Professional Documents
Culture Documents
RETHINKING THE
SALES FORCE
THESUMMARYINBRIEF
INSIDE. . .
Why Create Value?
Different Customers,
Different Values
Transaction Selling
Consultative Selling
Enterprise Selling
Changing Mindsets
Whatisthepurposeofasalesforce?
WhenauthorsNeilRackhamandJohnDeVincentisaskedsalespeople,sales
managersandsalesvicepresidentsthisquestion,theyreceived(invariousphrases)
thesameanswer,overandover:Asalesforcecommunicatesthevalueofyour
offering.
Inotherwords,accordingtotheseprofessionals,thejobofasalespersonistoexplain
thefeaturesanduseofaproductorservice.Ortouseacommonimage,salespeople
arelittlemorethantalkingbrochures.
RackhamandDeVincentisdisagree.Asalesforceshouldnot,andmustnot,belimited
tocommunicatingvalue.Itmustcreatevalue.
Noorganizationcansurvive,theauthorsargue,ifitdoesntfindawaythroughits
productsandservicestocreatevalueforcustomers.Everyfunctioninthe
organization,fromproductdesigntoaftersalesservice,mustbefocusedongiving
customerswhattheywantandneed.
Andthatincludesthesalesforce.For,asRackhamandDeVincentisexplainonthe
followingpage,customersdontneedtalkingbrochures.
Thissummaryshowsyouhowtotransformyoursalesforcefromvalue
communicatorstovaluecreators.
Specificallyyoulllearn
Howallcustomersfallintooneofthreecustomercategories:
Howtomatchaspecificsellingstrategytransactional,consultative,or
whattheauthorscallenterprisesellingtothecategorythatfitsyour
customer;
Howtocreatevalueforyourcustomerswithineachsellingstrategy
Andtheresmore.Howtoredesignthesalesprocessdependingonthetypeof
customersyouhave.Howtomakechangestoyoursalesforcewhentheyarepursuing
thewrongstrategy.Howtorethinkthesaleschannelstoyourcustomers.
Butthefirststepistounderstandwhytheeraofthetalkingbrochureisover.Turnthe
pagetofindout.
Sothebuyersspeakupagain.
Forgetthepitch.Werenotimpressed.
Whatelsecanyoudoforus?
Business Buyers
Are Watching the Costs
Globalization and
deregulation are creating a host
of new competitors from around
the world and from different
industries. To remain competitive,
businesses need to bring their
costs down.
Financial restructuring is also
having a major impact. The rash
of leverages buyouts and mergers
and acquisitions created massive
debt, which also pushes
companies to focus on lowering
costs.
The result: Businesses are
more price sensitive and value
conscious in their purchasing.
For example, business
purchasers now look at the
lifetime cost of a product or
service, not just the initial cost. A
machine part that is cheap
initially but that requires higher
maintenance or higher operator
skills is more expensive in the
long run.
Buyers are also segmenting
suppliers, for example, by
strategic importance or cost of the
product. They are ready to invest
time and money in developing
partnerships with suppliers of key
components --- but shop around
for the best price on standard
parts.
valuestartsandendswiththeproduct.
Forextrinsicvaluecustomers,valueis
notlimitedtotheproductitselfbutin
howtheproductisused.Theyarelooking
forsolutionsandapplications.
Extrinsicvaluecustomersbelievetheir
supplierssalesforcecanbevaluableifit
fullyunderstandstheirneeds.These
customerswantthesalesforcetotake
thetimetodeveloptheirunderstanding.
Strategicvaluecustomersdemand
muchmorethanadvicefromthesupplier
salesforce.Theywanttoleveragethe
corecompetenciesofthesupplieritself.
Strategicvaluecustomersarelooking
forapartnershipofequalsinwhichthe
twopartiesjoinforcestodevelopthe
customersproduct.
Transactionsellingoffersthebestset
ofsellingstrategiesandskillsforintrinsic
valuecustomerswhotreatsuppliersasa
commodityandaremainlyinterestedin
priceandconvenience.
Transactionsellingisfocusedoncost
reductionreducingthecostofthe
processandmakingthe
transactionhasslefree
forthecustomer.
TheCarMaxchainof
usedcardealerships
hasautomatedkiosks
givinginformationon
whatsavailableandat
whatprice.Customers
avoidcompletedthe
bothersome
negotiationswith
salespeople.
Consultativeselling
fitstheextrinsicvalue
buyerwhowants
morethanjustthe
product.Asthename
Goodbye Segmentation
By Customer Size
Traditional sales forces segment
customers by purchase size: one set
of strategies for small customers,
another for medium customers, and a
major account strategy for large
accounts.
Size is irrelevant to value,
however. A large customer that buys
paper clips in bulk doesnt need
consultative selling, while another
large customer looking for machine
tools may want that supplier advice.
The exception to the rule is
enterprise selling, which, because it
requires huge investments, involves
both suppliers and customers of
substantial size.
suggests,consultativesellinginvolves
givingadvicetobuyersforexample,
helpingcustomersunderstandtheir
problemsandissues.
Microsoftssalesforceoncesoldbulk
softwaretocorporateaccounts.Now
Microsoftproductsareoftensoldthrough
independentsolutionproviderssuchas
systemsspecialists.
Enterprisesellingisrequiredfor
strategicvaluecustomers.Inenterprise
selling,boththeproductandthesales
forcearesecondary.Theentiresupplier
organization,usuallythroughcross
functionalteams,isinvolvedin
contributingtothecustomerssuccess.
AppliedMaterialsdesignsandproduces
chipmakingmachines.Morethanone
hundredAppliedMaterialsemployees
fromengineerstoaccountantswork
withcustomerIntelonadailybasistomeet
Intelsneeds.
Thefollowingpageslookatthesethree
strategiesinmoredetail.*
TRANSACTION SELLING
facilitatingthetransactionbyreducingthecost,risk,or
difficultyofacquiringtheproductorservice.Youcould
forexample,eliminatethesameforce.Thatswhat
Saturndid.Inadditiontoallowinglowerprices,
eliminatingthesalesforcesavedcarebuyersthehassle
ofwhatshouldbeasimpletransaction.
Anotheroptionistomovetolowercostchannels.
Recognizingthatcomputerbuyinghadmovedintoa
transactionphasemostcustomersknewwhatthey
wantedMichaelDelldevelopedadirectsaleschannel
forcomputers.
AmericanExpressschargecardservicecould
havedevolvedintoatransactional
environment.Toavoidthis,AmericanExpress
offersanumberofspecialservicesthat
differentiatethecarefromothers.For
example,customersareautomaticallyinsured
whentheyusethecardtorentacar,it
guaranteeshotelroomseveniftheyarrive
late,andthecardcanbereplacedwithin
twentyfourhoursnomatterwhereonearth
customerslostit.
Anoteofwarning:Someescapeattempts
candestroyvalueinsteadofcreatingit.For
example,dontbeefupyourtechnicalsupport
staffforcommodityproducts.Customersstill
wontneedyourhelp.Insteadofbreakingfree
ofthetransactionalsale,youveonlyaddedto
yourcostsandmademattersworse.
Athirdoption:Reducethecostof
thesalesforce.Forexample,
culminatenonvalueaddingactivities,
suchasfrequentsalesmeetingsand
timeconsumingadministrative
reports.
Exit
Somecompanieshavemanagedto
maketransactionsellingprofitable.In
mostcases,however,transactionsales
offertheleastadvantagetosellers.
Buyerswhocaneasilytaketheir
businesstocompetitorsareinthe
driversseat.Somecompaniesare
findingthatthebeststrategyistocut
theirlossesandrefocustheir
resourcesonsalessituationinwhich
theyhaveabetterchanceofsuccess.*
CONSULTATIVE SELLING
Consultativesellingdoesnotworkin
everysituation.Ifyourproductisthe
sameaseveryoneelsesorthecustomer
knowsexactlytheproblemstheyhave
andthesolutionstheywant,consultative
sellingdoesnotaddanyvalue.
Manyorganizationsfind
themselvesdependentonrainmakers
highlypaidsellingsuperstarswhohave
thecontacts,knowledgeandskillsto
makeconsultativesellinghappen.
Theproblemwithrainmakersis
thattheyarescareandtheyarefickle.
Likeallsuperstarswhoknowtheirworth,
rainmakerscanbeluredtoacompetitor
fortherightprice,leavingyour
organizationinalurch.
Arainmakerscontactsarehard
toreplace,butyoudonthavetoremain
hostagetorainmakersifyoudevelop
valuecreationcapabilitiesintherestof
yoursalespeople.
Youcantransferarainmakers
abilitytohelpcustomersunderstandtheir
needsandfindsolutionsthrough
Coachingandtraining
Support,tools,andinformation
Aguidingsalesprocess
Inotherwords,giveyoursalespeoplethe
coachingtoasktherightquestions,
accesstoasophisticateddatabaseof
ENTERPRISE SELLING
underthecontrolofasalespersonor
evenasalesteam.Therearemanymore
peopleandmanymoretypesofpeople
whoparticipate.
Inenterpriseselling,thecustomerbuys
theentirevaluecreatingabilityofthe
enterprise.
TheBaxterStonecaseinvolvedsales,
purchasing,andsalessupportstaff,but
alsoproductionstaff,plantengineers,
materialsmanagers,andmanyother
functions.
ForExample,aconsultativesalesperson
wouldmeetwithacustomerdevelopan
understandingofhisorherneeds,andfind
theappropriateproducttoresolvethose
needs.
Inanenterpriserelationship,the
customersR&Ddepartmentwouldworkwith
thesellersR&Ddepartmentonanew
producttofulfillthecustomersneeds.
Unliketransactionalorconsultative
selling,theenterpriserelationshipisnot
Setting
strategy and
agenda
Supplier can
influence and
improve strategic
agenda
Identifying
execution
gaps
Anothercharacteristicofenterprise
sellingistheequalityofthetwo
companiesintherelationship.Ina
transactionalsaleespecially,vendorsare
inferiorsatthebeckandmercyoftheir
customers.Consultativesalespeopleget
morerespectbuttheyarestillnotequals.
Inenterpriseselling,thesellerand
buyerareequalpartnerscreating
customervalue.
Creating Value
Howdothetwopartnerscreate
value?Insimpleterms,theycreatevalue
byredesigningtheboundarybetween
customerandsupplier.
Thetraditionalboundarybetween
customerandsupplierisawallof
indifference.Afterall,thetwocompanies
areseparate.Whateachcompanydoes
onitssideofthewallisofnoconcernto
theotheraslongascontractual
expectationsaremet.
Thesuppliersproductionschedule
doesntmatchthecustomers
requirementsschedule.Thusthe
supplieriseitheroverproducing,
leadingtoexcessinventory,or
underproduction,leadingtolossof
sales.
Thecustomeronlycaresthatthe
supplierdeliversthepartontimeandthe
supplieronlycaresthatthecustomer
paysontime.Theproblemwiththis
Eachcompanyhasitswonlogistics
systems,includingseparatebutoften
duplicatepaperwork,transportation,
andwarehousing.
Thecustomerisdoingthingsinternally
thatthesuppliercouldnobetter.
Exploring
relationship
feasibility
Supplier can
provide resources
for exploring the
benefits and costs
of a high impact
relationship
Creating
Joint
vision
Supplier can
act as a
business
equal to setup
goals, metrics
and guidance
system for
relationship
Initiating
Enterprise
relationship
Supplier can
invest
resources to
ensure early
successes
boundaryisthatitcreatesinefficiencies.
Someexamples
Eliminatetheboundarywallbetween
supplierandcustomerandeachofthese
issuescanbeaddressed.ForExample,a
utilityreducedthetypesofcablesitused
fromtwentyseventonineinorderto
allowitscablesuppliertooptimizeits
productionscheduleandreduceexcess
inventory.
Inanotherexample,WalMartand
Procter&Gambleworkedtogetherto
eliminateduplicationintheirlogistics
process,allowingP&Ggoodstoreach
WalMartstoresatamuchlowercost.*
Improving Transactions:
Process Without People
A smooth cross-functional process
adds value in enterprise selling. In
transactional selling, add value by
designing a process that reduces the cost
of increases the convenience of the
transaction.
The way most transactional
processes are improved is by designing
out the sales person.
New Brunswick Telephone, for
example, created interactive phone
stores. Customers can get billing details,
make account inquiries, and buy a range
of products and services through their
touch-tone telephone or computer
twenty-four hours a day ---- all without
talking to a single sales person. With this
new process the cost per transaction fell
from eleven dollars to less than half that
amount.
Theanswer:Breakdowntheconsultative
salesprocessintoseparatestepswhat
wecallmilestones
Salespeoplefirstdevelopeda
valuehypothesisthatexplainedhow
thecompanywouldcreatecustomer
valuebasedontrendsthataffected
selectedindustriesorcustomertypes.
Theynextidentifiedspecific
prospectswhomightbenefitfromthe
valuehypothesis.Finally,theymetwith
thoseprospectstocustomizethe
hypothesis.*
Inconsultativeselling,whichdependson
moreindepthknowledgeofcustomers,
youmightwanttostructurearound
accountsorcustomers.Thus,aglobal
accountteamwouldsupplythecustomer
foritsworldwideneeds.
Tomakesignificantsalesforcechanges,
focusonthefourchangelevers:vision,
structure,capabilitiesandmetrics.
Thesametypeofaccountstructureis
appropriateforenterprisesales,except
thatseniormanagementmustleadthe
accountteams.
Vision
Youmuststartwithaclearvisionforyour
salesforce.Thatis,theymustclearly
understandyourorganizationscustomertype
andthetypeofsalesrequiredforthese
customers.
Capability Building
Establishingtheappropriateskillsor
capabilitiesinyoursalesforceisanother
majorchangelever.
Therightsalesstrategydoesntworkwith
thewrongstructure.Youmustdesigna
structurebasedontheneedsofyour
customertype.
Aconsultativesalesforce,for
example,musthavebothextensive
productandindustryknowledgeandthe
authoritytobuildcustomizedsolutions
forthecustomer.Developingthistypeof
knowledgerequiresextensivecoaching
fromexperiencedsalesmanagers.
Forexample,intransactionalsalesyou
wantcostefficiency.Onecostefficientwayto
structuresalesisbygeographicalarea,in
whicheachsalespersonhasresponsibilityfor
allproductsandaccounts.
Enterprisesellingrequiresevenmore
substantialskills.Oneofthemost
important:theabilitytoworkcross
functionally.Asalesforcemustbeableto
workwellwithitsowndesign,
Structure
Intransactionalsales,ontheotherhand,
theknowledgeandcapabilitiesneeded
fortheothertypesofsalesarenot
necessary.Youwillfinditmorecost
efficienttoputproductknowledgeina
databaseorothertypeofeasily
accessibleelectronicformatratherthan
investingintrainingforeachsalesperson.
Metrics
Performancemeasurementsandthe
rewardslinkedtothemarealsokey.
Traditionalcostbasedmetrics,suchas
costpertransaction,makesensefor
transactionalsales.
Forconsultativesales,theyrenot
goodenough.Consultativesellingcanbe
alongprocess.Dontwaitforthefinal
closeofthesaletomeasureresults.One
earliermeasurement,forexample,would
beintheneedsassessmentphasefor
example,howmuchpotentialforcreating
valuedidthesalespersonuncover.
Enterprisesellingrequires
measurementsforexample,returnon
investmentforbothpartiessinceboth
partiesareinvestingintheprocess.*
andretailintermediariessotaskssuchas
orderentryandbillingaredone
automaticallyandmoreefficiently
Indirectly,theendcustomerbenefitsfrom
thisefficiency.
Youcanalsoaddvaluedirectlytothe
endcustomer.Computerusersnolonger
havetoturntocomputerstoreclerksfor
helpwithproblems.Theycancallthe
manufacturers800linedirectly.
Thefinalstrategyforaddingcustomer
valueistoaddorshifttoabetterchannel
option.
Onecompany,whoseproductswere
becomingmoreandmorecomplex,
switchedtoaspecialtydistributorwiththe
technicalsupportandexpertiseits
traditionaldealernetworklacked.
Opportunitiesforaddingnew
channels,includingelectronicchannels
suchastheinternet,seemtobe
exploding.
Oneinnovativewaytoaddtoyour
channelsistosharechannelswith
anothercompany.MCIoffersfrequent
flyermiles,thussharinganairlinessales
channel.Inreturn,theairlinegetsfee
income.Andendcustomersgetthevalue
ofearningmileswithoutmoretravelor
addedexpense.