for routine maintenance and break-fix work, it is the wrong method to use when pricing work that dramatically improves the performance of customers processes and products in the field.

In the semiconductor equipment industry, performance improvement usually refers to process improvement done by highly skilled engineers who work for the equipment suppliers. These experts diagnose very complex problems, then suggest and implement changes to a customer’s processes that enable the customer to increase yield on current devices, build new devices with higher levels of performance, or both.

While the customer might easily realize tens of millions of dollars of additional revenue from these services, equipment manufacturers typically charge $250 to $350 per hour, or a total of $5,000 to $25,000. This has to be one of the best deals (for the customer) anywhere in manufacturing.

My suggestion to equipment suppliers is to immediately start charging a higher fee for performance improvement work. A flat fee of $100,000 or more, or a percentage of the expected worth of the performance improvement, would be good places to start.

Posted by Don Maher in Profitability

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Stop spending money and resources on prospects that don’t buy

If you’re like most companies, you have prospects you’ve been trying to sell to for years, only to hear one excuse after another regarding why they haven’t purchased anything from you. You may have spent thousands or even millions of dollars trying to win their business, only to see it go to a competitor time after time.

While persistence is a virtue, there comes a time when you have to recognize that in certain situations, failure, not success, lies on the other side of failure. Before you abandon a prospect like this, I suggest you find out their intentions regarding your company and products. A good way to do this is to arrange a face-to-face meeting with the prospect. Let them know ahead of time that you want to discuss the following:

  1. You’ve invested a lot of money and other resources into the relationship
  2. You haven’t realized a return on your investment
  3. You’d like them to speak honestly about why they haven’t purchased anything from you, and determine their intentions regarding purchasing your products in the future.
  4. How your relationship with the prospect will have to change if they decide not to buy from you.

Note: There is nothing wrong with doing this. You’re in business to make money and have fun, and to continue to invest resources in a losing cause, with little or no hope in winning, doesn’t meet either of these requirements.

Once you’re in the meeting, you want to discuss the following topics:

  1. What current or future advantages does the prospect recognize in your products vs. those of your competitors?
  2. If the prospect says there aren’t any, but they want you to continue to provide quotations and proposals, you need to find out why. (They may be interested in keeping you around just to create leverage with their preferred supplier.)
  3. If the prospect mentions advantages your products have, ask them to be specific about those advantages and what they mean in terms of additional money earned or saved, relative to your competitor.
  4. Finally, ask them if they intend to buy from you in the future, including what specifically they plan to buy and when.

In the end, you’ll be much better off knowing your prospects’ intentions, and adjusting your sales efforts accordingly, than continuing to throw money away hoping for a miracle.

Posted by Don Maher in Achieving Sales Goals, Profitability, Sales
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Sales Competencies

Recently I was asked for my thoughts on the competencies that every capital equipment salesperson should have. The following are what I consider most important:

  1. An understanding of the importance of profit
    In my mind, the number one priority for salespeople is to bring profitable business to their employer. Salespeople should know how their employer makes money; how prices affect margins (including how dramatically even a 1% difference in price affects net profit); and how profitability influences stock prices, bonuses, salaries, career growth, and available resources.
  2. Hardware, service, spare parts and product upgrades knowledge
    Salespeople should know the key competitive advantages and value propositions of every product and service they’re required to sell (marketing should develop these advantages so they’re clear, straightforward, and impossible-to-misunderstand). In addition, salespeople should know specifically how their products and processes help customers to achieve their objectives.
  3. Writing and presentation skills
    Every salesperson should be able to write a concise, coherent email or letter to a customer or a fellow employee. The salesperson should also be able to give a “why should I buy” presentation to a customer on relevant products, processes, services, spare parts, and system upgrades. The salesperson should also be able to clearly position (in the mind of the customer) his or her employers offerings relative to competitors’ offerings.
  4. How to successfully negotiate with aggressive, professionally-trained buyers who use PICOS and other profit-transfer methods.
    This competency should include more than how to conduct face-to-face negotiations. It should also cover the how, where and why aggressive tactics such as PICOS and its’ variations began; how customers are trained in its’ uses; what to expect in terms of customer behavior; how to develop a sales plan when approaching and conducting negotiations; how to keep the customers’ senior management informed of progress, delays and any misbehavior on the part of Purchasing people; and how to work successfully with individuals who employ these methods, without damaging relationships. 
  5. In-depth knowledge of the customers’ and competitors’ environment (and how to acquire that knowledge)
    This should include training salespeople on what to look for in publications like annual and quarterly reports;  how to find out about key changes in management; how to uncover the customers’ top priorities; current capacity utilization and potential changes in that utilization; customer profitability drivers; the process the customer uses to decide which products and services to buy, along with the people who make those decisions; and any specific pressures the decision makers are under from their customers, management, and investors. 
  6. How to establish and build relationships with customers
    The best salespeople in the company should train the rest in how to provide day-to-day support and superior execution on behalf of customers, over and above what competitors’ salespeople are providing, so that customers actually prefer to give your company more and more business.
  7. Sales and order process knowledge
    Salespeople should know how to establish exactly what the customer wants, and how to translate customer requirements into language, forms, etc. that the supplier understands and can work with; how to follow up to ensure that the product or service is moving through the manufacturing process on schedule; and how to prepare the customer if things don’t go according to plan.  
  8. How to manage sales time
    There will never be enough time to handle every demand on a salesperson, and certainly not enough time to do handle those demands equally well. Salespeople need to know how to rank the to-do’s on their plate; how to handle email and other dailies so they don’t become the “all dailies”; how to schedule and make regular progress on long-term initiatives; how to determine when “good enough” is; and how to decide what to do first thing on Monday morning.
  9. How to sell services
    Selling services (where typically no explicit need exists, resistance from the customer is common and demand has to be built carefully) is very different from selling hardware (where demand usually exists and the objective is to position your product favorably against one or more competitors).Many capital equipment salespeople (including me when I first started in sales) tend to view service as an afterthought. But with system margins under constant pressure, suppliers need to take every advantage of their ability to improve the performance of a customers’ installed base, and get paid well for doing it.
  10. Consultative and interpersonal skills
    Sales people need to know how to develop trust with people, and how to use that trust to deliver value to the customer through their knowledge of the business, products and services. They should know how to ask the right questions and discover real needs; how to work with customers as opposed to working for them; how to make customers feel comfortable; and how to offer and deliver real, provable value that solves real customer problems.

If you have questions, or would like to discuss these competencies further, please feel free to contact us at 650-862-0688 or at www.mahermarketing.com.

Thank you.

Posted by Don Maher in Achieving Sales Goals, capital equipment sales, Motivating Salespeople, Profitability, Sales
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PICOS: what it is, how to deal with it

Are you familiar with PICOS? While you may not recognize the acronym, you probably would recognize PICOS in practice, especially if you regularly deal with aggressive and well-trained purchasing department representatives.

PICOS stands for Program for the Improvement and Cost Optimization of Suppliers. It’s a supply chain management process that was developed at General Motors in the late 1980’s with the goal of dramatically reducing suppliers’ product and service prices, transferring as much supplier profitability to the buyer as possible.

PICOS-trained buyers develop and use well-orchestrated, company-wide plans to convince sellers that their offerings are no different or better than those of their competitors, and that getting a low price is the overwhelming factor in the customers’ purchasing decision.

PICOS-trained buyers repeatedly bring up price during negotiations, and frequently resort to threats to end negotiations, buy from a competitor, or complain to supplier executives when salespeople try to hold the line on discounts and giveaways. You may be thinking “most of our customers use these tactics; how is PICOS different?” It’s different because PICOS training materials specify the use of exaggerations and outright lies as acceptable means to a desired end.

While there is a lot more to understanding PICOS, there are some tactics that sellers can use to successfully combat it. Following are three of them:

  1. Know your offerings and their value relative to your competitors, the customer and the situation. Unless you know what your products and services are worth to the customer in terms of the additional profit your customer can earn using your products vs. those of your competitors, you won’t be able to convince yourself or the customer that your offerings are special and deserve a higher price. When Purchasing responds to your claims of superiorityby saying something like “competitor X can deliver the same results”, your response needs to be along the lines of “no, they can’t; we’re the only company that has proven it in the marketplace at customers A, B and C.”
  2. Never negotiate one item at a time; always think in terms of final context and package. At the beginning of a negotiation, an agreement to provide 80/20 payment terms instead of your standard 90/10 terms may seem like a small concession to make. However, that concession won’t seem insignificant at the end of a negotiation when it’s combined with other concessions such as lower prices, giveaways, additional field support, and tighter specifications. When the customer says “I need better payment terms”, your response should be “that’s certainly possible if you’re willing to agree to the price we’ve quoted”, or you can say “we’ll need to know and consider all of the concessions you’re looking for before we commit to any specifics.”The takeaway: you can give as many estimates as you want, but don’t make firm commitments on pricing, delivery, specifications, terms, field support, spare parts, or software until you know what’s really most important to the customer.
  3. Keep in touch with the real decision makers and the ultimate users of your products. Once a week, send a well-written, fact-filled email to all the key people involved in the negotiation, including customer executives, users of your products, and your own management, documenting any agreements and commitments made by both sides during the previous week. You might also include any threats made by purchasing representatives. If purchasing people object, and they will, you can simply say that your management insists that you document the proceedings in detail and keep everyone informed of the status of the negotiation. Doing this will also incentivize everyone involved to be more civil and honest, and to keep the rhetoric to a minimum.

For more on how you can work successfully with PICOS-trained customers, contact us here.

Posted by Don Maher in Achieving Sales Goals, Motivating Salespeople, Profitability, Sales

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