Accelerating the Market Adoption of an Innovation

Posted on April 7, 2013November 19, 2014 by Jerry Vieira

The Product Development and Management Association Glossary of Terms defines failure rate as the percentage of a firm’s new products that make it to full market commercialization, but which fail to achieve the objectives set for them. By that measure, it is not surprising that a quick internet search on the subject of product failure rate yields studies that claim anywhere between 50% (commercial) and 90% (retail food) of new product or service offerings fail.

Failure can mean some or all of lost time, wasted money, missed opportunity, damaged credibility, tainted brand reputation, enhanced competitive vulnerability, lost jobs, truncated careers and a host of other unpleasant outcomes. So, whether the real failure rate is closer to the lower (50%) or higher (90%) end of the estimate is not as important as recognizing that discovering ways to improve it is essential.

For the past 15 years a good part of our work at QMP has centered around helping business-to-business clients turn around under-performing businesses and products. Many of them were struggling with getting new offerings off the ground or gaining traction in the marketplace. We’d like to share with you a bit about what we have learned, in hopes that it may improve your probability of success and help you avoid the myriad consequences of failure.

The Empirical Science Basis of the Adoption of Innovation:

In 1962, Everett M. Rogers wrote a breakthrough work entitled, “The Diffusion of Innovation” (republished in its fourth edition in 1995 by The Free Press). In it he compiled a number of studies documenting adoption successes and failures of all types of innovations over the past 100 years — from sociological to scientific. He included varied research findings, such as the struggles of the Chilean health department with getting Andes mountain villagers to adopt the habit of boiling water for health reasons, Iowa farmers adopting hybrid seed corn and Pittsburg school system principals adopting new math.

While the lessons learned from reading such a remarkable book are many, two items stand out above all others; 1) the adoption or diffusion of an innovation is not a linear phenomenon (meaning it does not gain its energy and momentum just one isolated customer at a time across a wide range of groups), and 2) adoption is significantly accelerated by the dynamics of the intramarket communication network (how buyers in a market or group meet, discuss and communicate ideas).

In fact, one of the most amazing conclusions coming from the research is that communication through the intramarket network is roughly 13 times more effective than mass communication in the adoption of an innovation. This interesting research conclusion predates the emergence of social media, blogging and Tweeting which, by now, are well recognized as an effective internet-powered intramarket communication vehicles.

Mass Communication and Struggles with Adoption

One of the most common problems we find with innovations struggling to gain a foothold in the marketplace is the parent firm’s unwillingness to focus. Rather than taking a chance on a focused launch initiative, they believe it’s better to try a broad one and see what sticks. In addition, the management team and product people are typically so convinced of the universal applicability of the innovation, that it leads the firm to believe that “getting our name out there” quickly, to masses of potential buyers, will be all that is required for success. This is rarely the case.

In pursuing such a course of action, it is not uncommon for a firm to find they have spent valuable economic resources on grand branding schemes and exposure initiatives with a minimal real impact on market penetration. Applying for a second round of dilutive funding to finance a second run at that same holy grail is an option—and some select it – with the same results.

Fragmenting the market to gain a profitable foothold

Buyers, particularly commercial and business-to-business buyers, invest in an innovation because they believe the economic value they will receive from that innovation will exceed the amount they have to pay for it. The market success of an innovation requires that the market which you’ve targeted has a significant enough proportion of customers with a big enough common problem to create a compelling argument for an investment to solve it. The key is, not all market segments have the same problem to the same degree. Focusing your launch on a particular sub-segment of the market where the economic value proposition of the innovation is compelling, creates a much higher probability of success than a broad approach.

If it’s that simple, why don’t more businesses focus?

There are many reasons: First, investors prefer firms that are moving after big markets with big payoffs. The bigger the market envisioned, the bigger the potential payout. Secondly, the inventors have a sincere belief that “everyone” can eventually use their innovation—and eventually they may be correct. Third, innovators and marketers alike get caught in the excitement, glitz and hype of launching a major market initiative launch. It can be a very heady experience. And, fourth, they simply have too much marketing money in the budget and don’t know how to manage it well.

Trying to stand in front of the innovation-launch train as a voice of reason, as it barrels down the track of a well-funded general market launch is fruitless. It’s best to wait till the train burns out its fuel and then catch up to it further down the track when it has stalled.

Not withstanding the previous explanations, there is a more fundamental reason why people don’t focus for success, they simply don’t know how to select the best markets to focus on.

Criteria for Target Market Attractiveness:

Over the years of working the challenge of assessing and selecting the target market segment that will yield the highest probability of success for an innovation, we have developed a series of criteria that seem to work effectively.

Market Momentum: Different market segments have different economic, demographic and regulatory factors which affect its basic momentum. When selecting a market, we want our investments to be lifted and propelled downstream as much as possible by inherent momentum factors in our favor.

Compelling Need: This factor refers to the extent the problem the innovation is designed to resolve is compelling from an economic, safety or regulatory standpoint. Take the Segway for example, the innovative two-wheeled, gyroscopically-balanced personal transport scooter. It’s general market launch, after much early hype, has been less than hoped for by investors and its inventors alike. It is, however, finding its way to higher success rates in mobile security markets, on campuses, malls, large commercial complexes, inner city tourism, and in a slightly modified version, golf courses.

Match: The extent to which the innovation matches and completely resolves the compelling need it was designed to fix. A perfect match will increase customer satisfaction and improve the ability of potential customers to rapidly make the innovation-to-problem-fix mental link.

In the early days of flat panel monitors, when they were expensive compared to bulky CRTs, one of our clients attempted to penetrate the general desktop market with this own version of a flat panel monitor. At a $1,000 selling price, compared to a $249 monitor price, the effort failed. However, when the effort was refocused on hospital rooms (a much smaller segment of the market but with a more compelling set of needs), the monitor was wildly successful. In hospital rooms, space is constrained, electromagnetic interference from CRTs cannot be tolerated around sensitive medical monitoring equipment and sparks from high static CRTs can’t be permitted in oxygen rich environments. The client’s initial adoption failure was turned to success simply by redirecting the market focus—and there were no changes required to either the average selling price or inherent product features. In fact, the selling price increased as, over time, hospitals requested additional features to increase the basic capabilities of an already good solution.

Socket Count: A socket is a potential place where the innovation can be installed. For example, a first estimate of the potential sockets for the microwave oven at its inception would have been the number of households without one. Today, the number of sockets available for new microwave oven innovations is going to be limited to those sockets that either don’t have a microwave already installed (very few) or those for which the innovation solves a compelling need or significant shortcoming with their existing solution.We want to find a market to target our innovation at that not only has a compelling need and positive momentum factors , but also a lot of unfilled or under-satisfied sockets.

Value Quotient: Closely related to the magnitude of the compelling need is the balance of the value quotient from the customer’s perspective. This relates to the value of the benefit to the customer of solving their problem with your innovation, divided by the cost of acquiring, installing, learning and using it. There may be a significant compelling need, but if the cost of the innovation needed to repair the compelling need is prohibitive, adoption will be slow. A rule of thumb is that within three years of purchase the innovation should pay back at least 5 to 1 in bottom line cash flow for the customer. A further note on this point: Value received is not completely economic. Value comprises the complete suite of benefits encompassed in the Economic, Emotional, Political and Physical realms of what your product/service delivers.

RPQL Position Availability: RPQL stands for Relative Perceived Quality Leadership. Forty plus years of research in the Strategic Planning Institute PIMS data base (Profit Impact of Market Strategy) indicates that the single most important factor affecting a business unit’s success is the market’s perception of the relative perceived quality of its goods and services compared to its competitors. One important point to remember—perceived quality is related to the segment of the market. Not all segments perceive quality in the same way. Charging after a market that already has an RPQL leader is equivalent of a military frontal assault on an entrenched position. Not a wise decision.

IntraMarket Network: As mentioned earlier, innovations diffuse more rapidly if there is a strong intra-market network through which the value proposition of the innovation can be communicated—person-to-person, customer-to-customer. The intra-market network comprises two parts a) its venues (events, forums) and vehicles (journals, publications, websites) and b) its intra-market opinion leaders.

Opinion leaders are the real geometric multipliers of the value proposition message. For opinion leaders to be most effective they need to have four important characteristics. First, they need to be rabid believers in the innovation and its value proposition. Secondly, they need to be well-networked. Third, they need to be highly credible in the network of interest and finally, they need to be natural sales people—anxious and completely un-shy about communicating new ideas to friends and colleagues alike.

The next five target market attractiveness assessment criteria are important as well, but if the market isn’t attractive after an analysis of the first seven the second five are not worth working through.

Profitability: Selling the innovation must be inherently profitable. If you feel you have to reduce price to gain traction, it may simply be that you have a questionable value proposition or your perception of the customer’s compelling need is misunderstood. It certainly should bring into question your thoughts about the economic equation factor. Sometimes simply changing the target market can change the profitability by allowing pricing in proportion to unique benefit—as in the flat panel terminal example stated earlier.

Competitive Turmoil: The higher the competitive turmoil the more expensive it will be to create a successful presence. The exercise of focusing down to a smaller, less competitive market segment, will provide a higher probability of surviving any inevitable market shakeout.

Brand Leverage: It’s easier to gain market attention for your innovation if your brand speaks innovation. Apple will easily get media and intra-market opinion leader attention for a new consumer, music or creative computing idea. Volvo will get attention for an innovative auto safety related product—like a car seat or anti-roll stabilizer for an SUV. Neither will get brand traction if they introduce a pillow or dinner ware.

Accessibility: Sometimes markets may be attractive but relatively inaccessible because of sales channel limitations, aggressive competition for limited shelf-space, import/export restrictions, licensing requirements or other considerations.

Perceived Value of Differentiators: This last factor comes into play when the competitive turmoil factor is less than optimum. It assesses the degree to which your differentiated position for the innovation, compared with your competitors’ approaches, has meaning and economic value in the target segment under assessment.

Conclusions:

What we have learned in years of helping our clients with the market introduction of their innovations is this: Focusing on those markets that exhibit the best composite results on the listed assessment factors results in:

More rapid adoption
Higher average selling prices
Higher profitability
Higher degree of customer satisfaction
Lower market launch expenses
More defensible positions
Higher probability of surviving shakeout
Learning how to do it consistently in the future
Less ownership dilution

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For more information about how to accelerate the market adoption of your innovative product, contact QMP at qmp1@qmpassociates.com or 503-318-2696

The Basics of Foundational Marketing

Posted on April 2, 2013August 25, 2014 by Jerry Vieira

“You can’t build a durable building on a weak foundation.”

We’d like to share an insight that has helped executives and business owners sort through all the hype and claims over the last several years about an ever growing list of “gotta-do” new marketing and sales techniques.

If you’re a General Manager, business owner or C-level executive, your marketing team probably approaches you annually with a laundry list of funding requests to support their critical marketing and sales programs for the coming year. Those requests may include any or all of; a website upgrade, a branding program, a social media expansion program, a blog, a publicity and PR program or maybe even a new six-figure trade show booth – not to mention the additional staff to help manage it all. How do you decide what to approve? How do you sort through all the hype and enthusiasm about each program and decide what will truly give you the best return for your investment?

The graphic below illustrates an alternative approach to selecting marketing initiatives.

Most people think of marketing as one or more of the items listed on the right side of the graphic — in the grey, typical-marketing circle. Stop a moment and consider the list. Is this what you think of when you think of marketing? If yes, join the majority club. If not, join the other group. It has fewer members – but they are the ones who have found the secret to getting greater return on their marketing buck.

Before those of you in the smaller, enlightened group get smug, remember “typical marketing” programs aren’t completely useless. Let’s be realistic. These days, unless you operate a lemonade stand that will only be open for two weeks in August, everyone needs a website. So let’s agree that, to some degree, typical-marketing expenditures are necessary – and in fact, required, once the foundational marketing base is laid.

But, back to the point – the hidden secret about marketing and what the people in the smaller group know that others may not is this; Rarely will any typical marketing initiatives produce truly breakthrough results — and they can tie up a lot of money! What really sets up top and bottom-line breakthroughs is Foundational Marketing. Foundational Marketing is the stuff in the oval on the left. Foundational Marketing is inexpensive and the primary, required ingredient in every major success.

For any typical marketing expenditure to be productive, Foundational Marketing must be done well. In our experience, foundational marketing tools and techniques have produced remarkable results. For example:

A software firm earned 1,000 new clients in just a little more than two years
A fledgling medical product landed 150 hospital placements in its first two years, with some orders exceeding $1M. Prior to using Foundational Marketing techniques, this product was in only two hospitals, with the largest single order only $20,000.
An electronics firm achieved a 50%+ growth rate for six years straight
A components firm increased their win rate by 15% while investing 33% less quoting time
A wholesale distributor generated a 47% increase in regional sales in 1½ years

None of these breakthroughs required a significant investment in typical marketing.

To contrast the effectiveness of the two types of marketing even further, in one of those cases above, after the success had been achieved using Foundational Marketing techniques a new management team invested in a mid six-figure re-branding typical-marketing program that didn’t move the needle a bit – losing the discipline of Foundational Marketing along the way.

Why don’t more firms adhere to Foundational Marketing disciplines?

They don’t know what they are: B-school educators are fantastic at teaching principles and concepts, but in general, weak at delivering a practical approach to moving those principles and concepts into practice. I speak from experience as, at different times, both an MBA student and MBA-level university instructor. Concepts and principles education does not equate to skills, tools and process disciplines. Most B-school graduates do not come out newly-minted with a honed skill set and tool kit.

They haven’t developed a standard tool kit: You are more likely to find a dozen carpenters that use the same field-proven tools and processes for their trade, than a dozen top B-school graduates that use the same tool kit and process for strategy development. Coming to the job site, most marketing practitioners have to create their own tools and processes, convince the executive team to learn, trust and use them and support the execution discipline to see the resultant strategies through to success. Not to place all the blame on the practitioner, many firms simply haven’t developed a Foundational Marketing process and tool kit.

It’s tougher to do: Typical marketing programs are an easy way out – particularly if everyone in the industry is “doing something”. They can be delegated and the deliverables are easy to see: a new web site, a new logo, a bigger show booth.

They don’t have the discipline to do the Foundational work first: Unless the top-dog insists that Foundational Marketing receives first priority and is the right way to do marketing, it won’t get done. Foundational Marketing is a “think-before-doing” approach.

They think it takes too much time: Building a good foundation doesn’t take long if you have the right tools. We have witnessed strategic decisions made in a few days with execution and success in as little as 90 days.

They don’t believe in it because they’ve never seen it work: Using and trusting Foundational Marketing principles does take some faith and practice, but the track record is proven.

Under the Hood of Foundational Marketing:

Practicing Foundational Marketing is really not difficult if you have the right tools. Good and sound foundational marketing tools are based on empirical marketing science. Even non-marketing people can learn and succeed using them. In a way, a good Foundational Marketing tool is like a cell phone. You don’t need to be an electrical engineer with an understanding of electromagnetic field and communications theory to use a cell phone. All of that has been done for you and integrated into the cell phone. Good Foundational Marketing tools have already integrated sound empirical marketing science into them.

Success with Foundational Marketing does require – and this is the difficult part – transforming the way your organization thinks and the way your team executes marketing and sales. It really comes down to a battle of the mind – more than a battle of the wallet. When your organization understands Foundational Marketing – and begins to use its tools and techniques, both the probability of success and the return on investment of your marketing programs skyrocket.

A complete Foundational Marketing approach has four components:

· Market Strategy: A proven and steadfast way to decide what market segments to focus on and what differentiated position to carve out for your firm and each of its products.

· Business Development Initiatives: These are about how you will approach the segment(s) of the market you have decided to target. While components of tactical (typical marketing) are included, emphasis here is on specific customers to target, specific messages to communicate, the customer’s buying process, channel-to-market decisions and leveraging the intra-market customer-to-customer communication network in the target markets of choice.

· Sales Disciplines: There are two parts of the sales disciplines component of Foundational Marketing. Both require training and consistency. First, an effective, consistent sales process is a must – one which qualifies, discovers needs, proposes good solutions, and wins/sustains long-term clients. The second part is a differentiated sales story that is meaningful to customers – one which assures that your unique benefits story is told consistently through all channels to all target customers. It’s a story that emphasizes the economic, emotional and physical benefits in the right priority, for the right customers, in the right market. Sounds obvious, but many clients actually fail in these two fundamental requirements.

· A Performance Driven Culture: Think of the components of Foundational Marketing as the gears of an engine, the culture of a firm is the oil in the oil pan. (See the figure below). To consistently achieve your goals, the organization’s culture must encourage teams to communicate, execute, adjust, think, make decisions and lead in an honest way. A culture of performance excellence is defined by: accountability, clarity of expectations, measurements and metrics, ownership, open and honest communication, fact-oriented, sense of urgency, rewards and consequences, frequent checkpoints and the ability to quickly and constructively confront barriers and problems. With a culture of performance excellence lubricating Foundational Marketing, the engine hums. Without the oil of a culture of performance excellence, the gears seize.

Can Foundational Marketing fail?

Foundational Marketing programs do fail – for one of three reasons: First, if an organization does not have the discipline to execute and follow through, any program will fail. Foundational Marketing programs are no exception. Secondly, it is possible that some firms are too far gone to be saved by a Foundational Marketing program. However, in 20 years of consulting, we have witnessed only one firm in the second category. They required a complete change of their business model to survive. They did survive, but at a much lower revenue level.

Finally, we have witnessed firms that have relapsed. Relapse is characterized by success with Foundational Marketing, followed by a reversion back to sole dependence on those items in the typical marketing list. Relapse is very costly in money, time and lost opportunity. A relapse typically occurs when a new, uniformed marketing and sales or C-level executive enters the picture.

A Final Word:

A good example of the need for foundational discipline is in the weight loss arena. The basis of all weight loss programs is discipline: discipline to eat better, discipline to exercise more and discipline to adhere to a healthy lifestyle. The latest exercise machine does not obviate the need for discipline.

So it is with Foundational Marketing. Good tools and processes are needed – but organizational discipline fuels the best results. Foundational Marketing, supported by a culture of performance excellence has proven again and again to lower marketing and sales costs, increase market share, achieve more rapid adoption of new products and increase significantly the firm’s return on investment.

To learn more about Foundational Marketing call the QMP Group at 503.318.2696, email us at qmp1@qmpassociates.com or connect with us through our Contact Us page where you can detail your challenges.

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The Biggest Sales Myth

Posted on March 10, 2013August 25, 2014 by Jerry Vieira

A sure bet on what sales people believe…

One of the first topics commonly included in sales training programs and books is a discussion of “Sales Myths”. Over the years I have heard a number of these myths and have my own favorite set of a half-dozen or so that we use in our sales training program.

The myth that is particularly revealing is implied in this question we ask to sales people:

How many of you have ever lost to an inferior offering?

When I ask this, I always accompany it with a warning that it’s a trick question. In spite of the warning, a nearly unanimous show of hands is the response.

That’s when the trap closes.

It’s all about perspective

The truth is that you never lose to an inferior offering. It may appear inferior in your eyes, and from your perspective. You may even be able to show the specification inferiority in absolute provable, numerical or physical terms. But, it’s not your eyes and perspectives that matter. The only eyes and perspectives that matter are those of the customer.

So, what is the real story?

Losing to an offering that is inferior in your eyes really means some, or all, of the following:

You didn’t truly understand the criteria the customer used to make the decision until it was too late.
You didn’t ask what the criteria were.
You didn’t develop enough trust with the customer for them to share the criteria with you.
You didn’t understand the circumstances that influenced the customer.
You didn’t understand, or were unable to advise the customer to re-consider the decision criteria.
You were selling into a poorly qualified opportunity, one that didn’t match the strength of your offering.

Test yourselves:

If you are a sales person, or someone who has access to the sales pipeline of your firm, select the top six opportunities in the pipeline. For each of these opportunities list the top four to six criteria, in decreasing order of importance, that the customer will use to decide what to buy – or even if to buy at all.

When we use this exercise in our training programs, the stunned and embarrassed faces in the crowd are something to see.

Not too long ago, we were working with a client sales person on his pipeline. He was proudly sharing page after page of opportunity strategy worksheets. On every sheet the decision criteria, a section we strongly encourage sales people to document and use in formulating strategies and action plans, were exactly the same.

I had to ask how that could be – and if that was truly what the customers were telling him. If it were so, it would have been the most incredibly homogeneous market I had ever seen.

He replied, “No, the customers didn’t tell me those criteria. I know how my customers make their decisions. I don’t have to ask.”

Was this response arrogance? Laziness? Fear of asking? Lack of belief that decision criteria expressed by the customer is relevant? Whatever the reason, this poor sales person embarrassed himself in front of his peers and management?

Phrasing the question effectively

Much of the value that sales people receive from sales training is in learning key phrases and techniques for asking tough questions. These questions might be about funding availability, decision-making power, the competitive situation, gaining access to other folks involved in the decision, or, in this case the decision criteria.

One of the common traps sales people fall into with respect to understanding decision criteria is assuming that while they are talking with the customer, decision criteria are naturally being revealed in the normal course of conversation. Sometimes they are. Sometimes they aren’t.

The safe stance is to assume that they aren’t revealed. So, here are some questions to assist in revealing the real decision criteria:

Assuming you are not the exclusive decision maker, would you feel comfortable sharing what you believe other members of the committee are concerned about and would use in selecting the final solution?

If you feel uncomfortable speaking for them, what benefit do you think there might be in gathering the decision makers and influencers to work through and collect all the decision criteria and perspectives?

Have they compiled their concerns, needs and preferences in any sort of document?

Is there a vendor’s guide that would help assure that we will meet or exceed all your criteria?

Of course, there is always the option of asking directly, “What are the decision criteria”?

In reality, based on the responses of the hosts of sales people attending our training programs, that last question is rarely used. The more common scenario is that sales people believe that they know everything about the customer’s decision process simply by having had a discussion.

A final check…

Even if you haven’t broached the subject of decision criteria directly, and believe you know enough from the conversation, it is helpful to run through the following routine to review what you understand the criteria to be.

“Thanks for taking the time with me, Paul. Before we break up here, would you mind if I spent just a moment to confirm that I understand the criteria you will be using to make your decision. Here’s what I inferred from the conversation. (Re-cap here).

When you finish, ask, “Is there anything I missed? Is there anyone else that we need to speak with who might have additional criteria?”.

Explicit, Implicit and Hidden Criteria

If you follow that dialogue you get only explicit criteria. It’s certainly better than not knowing anything – but it’s incomplete.

Implicit and hidden criteria are best revealed through keen observation. While much is said in sales literature about listening skills, keen observation skills are equally, if not more important.

Observing and noting the physical surroundings, the personalities of the buyers, the organizational and political situation in the customer’s firm, the personal ambitions of the buyers and body language can reveal approaches which meet implicit and hidden criteria. If the office is highly organized and neat, so should be your proposal, your meetings, your presentations and your communications. If the customer works in teams, package your offering as a team effort. Implicit and hidden criteria / requirements can be met at the sub-conscious, as well as the conscious behavioral level.

Keep in mind what Yogi Berra is purported to have said,

“You can see an awful lot just by observing”

A final point:

In the hands of the skilled sales person, dialogue and observation must work closely together to identify customer buying criteria. The more the criteria are understood the higher the probability of winning and the lower the risk of losing to an apparently inferior offering. .

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Learn more about the QMP process for understanding customer decision making and creating winning sales strategies.

Common Sales Myth #2 – You’ve Lost to an Inferior Offering

Posted on January 3, 2013March 20, 2014 by Jerry Vieira

When we ask salespeople in our workshops to raise their hands if they have ever lost a deal to an inferior competitive offering, they almost universally raise their hands – even though we have told them ahead of time, “It’s a trick question.”

The truth is: No one ever loses to an inferior offering.

“How can that be true?”, you ask. “How,” you may ask, “could anyone consider that crap, superior?”

If you lost, all the evidence indicates it wasn’t really an inferior offering, after all. That truth of it lies in two facts; 1) the decision-maker’s perspective and the values from which the relative superiority and inferiority judgement arose both differed from yours and 2) the outcome satisfied only one person’s needs – and that person wasn’t you. But, ultimately, the outcome is the final proof.

At the moment a customer, and/or the ultimate decision maker, makes a decision to buy another “inferior” offering instead of your “superior” offering, that other offering is being perceived as a superior alternative in the eyes of that decision maker – by a unique, hidden or secret set of evaluation criteria that you simply don’t understand or chose to ignore. Your personal opinion doesn’t, and didn’t matter. Relevant value is only in the eyes of the beholder – not the seller.

There are several reasons we are led to self-deceptively believe this harmful myth.

1. We, in sales, think all value is economic. That’s the reason we put so much emphasis on price competitiveness.

Perceived value can be economic, but it can also be emotional or physical. When my family was young, I remember spending a lot of time analyzing car models and test driving a half dozen or so, narrowing them all down to two finalists. I sequentially drove both of them home for my wife’s final OK. She ran out to the driveway, a new-born in her arms and our other child, a two-year old, clinging to her jeans. She sat in the first car while I held the baby. She didn’t drive it. No excitement.

I returned that car and came back with the other option – a different brand and model from a different dealer. We repeated the drill. While she was sitting in the second car, she reached down, ran her hand across the seat (not leather in those days) and said, “This is it. It feels right.” We bought that car. It had nothing to do with the performance, reliability, handling or any other criteria I was discussing with either sales person. I didn’t have a clue that a “feel” test was going to be the ultimate consideration and the final decision point. I thought, as the salesperson did, that I was acting as the “official” power purchaser and “ultimate” decision maker.

This “feel test” was an obvious physical value – not an economic or emotional one – and it held importance in the criteria by a “hidden” decision maker.

2. We don’t understand the real decision criteria. In the story above, I narrowed down the choices. However, there was another final hurdle that neither the sales person or the purchasing agent (me) knew of.

3. We don’t understand all the decision makers (See my new car story, above)

4. We emphasize the wrong product (or service) strengths. Not all strengths are meaningful to all buyers – or with the same relative importance. There is nothing more irritating and distracting than a salesperson spewing data, stats and features when you are trying to focus on the one, two or three most important things in your personal decision tree.

5. We try to sell to the wrong target customer in the wrong target market. We continually hear, particularly from inventors and entrepreneurs when we ask them who their target customers are, that “everyone” can use their new product, service or invention. This leads to inefficient use of sales time, and significant mismatches in message. Telling the whole story, while missing the relevant customer or market-specific benefits, is common and leads sales people to say things like, “They (the customers) just don’t get it.”

We have witnessed a company that believed so strongly in the universality of their value proposition nearly go out of business as they scattered their message as broadly as possible. Panicked by their rapidly dwindling marketing and sales pocketbook, lack of success and anxiousness to avoid failure, they engaged us. We told them to focus very tightly on markets and customers where the value received was the greatest. They finally agreed and the business began to turn around in less than 3 months. That simple change resulted in a four year run of breakthrough growth.

6. We don’t understand our own value proposition and differentiation: Each of our products or services should have a clearly articulated value proposition and differentiation in all three value areas; economic, emotional and physical. These values must be enhanced by the corporate brand – the ambient light that our products shine in. Johnson & Johnson, 3M, GE and Apple (to a somewhat lesser extent these days) all bask in the glow of that favorable corporate light. The corporate light typically shines an intangible emotional and implied physical light on products and services.

Don’t bail on price as a last desperate attempt to fix your perception mistake.

One final point: To think that price is the only variable available to trigger a buy is flat wrong. But that is the topic of another myth. Suffice it to say, if that were true we’d all be driving the cheapest cars on the road.

Watch our QMP Insights blog for Sales Myth #3: “It’s relationship business”

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Click to learn more about the QMP Sales Process and Skills workshops or call us at 503-318-2696 or through our Contact Us page .

Common Sales Myth #3 – Sales is all about Relationships

Posted on January 2, 2013April 29, 2014 by Jerry Vieira

It’s a Relationship Business!

That four-word phrase is probably the most common statement we hear when we talk to sales people about their business. It is even more common than the statement, “It’s a Price-Driven Market” – though more often than not those two statements travel closely together.

Do You Have Brothers and/or Sisters? The Limits of the Relationship

To challenge the assumption that businesses are primarily relationship-driven we ask salespeople the following questions. Here they are, with the typical answers.

Q. “Do you have a brother and / or a sister?” A. “Yes.”

Q. “Do you have a good relationship with your brother or sister?” A. “Yes”

Q. “If your brother or sister tried to sell you something that would be detrimental to your business, would you buy it?” A. “No (expletive deleted) Way”

Q. “What if they threatened to would tell your Mom that you refused to buy from them, would it change your mind?” A. Laughter. “No”

Here’s the point: All relationships, even good ones, have their limits

Relationships are based on trust.

Any activity that violates trust, violates and detracts from the relationship.

Let’s look at the Trust Equation, developed by David Maister, Charles Green and Robert Galford in their wonderful book “The Trusted Advisor“. According to Maister et al, Trust equals the sum of= (Credibility + Reliability + Intimacy) divided by (Self Interest).

T = (C + R + I) / SI

Anything a sales person or their company does to lower Credibility, Reliability or Intimacy, lowers Trust and damages the business Relationship. As you can also see from the equation, anything that blatantly demonstrates your, or your firm’s, Self-Interest also damages Trust and thereby the Relationship.

Nothing in the equation can affect Trust more than the amount of your self-interest perceived by the customer. The higher the Self-Interest perceived, the lower the Trust.

Here’s the point. Depending on the Relationship alone can be perceived by the customer as inherently demonstrative of high Self-Interest. In Relationship terms, “They want me only for my money.”

What Relationships Can and Can’t Do

Relationships can:

Get you an audience to make your case
Buy you some time and patience when you or your company screw up
Get you early, but not necessarily exclusive, notice of a new opportunity at an account

Relationships can’t:

Make up for a significant competitive shortcoming in your product or service offering
Repeatedly cover for your operational team’s inability to deliver
Make up for poor product or service quality
Find and win completely new accounts
Provide you more than a few percent price premiums
Make up for poor market targeting
Make up for fundamentally slow market momentum
Fix functional short-comings in your products

Here’s the Point: Don’t get complacent because you have good relationships.

Don’t Shoot Yourself in the Foot

Believing that your relationships give you enormous power is, for the most part, fallacious thinking, and can actually ill-inform you on what you and your company need to do. Here are some examples:

If it’s all about relationships, what impetus will your engineering team have to design better products?
If it’s all about relationships, why should your firm ever reduce prices or negotiate terms?
If it’s about relationships, why should operations need to worry about quality? Or delivery?

Here’s the point: Bragging about the customer relationships you have can simply provide unjustifiable cover for others in the organization to not execute their job as effectively as they should. Remember, it’s still a very competitive world out there.

One More Point: The Fallacy of the Rolodex of Relationships

More often than is advisable, a client will enthusiastically recruit a sales person based on the contacts that sales candidate has amassed during their illustrious sales career. Sales people treasure and protect to the death, their sales contacts and consider that list as a strategic personal asset. It becomes a key feature in the personal selling proposition they use in seeking a new job.

Rolodex provides a great tool for managing those. However, even the best list of Rolodex or CRM-managed contacts, can rarely, for the long term make up for business shortcomings in product, service, delivery, quality, competitiveness and value.

Let me illustrate. In 1970, General Motors had roughly a 50% share of the US auto market. That market share was supported by an incredibly, well-established national network of dealers and sales people. Everyone knew everyone.

Since 2000 General Motors had lost roughly 50% of that 50% share.

Here’s the Point: Relationships aren’t everything.

Recommendations:

As much as has been written in this blog about the fallacies and dangers of dependence on customer relationships, let me make a final few points.

You must continue to develop your business relationships
You must continue to nurture those relationships based on paying close attention to each of the key elements of the trust equation
You must not, for a moment, let the rest of your business team off the hook by bragging and convincing them they only need to depend on your ability to develop and maintain good customer relationships

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Click to learn more about standard and tailored QMP Sales Skills and Process Workshops or Contact Us at 503-318-2696 to discuss your sales and sales management challenges.

Common Sales Myth #4 – It’s a Price-Driven Market

Posted on January 1, 2013March 13, 2014 by Jerry Vieira

I truly sympathize with sales people who are dealing with commodity managers in large corporate purchasing organizations. Those procurement specialists can be brutal in negotiation. More and more they are driven by corporate edicts to “source overseas” or “reduce commodity purchase costs by 3% per year” or to “reduce the number of suppliers by 20%”.

The truth is, classifying what they do as “Negotiation” is not fair to Merriam-Webster’s definition of the word – or to anyone for that matter.

Can it get any tougher for manufacturers? The Rock

These days, sales people and their parent manufacturing companies commonly find themselves confronting a series of “non-negotiable” buyer requirements that would be laughable, if they weren’t so real and becoming more common:

– 90 day payment terms

– Guaranteed cost-downs

– The lowest cost – period!

– The highest possible on-time delivery

– Impeccable quality

– Unlimited time frame on returns

– “No-questions asked” returns

– No-charge, collaborative up-front engineering and/or marketing cost sharing

– Transparent margin calculations

– And the requirement to keep a buffer inventory of finished parts in the factory – owned, of course, by the supplier

The not-too-thinly veiled threat hidden among those requirements is, “If you can’t meet these terms, we can always find someone else to supply that part/service in Mexico, Asia, Brazil, India” or even, “We’ll build those parts here – ourselves, inside”.

We talked about the Rock above. Here’s the Hard Place.

In the banker’s office the CEO and CFO of the small manufacturing firm are hearing:

– Your cash flow is slowing

– Your margins are slipping

– Your credit line needs to be reduced and renegotiated

– We need to see your financials, monthly

– We need to tighten up our loan portfolio because of the lending debacle of 2008

– and… “No, you can’t have any more leeway”.

So, between the banks pushing for higher prices and margins on your products to improve cash flow (or you lose your financing), and your big customers pushing for lower and lower prices, what’s a small manufacturing firm to do? And, how does a sales person make a living if he isn’t price competitive. Isn’t some margin, albeit low margin, better than losing a customer?

What Price Competition Really Means

Price-driven competition means that one or more of the following statements are true:

The buyers in your target market perceive no meaningful performance or value differences between products from different suppliers – including yours
Your product offering actually has no real and meaningful differentiation compared to your competition for those customers in that target market segment
You, as a sales person, or your marketing team, are doing a very poor job of communicating your meaningful, market-specific differentiation to customers in that market
You are unable to economically quantify the value your product can deliver to customers in that market
You are aimed at the wrong market and customers – a market for which your differentiation does not actually deliver meaningful, economic, emotional or physical value

We have seen all of these situations in our client engagements – typically disguised and drowned out by the sales person’s pleading and cries to “drop the price”.

So What Can Be Done About This Kind of Situation?

The simple, yet most effective answer is: Decide which of the five statements above are true – then set about fixing them.

It is actually easier than you might imagine.

A Case in Point 1: Wrong Market Targeting

A client of ours had a new product that wasn’t selling well. It was price disadvantaged by a factor of 3 over competitive offerings in the general market!! In spite of this, the new business development team was hustling to set up general distributors across the country. They were counting on a major price reduction they were politicking for with corporate to spur sales – when in fact corporate was quietly considering shutting the product line down.

We were asked to determine whether the product line was worth saving.

What little sales there were, were focused in two very narrow markets. Simply by asking customers that bought the few units that were sold in each of these markets why they bought this “over-priced” alternative, a set of inherent, here-to-fore un-promoted competitive advantages were revealed.

Then simply by pivoting the sales team to focus on the market in which the most compelling benefits were revealed the following results were realized:

– Not only did the price not have to be reduced, the market’s desire for added features quickly brought the average selling price of the top model to 4X the original price!

– The single largest order for this product had been $20,000 – now with focus and a re-promoted and re-emphasized set of market-specific benefits the largest order from a customer exceeded $1,000,000

– The number of new customers buying this product quickly rose from 2 to over 150

– Price reductions were no longer discussed

– The effort to saturate the market with distribution outlets was no longer considered necessary and saved a ton of money

Case in Point 2: Poor Economic Benefits Communication

In another instance a client was puzzled by the slowness with which their new product, designed specifically to help customers save substantial amounts of money, was not selling better. The root cause was discovered to be the distributor sales manager who simply “.. did not believe the economic argument” and refused to promote it – in spite of the customer testimonials to the effect of the savings realized.

A rapid individual re-education was required, followed by a re-training of the distribution sales force, and the product’s sales turned up shortly afterwards.

Case in Point 3: The CEO Gap

I once asked a group of 12 B2B CEOs to take out a blank sheet of paper and write down what they perceived as their best product offering, the product that they thought customers should appreciate the most. I also asked them to identify an ideal customer for that product.

I then asked them to identify the factors and calculate what economic benefit that ideal customer was likely to receive from that product. They stumbled. None of them could do it in the 15 minutes allotted.

If they can’t do it – can their sales people?

The Point:

Price-driven markets and situations are often a symptom of; a) misdirected market targeting or b) a lack of understanding of, and poor ability to communicate, market-specific economic, emotional or physical benefits of your product offerings to potential customers.

Customers buy for their own reasons, not yours. No matter what you have convinced yourselves about the value customers should see, they saw what they were looking for when they decided to buy. Sometimes it’s not what you want them to see, but if it worked it is delivering real value.

So, if your sales people are screaming for price reductions and you have customers buying when you are not the cheapest price – those customers are seeing something you are not. You need to find out what that is and why. And if they are not buying when the economic case is real, independent of the price, your communication is broken somewhere along the line.

Oh yeah, one final point. If price was truly the ultimate deciding point for decisions, we’d all be driving Versas. If it helps, here’s a link to Car and Drivers article on the 10 Cheapest Cars

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If you’d like to learn more about dealing with price-based competition call Jerry Vieira, CMC at 503.318.2696 or email to jgv@qmpassocites.com. The QMP Website is at www.TheQMPGroup.com and more insights can be found at The QMP Insights Blog

Common Sales Myth #5 – Closing Techniques are Effective

Posted on January 1, 2013March 13, 2014 by wadmin

Let’s start this discussion with a stipulation that all successful sales have to go through some sort of closing stage. Nothing happens until a customer or client agrees to pay your company for the delivery of a service or a product. So, in the strictest sense, I guess we can call that a “close”. We can also imagine that all commerce in the world would come to a screeching halt unless some kind of transaction closing happened.

So, good closing techniques are essential – right? And if that’s so why am I targeting closing techniques as a myth?

A Closing Process is Different than a Closing Technique

A “Closing Process” is likely to be mechanistic. Get the quantity and delivery dates correct, get the PO issued and confirm with the customer your ability to meet the delivery schedule. These days that process may be enabled by all sorts of mobile systems, and field inventory accessibility tools. That’s mechanistic closing.

“Closing Techniques” are something different all-together. Closing Techniques are many times designed to manipulate the emotions of the buyer, or to create a sense of urgency, guilt or fear, toward the end of triggering a commitment to buy. At one level, an example might be a car salesman saying something like, “Well, these models are going fast. In fact, there was a guy in here earlier that test drove and liked the exact car you just expressed an interest in. He said he was bringing his wife back this evening for a final decision.” Or, in a business-to-business environment, “We are just about at capacity and if you really need delivery in July, we need to get your order committed and on the schedule no later than end of this week.”

Well before you assume that closing techniques are cool, perhaps even having been indoctrinated by the training your own sales management required, consider the following information – then decide for yourself.

The Impact of being “Closed” by a “Closing Technique”

Neil Rackham in his book “SPIN Selling” reveals the results of 10 years of research done by the Huthwaite Center into high $-value sales success, analyzing 10,000 sales people and 35,000 sales calls in 27 countries. They studied 116 factors that might contribute to sales success.

The results of that study concluded that customers with which “Closing Techniques” were used (emotional, urgency or fear) were:

Less likely to buy
Less likely to re-buy
Less likely to be satisfied after the buy

Admittedly that is an extremely brief description of his work and its conclusions. But it is compelling – and I strongly recommend all sales managers read “SPIN Selling“. It may alter, for the better and forever, your thoughts about training your sales people to use “Assumptive” closes, the “Standing Room Only” close, the “Alternative” close, or any other trick closing technique.

The Huthwaite SPIN model offers an excellent, and more effective, sales process alternative. SPIN is an achronym, and stands for Situation, Problem, Implication and Need-Payoff. The SPIN selling process trains people how to use questions of each type to win a sale.

So, Why is So Much Emphasis Still Placed on the Training and Use of “Closing Techniques”?

Today, the pressure on Sales Managers to produce sales results is higher than it has been in years. Foreign and price-based competition, combined with a still iffy and sluggish economy is resulting in significant pressure on small-to-mid-sized firms. The result is that CEOs, Owners and Sales Managers believe that closing techniques will somehow move a sale forward more quickly. But, in my experience I find that they are, for the most part, ignorant of what the data from the Huthwaite study reveal – and ignorant of other more effective sales techniques. And, they may be pressed to find the time or money to embark upon such a change of direction and approach in mid-stride.

Customer and Client Collaboration Works Much Better

So rather than disenfranchising your sales prospects with slick closing techniques, consider a sales approach more like the Winter Olympics sport of curling. A good sales person is like the “sweeper” who, through patient and detailed questioning, problem solving and collaboration leads the customer to the best answer to help them achieve their goal.

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Revitalizing Stalled Sales

Posted on January 26, 2012June 13, 2013 by Jerry Vieira

As the economy continues to bounce along, (some say showing signs of a small movement off its bottom while others disagree), business owners and managers are getting impatient to find ways to boost revenue. Not only are we seeing evidence of this within our own client base, but also our “Insights” blog post on “Diagnosing Stalled Sales”, published in June of 2011, has re-surfaced recently as the top-read posting on the all time QMP blog popularity-list. The second most popular blog on that list is “The Marketing and Sales Audit”. Business leaders are looking for revenue answers. Standing idly by and waiting for the economic recovery is no longer a reasonable option.

As I re-read that “Diagnosing Stalled Sales” post, I realized that it was too diagnostic and not prescriptive enough. After all, what good is a diagnosis without a treatment? Apologies to those readers who came away from that post less than satisfied. This post makes up for that shortcoming.

Deciding What to Do

The first thing to recognize is that all revenue increases must come from one or more of the following four sources: 1) introducing new products, 2) stealing market share from competitors (new account wins in your current markets), 3) the natural momentum of your current markets or 4) penetrating new markets.

New Products:

If you have a new product-development initiative in the works, good for you. But pursuing this option for increased revenue typically takes time and money. Both are in short supply these days for small to mid-size businesses, exacerbated as our clients currently relate, by the challenge of tightened banking requirements.

New product development initiatives typically fall into one of three categories: a) improving what you already offer, b) meeting some new customer requirement or c) launching a breakthrough.

Meaningful overnight revenue upsides are rare from new products as it takes time to develop, tool, test and introduce a new product. It then takes time for the market to become aware of it, understand it, change their old ways of doing things (and who they may be buying from) and begin to adopt your new product. There are ways of accelerating this adoption rate, but only if the product is a breakthrough – something that fundamentally turns the market on its ear. Even in that case, time is the challenge. Twenty-five years into its existence, I still meet educated people who don’t own a personal computer, and it took 50 years for the automobile to be completely adopted by consumers.

Don’t get me wrong, new products are strategically important for a firm. I strongly encourage new product development, particularly if the product fills some need the customer didn’t even know they had – a real breakthrough. Breakthrough products typically bring sustainable growth, give customers a meaningful reason to change and provide higher margins. (More on this subject in a future blog post on the subject of Innovation).

So, keep developing; keep considering new ideas; just don’t expect the heavens to open and revenue to come raining down quickly.

Stealing Market Share from Competitors:

One of the fundamental principles of military strategy is, “The hardest ground to capture is the ground that is occupied. It typically takes anywhere from 3 to 6 times superior resources to take over a position from an occupier. Interestingly, most of the initiatives that small to mid-size companies attempt (unwisely) to increase sales fall into this, the most challenging category.

These days, there are a number of popular marketing initiatives that are all the rage – search engine optimization, the use of AdWords, re-branding, social media and database marketing – to name a few. These are not inherently bad or good. However, the key to achieving significant growth with any of them is to assure their use in a focused way combined with growth options #1 (Introducing New Products) or #4 (Penetrating New Markets). Using them in a focused way assures maximum return for minimum investment.

Some of you may decide that this option, stealing share from competitors, is the only one available to you and that you don’t have time and money for new product development or to try to penetrate a completely new market. If you do, the road will be difficult and certainly take more resources and time than you anticipated. If you can’t be dissuaded, here are some tips to make it easier:

a) Try to fragment your competitor’s market: Find and target sub-sets of customers that have a common dissatisfaction with the competitors’ offerings. The Japanese didn’t attack the US auto market all at once on all fronts. They focused first on the most vulnerable and receptive set of customers with a quality small car offering. After establishing this foothold they expanded based on their proven quality reputation.

b) Tailor a market-specific benefits story to the customers in the specific target market fragment you wish to penetrate. You may even wish to set up a separate website for that specific market. At minimum you will need a focused sales presentation.

c) Focus your sales team on that segment and train them to tell that market-specific story. Make a concentrated effort for 90 days with frequent feedback from the sales team to see if the story is gaining traction. The test of traction is a growing sales pipeline.

d) Never lead the penetration effort with pricing reductions. You’ll hurt yourself.

The Natural Momentum of Your Markets:

This is the primary problem most small-to-midsized businesses are dealing with. It is true that all boats rise and fall with the tide. That doesn’t mean that some boats don’t move around the bay faster than others, whatever the tide situation. There are always segments of a market that trend opposite, or move faster than, the overall economy. If the economic momentum of your primary target market has slowed, and doesn’t look like it will return quickly, then it’s time to consider growth option #4 – penetrating new markets.

Penetrating New Markets

The requirements for a successful penetration of a new market are: a) a good set of target market attractiveness assessment criteria, b) a high degree of focus in your attack on the market and c) rapid feedback and re-targeting process to use as required. You need not make a big, costly production of launching an initiative at a new target market. Assessing attractiveness, focusing and gathering intelligence about receptivity (basically validating the market’s attractiveness) is not a big deal.

For each of the following questions, start with the phrase, “To what degree..” and score on a scale of 1 to 10.

… does this market exhibit sustainable economic, demographic or regulatory momentum?

… do customers in this market have a compelling problem that can be solved by our product?

… does our product offer a clear competitive advantage in solving that problem for the customer?

… does solving that problem reap a meaningful reward for the customer – economically, emotionally or physically

… is there a competitive leadership position available in the market?

… can we easily reach customers in this market?

… is there strong intra-market communication between peers in this market?

… can we sell into this market profitably?

These criteria will provide a starting point for a relative attractiveness assessment. You may wish to use more, or different, criteria.

Doing it:

It is common in slow economic times for sales teams to increase their activity in trying to sell to a wider range of prospects, try to penetrate large accounts that competitors own, campaign for price concessions to win new business and chase opportunities that are a marginal match for the firm’s capabilities. As driven by the survival instinct as these activities may be and as resourceful as they may appear on the surface, they are typically non-productive. In fact, they can be hugely counter-productive. The results of such efforts are typically depressed profitability, unsustainable success and trapping the firm into businesses and/or products it cannot maintain. Such activities can also dilute customer support resources, jerk around product development and operations resources, damage the firm’s quality reputation, start price-wars and cause a distraction of the business from what it does best. It can take many years to recover from the negative consequences of impulsive sales actions taken in the fever and panic of an economic crisis.

I state the case in a dire scenario because the real key to success is focus and feedback. Focus means staying focused on the target market you decided upon using the criteria above. Feedback means monitoring progress, receptivity and success frequently and adjusting quickly.

The discipline of a limited number (one or two) highly focused initiatives targeted at specific new markets, followed by rapid sales feedback, has consistently produced good results. When followed-through with discipline the results have been significant. Our subject firms have won new clients, avoided price competition, found new ways to provide additional value to customers, increased selling prices, reduced the hysteria associated with trying to respond to every quote that comes within 100 yards of the door, achieved double-digit increases in win rates and made rapid strategic adjustments that saved them from economic disasters.

The approach we suggest requires the adoption of three basic process disciplines: 1) rapid market assessment, 2) rapid and focused launch initiatives and 3) disciplined and frequent field sales feedback. While these disciplines may be different than what your organization has used in the past, they are easy to learn, cost-effective to deploy and yield a higher probability of success – in both challenging and healthy economic times.

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We invite you to read our related blog posts “Diagnosing Stalled Sales” and “Finding New Markets“

The Big Deal: Sorting Fact from Fiction in the Sales Pipeline

Posted on August 4, 2011August 25, 2014 by Jerry Vieira

The Big Deal

Every sales manager, business owner, general manager and CFO, at some point in their careers, have been entertained by the overly-enthusiastic sales person describing the “Big Deal” that was about to close. And unless those managers were completely naïve and inexperienced, a twinge of skepticism should have arisen. Was what they were hearing, in fact, real?

When hearing about a “Big Deal”, managers must confront the challenge of what to do about it – ignore it, or prepare. Preparation may comprise some or all of capacity planning, inventory commitment, equipment capacity increases, cash planning and workforce planning. Failure to anticipate these factors can result in an inability to deliver to the customer what they want, on time, should the deal actually break. On the other hand, a knee-jerk financial commitment based on the potential of the deal, can leave the firm with a lot of unusable inventory should the deal fail to materialize.

So, how does a manager judge the reality of the “Big Deal”?

Here’s an old joke that serves as a guideline for the most skeptical.

Question: How do you know when a sales person is exaggerating?

Answer: His lips are moving.

While this approach may appear easy, it is not dependable. There is a better way to sort through the reality of the “Big Deal”.

Ask Six Basic Questions:

The likelihood of closing a “Big Deal’ can be assessed by answering six basic questions. As you answer these questions, keep in mind is that the answers to the first five are only valid from the customer’s perspective.

Question 1: Compelling Need

To what degree is the prospective customer confronted with a real, compelling problem or challenge that needs to be addressed quickly or can the customer do nothing?

Research has shown that between 30% to 50% of all opportunities in a sales person’s pipeline never actually close. The customer simply never buys anything. These are called “No-Decision” outcomes. The sales person seems to be the only one convinced that there is a customer compelling need that will result in a buy. No matter how convinced your sales person may be that the customer has a need, the only opinion that counts is the customer’s.

To further pursue this line of inquiry, you might continue by asking: Is there a deadline by which the customer problem must be fixed? Is there a significant economic penalty, safety consideration or other obvious consequence if the customer problem isn’t fixed? Another revealing question is, “Can the customer do nothing?” Or, “What is the economic or other consequence to the customer of doing nothing?”

The lack of a compelling need, leads to the large number of “no Decisions” in a sales persons pipeline.

Question 2: Economic Benefit

To what degree is there a significant economic benefit to the customer if the problem / challenge is resolved or the need filled?

Businesses, too often evaluate the economic value of a sales opportunity only from their own perspective. How much revenue or commissions will it bring to us? While this is a good way to evaluate attractiveness in terms of the bottom line, how much money your firm can make is completely irrelevant to the likelihood of the deal closing. In most business-to-business environments, decisions to buy are made by customers based only on the degree to which “they” believe that “they” will make money. In other words, there must be a significant economic benefit in their favor, well beyond the cost of purchasing your product or service, for the deal to close. The economic balance must be disproportionate in favor of the customer. This is the basis or all ROI.

Question 3: Match

To what degree do your capabilities (products and services), precisely and completely meet the needs of the customer?

As convinced as you may be that you have a significantly well matched solution which solves every dimension of their challenge, you only score closing points if the customer believes it.

Question 4: Competitive Position

To what degree does the customer believe your solution is the best of all the alternatives available?

While a number of competitors may provide a reasonable match to the problem or need, all alternatives are rarely equal. Let me repeat for emphasis. Convinced as you may be that you have a significantly advantaged solution, you only score points if the customer believes it with the same conviction. And unless you can translate that differentiated position into a differentiated economic benefit to the customer, you miss a great opportunity to solidify your advantage in the customer’s eyes.

Question 5: Champion

To what degree do you have a high-level, influential and authoritative decision maker believing your solution is best?

A “Champion” is a person in the customer organization that likes your solution, believes it is in the best interest of their company to select it, wants it to win and is working toward that end. All Champions are not equal. The only Champions that really count are those with the highest composite score on three dimensions: Influence, Power and Affinity.

Influence is the degree to which they can influence a decision. The degree of influence may arise from technical expertise, seniority, family influence, organizational rank or some other source. Authority is the degree to which they can unilaterally make the decision and Affinity is the degree to which they are attracted to your solution.

Champions that are likeable, who like you, and are always willing to have lunch with you, are not “real” Champions unless they score high on the Influence-Power-Affinity scales.

Question 6: Leverage:

To what degree does winning this opportunity bring additional benefit to your company?

This is the only one of the six criteria that; a) doesn’t increase (or decrease) the credibility of the opportunity and b) is only important from your perspective, not the customer’s.

Leverage may exist in several forms: straight out earnings, a new first-time market capability, a first-win at a new account or a technological breakthrough that can be leveraged to other customers.

Even though it’s not customer-centric this factor is good to evaluate, so you can assess the benefit of concentrating and/or redeploying assets to winning this “Big Deal”

Getting to Reality:

The word confrontation can have a bad connotation, but for purposes of analyzing the “Big Deal”, let’s agree that confrontation simply means getting to the reality of it in a respectful, yet determined, way.

Some managers find it difficult to confront a sales person about the reality of a “Big Deal”, particularly when others are in the room. Presumably this is out of respect, to avoid the embarrassment of seeming confrontational, or to avoid appearing not to trust an employee. One way or another, these emotional barriers to assessing reality need to be overcome.

A highly respected local CEO was participating in panel on Performance Management recently. He was asked how he avoided hesitating and how he handled the discomfort associated with confronting these and other kinds of important issues. His response, “I was always more afraid of the consequences of not confronting the issues.”

There’s typically a lot riding on a “Big Deal”. The six areas of inquiry listed above will help you and your organization stay focused, concentrate where the opportunity is truly best and allocate scarce resources appropriately.

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Learn more about the QMP sales process for accurately qualifying and closing sales opportunities.