I. Dr. Seuss's Selling Technique

Most people have read the Dr. Seuss tale "Green Eggs & Ham", either as kids or to their children. What is interesting is the relevance this story has to selling. Learn the secrets of Dr. Seusus's selling technique and build your sales.

"I am Sam. Sam I am. Do you like green eggs and ham? Would you like them here or there? Would you like them in a box, would you like them with a fox?"

3 Step Selling Technique From Dr. Seuss

1. Sam is selling a product and although his prospect is not initially interested, Sam doesn't let that deter him from asking.

2. Sam consistently offers the prospect a choice when trying to close the sale.

3. He refuses to give up. No matter how many times his prospect says "no", Sam keeps offering alternatives. He offers fourteen options before finally closing the sale.

I am not suggesting that you pester your customers but most people give up too early in the sales process. We hear a few "no's" and decide to turn our attention elsewhere. It is your responsibility as a business owner to ask the customer to make a decision - you cannot expect a customer to do the work for you.

If you have been effective in learning about their specific needs and presented the appropriate solution to your prospect then you have earned the right to ask them for the sale. Here are a few selling techniques that will help you reach this point:

Tell Me More: Avoid launching into a lengthy discussion of what you can do for your client until you thoroughly understand what business challenges they face. Use open questioning to gather this information and avoid jumping to conclusions too quickly. Listen carefully to what they say and clarify anything that is not clear. Ask them to elaborate by using prompts such as "uh-huh," "tell me more," and "what else?"

Many Options: When it comes time to present your product or service, try not to limit the prospect to one option. Provide a choice of solutions that meet their specific concerns. Explain the benefits of each option, and when necessary, discuss the drawbacks of each alternative. Do not present so many options that the decision becomes overwhelming. Be prepared to tell your prospect which option best suits their needs if they ask.

Speak Easy: Speak in terms they can understand, avoiding the use of terminology they may not recognize. Case in point; as I developed my web site, I found myself talking to people who were extremely knowledgeable but they used terminology that sounded like a foreign language to me. I found myself getting frustrated, and in some cases feeling a bit dumb, because I had to keep asking them what they meant. Be very cautious how much jargon you use in your presentations and make sure your customer understands what you are saying.

Objections Are Common: Recognize that objections are a natural component of the sales process. It's common for a customer to express several objections before they make the decision to commit to the purchase. Don't take these objections personally and do not assume that it means the other person is not interested. Understand that your prospect will likely have specific concerns about making a decision.

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Dig Deep: Clarify their objections to uncover the true hesitation - do not hesitate to probe deeper to explore the real issues preventing them from making a decision. In most cases, your prospect will give you the information you need providing you keep your approach non-confrontational and neutral. Learn to handle objections in a non-argumentative manner. When you uncover their true objection keep your response brief and to the point. Talking too much will seem that you are trying to justify your product or price. Plus, you can sometimes talk yourself out a sale if you aren't careful.

Ask: Ask for the sale. As long as you do not pressure them into making a decision, they won't be offended by your request. Develop the confidence to ask for the sale in a variety of ways and begin asking every qualified person for their commitment. Recognize that many people want to be given permission to make a decision and look to the salesperson for that permission.

Use Polite Persistence: Take a lesson from Sam and learn the importance of polite persistence. The most successful sales people ask for the sale seven or eight times and don't give up at the first sign of resistance. Research has shown that these individuals consistently earn more than their coworkers and peers.

Use these selling techniques and you are sure to win like Sam I Am.

II. Psychological Tricks in Selling

By Stephen Bucaro

In this article, I'm revealing six powerful secret psychological tricks that you can use to increase the effectiveness of your advertising and marketing. What if you don't sell anything? Should you ignore this information?

You ARE selling something. Whether you are a Real Estate agent selling multi-million dollar homes, or a worker trying to sell your boss on the idea that you are a valuable employee, everybody is selling something. So it would be wise to learn these secret tricks and use them to achieve your own personal success.

The secret psychological tricks that I am going to reveal are not really secret. They have been used by shrewd salesman for millennium. Their existence was revealed back in 1984 by Dr. Robert Cialdini in his book "Influence : The Psychology of Persuasion".

You will recognize these tricks being used everywhere in advertising today. Now you will be able to put them to use to enhance your own personal success.

1. Psychological Selling Trick Number 1: Reciprocity

Reciprocity works like this: you give someone something of value for free. That individual feels an obligation to return the favor. Reciprocity is a very powerful principle.

To use reciprocity as a marketing tool, you give people something of value for free, they reciprocate by purchasing your product or service. But you would be surprised how many advertisers totally blow it. Either they don't understand the concept of "free", or they don't have total faith in the principle of reciprocity.

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For example, consider the offer "get a free camera when you subscribe to our magazine for two years." That's not free. Or, "free installation with a one year commitment." That's not free. The customer is paying with an obligation. No sale.

Consider the offer, "receive the latest issue of our magazine absolutely free. No bill will be sent." If the prospective customer finds the magazine to be of value, they feel an obligation to subscribe. Or, "one month of free Internet service. No credit card required." If the Internet service performs well, the prospective customer feels an obligation to sign up.

The trick is to create something that has high perceived value to a prospective customer, but costs you little or nothing to produce. Free information is a good example. Here again many advertisers totally blow it. The free information turns out to be nothing more than blatant advertising.

Free samples of your product or service is another good example. Again, many businesses blow it. They either produce a cheaper version of their product to use as free samples, or they use the free sample campaign as a means to dump reject product.

The largest Internet Service Provider is well known for giving away hundreds of hours of service for free. No credit card required. The largest cookie company is famous for giving away free cookies. Reciprocity is a very powerful marketing strategy.

2. Psychological Selling Trick Number 2: Scarcity

Scarcity works like this: There is a limited amount of the item available. After those are gone, the item will not be available. "urgency" implies Scarcity. For example, "this offer will be honored only for a limited time".

The effectiveness of the scarcity principle is well demonstrated by the large segment of the population involved in pursuing antiques, collectibles, and memorabilia simply because these items are scarce. Scarcity is often contrived, as when a company produces a "limited edition".

For example, when Disney releases a limit edition of one of its classic stories - yes, limited to a production of more copies than they could ever possibly sell - then it goes in the "vault". And how fortunate we'll be a few years from now when they decide to do us the favor of taking it back out of the vault.

Note: Manufactured items, especially DVDs and CD-ROMs, cannot be "scarce". It's a simple matter to put the manufacturing dies back into production. All scarcities of manufactured items are contrived.

One popular incarnation of scarcity is the "going out of business sale". Customers somehow don't pick up on the fact that the mark-downs are not that great, or that the store has new merchandise coming in the back door to take advantage of the increase in traffic.

Scarcity is a very powerful marketing tool. There are many ways to contrive scarcity. You can create a limited edition, or for items like information products, scarcity can exist in the form of urgency by creating a limited time offer.

3. Psychological Selling Trick Number 3: Commitment

Commitment involves getting a prospective customer to take a tiny step towards a goal. For example, you might get them to request free information, or fill out a survey. When the prospective customer takes

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that first step, they have made a commitment, however tentative, towards the goal you have set out for them. They are likely to take another step.

One example of this process is the "two step" method used in mail order. When a mail order marketer runs an advertisement, they don't even try to sell the product. Instead, the advertisement offers free information. A prospective customer makes that first commitment towards purchasing the product by requesting the free information. The free information they receive is designed to entice them to take the next step.

Another example of using commitment as a marketing tool is a survey. By checking a few boxes and answering a few questions, a prospective customer takes that first step towards a commitment. The result they receive from the survey is designed to entice them to take the next step.

Yet another example of using commitment as a marketing tool is a lottery. For example, people enter their name and address on a ticket for a chance to win a new car. A salesman uses that information to contact them. By entering their name and address on the lottery ticket, the individual has made a commitment to own that new car.

The most common example of the principle of commitment are those long-winded full page advertisements in magazines. The prospective customer invests a great deal of time reading through the entire advertisement. That investment of time represents a commitment. They are likely to take the next step, responding to the advertisement.

To use the psychological power of commitment in your advertising, don't try to sell your product or service in your ad. Instead, use a survey, contest, or free information to get a prospective customer to make that first step towards a commitment to purchase your product.

4. Psychological Selling Trick Number 4: Consensus

Consensus involves getting prospective customers to believe that "everybody's doing it". Everybody is just waiting in line to purchase your product. Everybody can't be wrong, so the product must be fantastic!

Of course you're smart enough to know that everybody CAN be wrong. Everybody thought that SUVs were safe vehicles (they roll over). Everybody thought Enron was a great investment (it went bankrupt). Everybody thought Iraq had weapons of mass destruction (well maybe not everybody). You're an independent thinker.

Here are some examples of headlines using the consensus principle: "It's the new sensation crossing the country", "People are signing up in droves", "People just can't get enough of them", "Record sales", "Unbelievable response!" and "Join millions of smart consumers". Combine this with a stock photograph of a large group of people, a long line of people, or a crowd of people, and you have a powerful consensus message.

Note: Many people don't think they're having fun unless they're in a large, noisy crowd. Unfortunately, every large crowd contains a few lunatics. When things go wrong, the crowd stampedes and people get hurt, or killed. When I see a large crowd, I head the other way.

Fortunately, most people are not independent thinkers. They act like a herd of cattle. Use the consensus principle in your advertising, and people, like lemmings headed for the sea, will come in waves to buy your product.

5. Psychological Selling Trick Number 5: Authority

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Authority involves getting prospective customers to believe that someone who is knowledgeable or famous uses your product or service. If a knowledgeable or famous person uses your product, then it must be fantastic!

The bigger the authority, the more powerful the advertising message will be. For example, doctors are authorities. "Most doctors prescribe Tylenol for arthritis pain". Large organizations are authorities. "The National Heart Association says - Quaker oatmeal is good for your heart." The Federal Government is an authority. "The U.S. Food and Drug Administration says whole wheat bread is part of a complete diet". If only we could think of a way to use God as an authority!

Here's how to use the principle of authority in advertising: search the Internet for any references to your product or service. Find an article that alludes to your product being of value. For example, let's say you sell black T-shirts. You find an article by the U.S. Department of Agriculture that says "bees are attracted to bright colored clothing". Your copy: "The U.S. Department of Agriculture that says my T-shirts protect you from attack by stinging insects."

Most advertising using the authority principle is taken out of context and exaggerated. Some advertising uses totally fake authorities. "My dog biscuits are recommended by the International Association of Dog Nutritionists" (an organization I started last week). Some advertising uses a "study" as an authority. "A recent study found that my lemonade tastes better than any other brand" (my mother liked it better).

I don't recommend that you use a fake organization, a fake study, or take information out of context or exaggerate, but if you can locate a legitimate authority or study related in any way to your product and quote it without exaggeration, you will have a powerful authority message.

6. Psychological Selling Trick Number 6: Greed

Greed involves taking advantage of many peoples belief that there is a secret short cut to wealth. They believe that wealthy people didn't earn their wealth, instead they know a "secret".

Note: I am not recommending that you use the principle of greed because it is used by unethical scammers. I'm simply informing you of it's existence in order to make this series of articles complete.

The simplest method of using the principle of greed is the chain letter. You have no doubt received a chain letter at some point. A chain letter contains a chart specifying the massive amounts of money the recipient will get when they follow the instructions. The first instruction is to send money.

The multi-level or network marketing scheme works similar to a chain letter. The prospective recruit gets a chart showing the massive amounts of money they will receive when they join the network. After parting with their money, the victim is instructed to con their friends and relatives into joining.

Another method of using the principle of greed is the lottery or casino. The odds of winning most lotteries are about the same whether you buy a ticket or not. A casino allocates only a tiny portion of it's customers money to winnings in order to create the illusion that the odds of winning are good. Many people don't understand statistics. In their mind, the phrase "win a million dollars" translates into "get a million dollars".

Another example of the principle of greed is the business opportunity scam. We know it works because successful scammers invest millions to run business opportunity infomercials, and they make hundreds of millions in profits. They prey on people who believe there is a secret short cut to wealth. The scammers think people who fall for their scam are stupid, lazy, and greedy, so they deserve to get ripped off.

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The way to use the principle of greed is to contrive a "secret plan". Run an ad describing how the plan requires absolutely no work to make massive amounts of money. Include a few bogus testimonials and a legitimate looking chart that shows the massive amount of money the plan will bring. Some scammers include pictures of fake checks or fake bank statements.

Never divulge any details of the plan in the ad. The prospective customer is required to send money to get the plan. The typical plan instructs the purchaser to run the same scam.

The principle of greed is very powerful. People who have been ripped of by this scam a thousand times before will, like hypnotized zombies, send you their money. They think THIS TIME they will receive the REAL secret plan.

III. The Top 7 Sales Blunders.

Increase Your Sales By Avoiding These Mistakes

We all make mistakes when selling our product or service. Here are the most common sales mistakes people make. I have to admit I have made many of these mistakes, even though I have been teaching this stuff for almost a decade.

Sales Mistake # 1: Allowing a prospect to lead the sales process. The best way to control the sales interaction is to ask questions. This is also the best way to learn whether or not your product or service meets the needs of your prospect. Quality questions that uncover specific issues, problems, or corporate objectives are essential in helping you establish yourself as an expert.

Sales Mistake # 2: Not completing pre-meeting research. After several weeks of voice mail I finally connected with my prospect and scheduled a meeting. Unfortunately, I entered the meeting without first researching the company.

Instead of presenting a solution to an existing problem, I spent the entire meeting learning fundamental information, which to senior executives, is a complete waste of their time. This approach is one of most common sales mistakes. Invest the time learning about your prospect before you call them and before you try to schedule a meeting.

Sales Mistake # 3: Talking too much. Too many sales people talk too much during the sales interaction. They espouse about their product, its features, their service and so on. When I first bought carpet for my home I recall speaking to a sales person who told me how long he had been in the business, how smart he was, how good his carpets were, etc. But this dialogue did nothing to convince me that I should buy from him. Instead, I left the store thinking that he did not care about my specific needs. A friend of mine is in the advertising business and often talks to prospects who initially request a quote. Instead of talking at great length about the ad agency’s experience and qualifications, he gets the potential client talking about her business. By doing this he is able to determine the most effective strategy for that prospect.

Sales Mistake # 4: Giving the prospect information that is irrelevant. When I worked in the corporate world I was subjected to countless presentations where the sales person shared information that was completely meaningless to me. I don’t care about your financial backing or who your clients are. Make the most of your presentation by telling me how I will benefit from your product or service until I know how your product or service relates to my specific situation.

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Sales Mistake # 5: Not being prepared. I remember calling a prospect expecting to receive his voice mail. That meant I was completely unprepared when he answered the call himself. Instead of asking him a series of qualifying questions I simply responded to his questions, allowing him to control the sale. Unfortunately, I didn’t progress any further than that initial call. When you make a cold call or attend a meeting with a prospect it is critical that you are prepared. This means having all relevant information at your fingertips including; pricing, testimonials, samples, and a list of questions you need to ask. I suggest creating a checklist of the vital information you will need and reviewing this list before you make your call. You have exactly one opportunity to make a great first impression and you will not make it if you are not prepared.

Sales Mistake # 6: Neglecting to ask for the sale. I recall a participant in one of my workshops expressing interest in my book. I told him to look through it but at no time did I ask for the sale. Later, I heard him express this observation to other participants in the program. If you sell a product or service, you have the obligation to ask the customer for a commitment, particularly if you have invested time assessing their needs and know that your product or service will solve a problem. Many people are concerned with coming across as pushy but as long as you ask for the sale in a non-threatening, confident manner, people will usually respond favorably.

Sales Mistake # 7: Failing to prospect. This is one of the most common mistakes independent business make. When business is good many people stop prospecting, thinking that the flow of business will continue. However, the most successful sales people prospect all the time. They schedule prospecting time in their agenda every week.

Even the most seasoned sales professional makes mistakes from time to time. Avoid these blunders and increase the likelihood of closing the sale.

IV. The seven steps of the sale.

The Seven Steps of the Sale is the most common traditional structure used for explaining and training the selling process for the sales call or meeting, including what immediately precedes and follows it. This structure is usually represented as the Seven Steps of the Sale, but it can can be five, six, eight or more, depending whose training manual you're reading.

This structure assumes that the appointment has been made, or in the instance of a cold-call, that the prospect has agreed to discuss things there and then. The process for appointment-making is a different one, which is shown later in this section. Aside from the questioning stage, this structure also applies to a sales visit which been arranged for the purpose of presenting products/services or a specific proposal following an invitation, earlier discussions or meetings. For these pre-arranged presentations it is assumed that the sales person has already been through the questioning stage at prior meetings.

NB The Seven Steps of the Sale remains a helpful structure for sales and sales training, but do bear in mind that the concept is over forty years old, and these days the modern collaboration and facilitation methods are a lot more effective.

the seven steps of the sale

- planning and/or preparation - introduction or opening - questioning - presentation

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- overcoming objections/negotiating - close or closing - after-sales follow-up

the seven steps of the sale in summary

planning and preparation - the seven steps - 1

Generally, the larger the prospect organization, the more research you should do before any sales call at which you will be expected, or are likely, to present you company's products or services.

ensure know your own product/service extremely well - especially features, advantages and benefits that will be relevant to the prospect you will be meeting

ascertain as far as you can the main or unique perceived organizational benefit that your product or service would give to your prospect

discover what current supply arrangements exist or are likely to exist for the product/service in question, and assess what the present supplier's reaction is likely to be if their business is at threat

understand what other competitors are able and likely to offer, and which ones are being considered if any

identify as many of the prospect organization's decision-makers and influencers as you can, and assess as much as far as you can what their needs, motives and relationships are

try to get a feel for what the organizational politics are

what are the prospect's organizational decision-making process and financial parameters (eg., budgets, year-end date)

what are your prospect's strategic issues, aims, priorities and problems, or if you can't discover these pre-meeting, what are they generally for the market sector in which the prospect operates?

prepare your opening statements and practice your sales presentation

prepare your presentation in the format in which you are to give it (eg., MS Powerpoint slides for laptop or projected presentation) plus all materials, samples, hand-outs, brochures, etc., and always have spares - allow for more than the planned numbers as extra people often appear at the last minute - see the presentation section for more detailed guidance on designing formal sales presentations

prepare a checklist of questions or headings that will ensure you gather all the information you need from the meeting

think carefully about what you want to get from the meeting and organise your planning to achieve it

introduction/opening - the seven steps - 2

smile - be professional, and take confidence from the fact that you are well-prepared

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introduce yourself - first and last name, what your job is and the company you represent, and what the your company does (ensure this is orientated to appeal to the prospect's strategic issues)

set the scene - explain the purpose of your visit, again orientate around your prospect not yourself, eg "I'd like to learn about your situation and priorities in this area, and then if appropriate, to explain how we (your own company) approach these issues. Then if there looks as though there might be some common ground, to agree how we could move to the next stage."

ask how much time your prospect has and agree a time to finish

ask if it's okay to take notes (it's polite to ask - also, all business information is potentially sensitive, and asking shows you realise this)

ask if it's okay to start by asking a few questions or whether your prospect would prefer a quick overview of your own company first (this will depend on how strongly know and credible your own company is - if only a little you should plan to give a quick credibility-building overview in your introduction)

questioning - the seven steps - 3

the main purpose of questioning is to confirm or discover the strongest or unique perceived organizational benefit that would accrue to the prospect from the product/service - it may be one (usually) or two (occasionally) or three (rarely) key things, which may be obvious to seller and buyer, or not obvious to either, in which case questioning expertise is critical

questioning must also discover how best to develop the sale with the organization - how they decide, when, people and procedures involved, competitor pressures, etc.

good empathic questioning also builds relationships, trust and rapport - nobody wants to buy anything from a sales person who's only interested in their own product or company - we all want to buy from somebody who gives the time and skill to interpreting and properly meeting our own personal needs

you will have prepared a list of questions or headings - now use it

use open questions to gather information - for example, questions beginning with Who, What, Why, Where, When, How

when training or learning the skills of using open questions it helps to refer to the Rudyard Kipling rhyme: "I keep six honest serving men, They taught me all I knew; Their names are What and Why and When, And How and Where and Who.." - from Just So Stories, 1902, The Elephant's Child. (other useful training quotes)

use "can you tell me about how..." if you are questioning a senior-level contact - generally the more senior the contact, the bigger the open questions you can ask, and the more the other person will be comfortable and able to give you the information you need in a big explanation

'what...? and 'how...?' are the best words to use in open questions because they provoke thinking and responses about facts and feelings in a non-threatening way

use 'why?' to find out reasons and motives beneath the initial answers given, but be very careful and sparing in using 'why' because the word 'why?' is threatening to most people - it causes the other person to feel they have to defend or justify themselves, and as such will not bring out the true situation and feelings, especially in early discussions with people when trust and rapport is at a low level

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listen carefully and empathically, maintain good eye-contact, understand, and show that you understand - especially understand what is meant and felt, not just what is said, particularly when you probe motives and personal aspects

interpret and reflect back and confirm you have understood what is being explained, and if relevant the feelings behind it

use closed questions to qualify and confirm your interpretation - a closed question is one that can be answered with a yes or no, eg., "Do you mean that when this type of equipment goes down then all production ceases?", or "Are you saying that if a new contract is not put in place by end-March then the existing one automatically renews for another year?"

when you've asked a question, SHUT UP - do not interrupt

your prospect should be doing 80-99% of the talking during this stage of the sales call; if you are talking for a third or half of the time you are not asking the right sort of questions

do not jump onto an opportunity and start explaining how you can solve the problem until you have asked all your questions and gathered all the information you need (in any event never be seen to 'jump' onto any issue)

all the time try to find out the strategic issues affected or implicated by the product/service in question - these are where the ultimate decision-making and buying motives lie.

if during the questioning you think of a new important question to ask note it down or you'll forget it

when you have all the information you need, acknowledge the fact and say thanks, then take a few moments to think about, discuss and summarise the key issues/requirements/priorities from your prospect's organizational (and personal if applicable) perspective

questioning is traditionally treated by conventional sales people and conventional sales training as a process to gather information to assist the sales person's process, and this is how it is typically positioned in the old-style 'Seven Steps of the Sale'; however, modern sales methodology treats questioning in a radically different way - as an essential part of a facilitative process whose purpose is to help the buyer decide (see the information about buying facilitation for explanation)

presentation - the seven steps - 4

the sales presentation should focus on a central proposition, which should be the unique perceived benefit that the prospect gains from the product/service

during the questioning phase the sales person will have refined the understanding (and ideally gained agreement) as to what this is - the presentation must now focus on 'matching' the benefits of the product with the needs of the prospect so that the prospect is entirely satisfied that the proposition

the sales person therefore needs an excellent understanding of the many different organizational benefits that accrue to customers, and why, from the product/service - these perceived benefits will vary according to the type of customer organization (size, structure, market sector, strategy, general economic health, culture, etc)

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the sales presentation must demonstrate that the product/service meets the prospect's needs, priorities, constraints and motives, or the prospect will not even consider buying or moving to the next stage; this is why establishing the prospect's situation and priorities during the questioning phase is so vital

the above point is especially important to consider when the sales person has to present on more than one occasion to different people or groups, who will each have different personal and organizational needs, and will therefore respond to different benefits (even though the central proposition and main perceived benefit remains constant)

all sales presentations, whether impromptu (off the cuff) or the result of significant preparation, must be well structured, clear and concise, professionally delivered, and have lots of integrity - the quality and integrity of the presentation is always regarded as a direct indication as to the quality and integrity of the product/service

it follows then that the sales person must avoid simply talking about technical features from the seller's point of view, without linking the features clearly to organizational context and benefit for the prospect - also avoid using any jargon which the prospect may not understand

sales presentations must always meet the expectations of the listener in terms of the level of information and relevance to the prospect's own situation, which is another reason for proper preparation - a vague or poorly prepared sales presentation sticks out like a sore thumb, and it will be disowned immediately

when presenting to influencers, which is necessary on occasions, it is important to recognise that the sales person is effectively asking the influencers to personally endorse the proposition and the credibility of the selling organization and the sales person, so the influencers' needs in these areas are actually part of the organizational needs of the prospect company

the presentation must include relevant evidence of success, references from similar sectors and applications, facts and figures - all backing up the central proposition

business decision-makers buy when they become satisfied that the decision will either make them money, or save them money or time; they also need to be certain that the new product/service will be sustainable and reliable; therefore the presentation must be convincing in these areas

private consumer buyers ultimately buy for similar reasons, but for more personal ones as well, eg., image, security, ego, etc., which may need to feature in these type of presentations if they form part of the main perceived benefit

while the presentation must always focus on the main perceived benefit, it is important to show that all the other incidental requirements and constraints are met - but do not over-emphasise or attempt to 'pile high' loads of incidental benefits as this simply detracts from the central proposition

presentations should use the language and style of the audience - eg., technical people need technical evidence; sales and marketing people like to see flair and competitive advantage accruing for their own sales organization; managing directors and finance directors want clear, concise benefits to costs, profits and operating efficiency; and generally the more senior the contact, the less time you will have to make your point - no-nonsense, no frills, but plenty of relevant hard facts and evidence. See the presentation section for more guidance on this.

if the sales person is required to present to a large group and in great depth, then it's extremely advisable to enlist the help of one or two suitably experienced colleagues, from the appropriate functions, eg.,

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technical, customer service, distribution, etc., in which case the sales person must ensure that these people are properly briefed and prepared, and the prospect notified of their attendance.

keep control of the presentation, but do so in a relaxed way; if you don't know the answer to a question don't waffle - say you don't know and promise to get back with an answer later, and make sure you do.

never knock the competition - it undermines your credibility and integrity - don't even imply anything derogatory about the competition

if appropriate issue notes, or a copy of your presentation

use props and samples and demonstrations if relevant and helpful, and make sure it all works properly

during the presentation seek feedback, confirmation and agreement as to the relevance of what you are saying, but don't be put off if people stay quiet

invite questions at the end, and if your are comfortable, at the outset invite questions at any time - it depends on how confident you feel in controlling things

whether presenting one-to-one or to a stern group, relax and be friendly - let your personality and natural enthusiasm shine through - people buy from people who love and have faith in their products and companies

overcoming objections/negotiating - the seven steps - 5

decades ago it was assumed that at this stage lots of objections could appear, and this would tend to happen, because the selling process was more prescriptive, one-way, and less empathic; however, successful modern selling now demands more initial understanding from the sales person, even to get as far as presenting, so the need to overcome objections is not such a prevalent feature of the selling process

nevertheless objections do arise, and they can often be handled constructively, which is the key

if objections arise, firstly the sales person should qualify each one by reflecting back to the person who raised it, to establish the precise nature of the objection - "why do you say that?" is usually a good start

it may be necessary to probe deeper to get to the real issue, by asking why to a series of answers - some objections result from misunderstandings, and some are used to veil other misgivings which the sales person needs to expose

lots of objections are simply a request for more information, so definitely avoid responding by trying to re-sell the benefit - simply ask and probe instead; the best standard response is something like "I understand why that could be an issue, can I ask you to tell me more about why it is and what's important for you here?.."

try to avoid altogether the use of the word 'but' - it's inherently confrontational

an old-style technique was to reflect back the objection as a re-phrased question, but in a form that the sales person is confident of being able to answer positively, for example: the prospect says he thinks it's too expensive; the sales person reflects back: "I think what you're really saying is that you have no problem with giving us the contract, but you'd prefer the payments staged over three years rather than two? - well I think we could probably do something about that..."

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another old-style technique used to be to isolate the objection (confirm that other than that sticking point everything else was fine), then to overcome the objection by drawing up a list of pro's and con's, or analysing to death all the hidden costs of not going for the deal, or re-selling the benefits even harder, and then to close powerfully, but these days such a contrived approach to objection handling is likely to insult the prospect and blow the sales person's credibility

it is important to flush out all of the objections, and in so doing, the sales person is effectively isolating them as the only reasons why the prospect should not proceed, but then the more modern approach is to work with the prospect in first understanding what lies beneath each objection, and then working with the prospect to shape the proposition so that it fits more acceptably with what is required. See the section on negotiating.

avoid head-to-head arguments - even if you win them you'll destroy the relationship you'll go no further - instead the sales person must enable a constructive discussion so that he and the prospect are both working at the problem together; provided the basic proposition is sound most objections are usually overcome by both the seller and the buyer adjusting their positions slightly; for large prospects and contracts this process can go on for weeks, which is why this is often more in the negotiating arena than objection handling

you've handled all the objections when you've covered everything that you've noted down - it's therefore important to keep notes and show that you're doing it

by this stage you may have seen some signs that the prospect is clearly visualising or imagining the sale proceeding, or even talking in terms of your working together as supplier and customer; this is sometimes called buying warmth. Certain questions and comments from prospects are described as buying signals because they indicate that the prospect may be visualising buying or having the product/service. In the old days, sales people were taught to respond to early buying signals with a 'trial close', but this widely perceived as clumsy and insulting nowadays. Instead respond to early buying signals (ie those received before you've completed the presentation to the prospect's satisfaction, and answered all possible queries) by asking why the question is important, and then by answering as helpfully as possible

close/closing - the seven steps - 6

in modern selling, even using the traditional Seven Steps process, every sales person's aim should be to prepare and conduct the selling process so well that there are few if any objections, and no need for a close

the best close these days is something like "Are you happy that we've covered everything and would you like to go ahead?", or simply "Would you like to go ahead?"

in many cases, if the sales person conducts the sale properly, the prospect will close the deal himself, and this should be the another aim for the sales person - it's civilised, respectful, and actually implies and requires a high level of sales professionalism

the manner in which a sale is concluded depends on the style of the decision-maker - watch out for the signs: no-nonsense high-achievers are likely to decide very quickly and may be a little irritated if you leave matters hanging after they've indicated they're happy; cautious technical people will want every detail covered and may need time to think, so don't push them, but do stay in touch and make sure they have all the information they need; very friendly types may actually say yes before they're ready, in which case you need to ensure that everything is suitably covered so nothing can rebound later

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for the record here are some closes from the bad old days - the traditional golden rule was always to shut up after asking a closing question, even if the silence became embarrassingly long - (a who-talks-first-loses kind of thing) - use them at your peril:

the pen close: "Do you want to use your pen or mine?" (while producing the contract and pen)

the alternative close: for example - "Would you like it delivered next Tuesday or next Friday?", or "We can do the T50 model in silver, and we have a T52 in white - which one would you prefer?"

the challenge close: "I know most men wouldn't be able to buy something of this value without consulting their wives - do you need to get your wife's permission on this?.." or "Most business people in your position need to refer this kind of decision to their boss, do you need to refer it?"

the ego close: "We generally find that only the people who appreciate and are prepared to pay for the best quality go for this service - I don't know how you feel about it?..."

the negative close: "I'm sorry but due to the holidays we can't deliver in the three weeks after the 15th, so we can only do it next week, is that okay?"

the guilt close: "Over three years it might seem a lot of money, but we find that most responsible people decide they simply have no choice but to go for it when it's less than a pound/dollar a day to protect your.../safeguard your..../improve your... (whatever)."

the sympathy close: "I know you have some reservations that we can't overcome right now, but I've got to admit that I'm pretty desperate for this sale - my manager says he'll sack me if I don't get an order this week, and you're my last chance - I'd be ever so grateful if you'd go ahead - and I promise you we'd be able to sort out the extra features once I speak to our production people..." (How could anyone live with themselves using that one?....)

the puppy dog close/puppy dog sale: "Let me leave it with you and you see how you get on with it..."

the last ditch close: (sales person packs case and goes to leave, but stops at the door) "Just one last thing - would you tell me where I went wrong - you see I just know this is right for you, and I feel almost guilty that I've not sold it to you properly, as if I've let you down....."

the pro's and con's list: "I can appreciate this is a tough decision - what normally works is to write down a list of all the pro's and con's - two separate columns - and then we can both see clearly if overall it's the right thing to do..."

the elimination close: "I can see I've not explained this properly - can we take a moment to go through all the benefits and see which one is holding us back from proceeding?" (At which the sales person lists all the benefits - the positives, and runs through each one to confirm it's not that one which is causing the problem, crossing a line through each as he goes. When he crosses the last one out he can claim that there really seems to be no reason for not going ahead...)

follow-up - the seven steps - 7

after-sales follow-up depends on the type of product and service, but generally for every sale the sales person must carry out a number of important processes:

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all relevant paperwork must be completed and copies provided to the customer - paperwork is will cover the processing of the order, the confirmation of the order and its details to the customer, possibly the completion of installation and delivery specification and instructions

Sales reporting by the sales person is also necessary, generally on a pro-forma or computer screen, typically detailing the order value, product type and quantity, and details about the customer such as industrial sector - each sales organization stipulates the sales person's reporting requirements, and often these are linked to sales commissions and bonuses, etc.

The sales person should also make follow-up contact with the customer - as often as necessary - to confirm that the customer is happy with the way the order is being progressed; this helps reduce possible confusion and misunderstood expectations, which are a big cause of customer dissatisfaction or order cancellation if left to fester unresolved

Customer follow-up and problem resolution must always be the responsibility for the sales person, who should consider themselves the 'guardian' of that customer, even if a well-organised customer service exists for general after-sales care

Customers rightly hold sales people responsible for what happens after the sale is made, and good conscientious follow-up will usually be rewarded with referrals to other customers

Follow-up is an important indicator of integrity; when a sales person makes a sale he is personally endorsing the product and the company, so ensuring that value and satisfaction are fulfilled is an integral part of the modern sales function

V. The changing face of selling.

Please note that where reference is made to the customer 'organization' this reflects a business-to-business scenario, however, the principles in all other respects apply for business-to-consumer scenarios.

values/expectations of the sales organization and the selling process

traditional (typified by 1960's through to 1980's and amazingly still found today)

modern (essential today to sustain success in business-to-business and consumer markets)

standard product customised, flexible, tailored product and service

sales function performed by a 'sales-person'sales function performed by a 'strategic business manager' 

seller has product knowledge

seller has strategic knowledge of customer's market-place and knows all implications and opportunities resulting from product/service supply relating to customer's market-place

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delivery service and supporting information and training are typical added value aspects of supply

strategic interpretation of the customer organisation's market opportunities, and assistance with project evaluation and decision-making are added value aspects of supply

good lead-time is a competitive advantage

just-in-time (JIT) is taken for granted, as are mutual planning and scheduling; competitive advantages are: capability to anticipate unpredictable requirements, and assistance with strategic planning and market development

value is represented and judged according to selling price

value is assessed according to the cost to the customer, plus non-financial implications with respect to CSR (corporate social responsibility), environment, ethics, and corporate culture

the benefits and competitive strengths of the products or service are almost entirely tangible, and intangibles are rarely considered or emphasised

the benefits and competitive strengths of the product or service now include many significant intangibles, and the onus is on the selling organization to quantify their value

benefits of supply extend to products and services only

benefits of supply extend way beyond products and services, to relationship, continuity, and any assistance that the selling organization can provide to the customer to enable an improvement for their staff, customers, reputation and performance in all respects

selling price is cost plus profit margin, and customers have no access to cost and margin information

selling price is market driven (essentially supply and demand), although certain customers may insist on access to cost and margin information

seller knows the business customers' needsseller knows the needs of the business customers' customers and partners and suppliers

sales person sells (customers only deal with sales people, pre-sale)

whole organization sells (customers expect to be able to deal with anybody in supplier organization, pre-sale)

sales people only sell externally, ie, to customers sales people need to be able to sell internally to their own organization, in order to ensure customer needs are met

strategic emphasis is on new business growth (ie, acquiring new customers)

strategic emphasis is on customer retention and increasing business to those customers (although new business is still sought)

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buying and selling is a function, with people distinctly responsible for each discipline within selling and customer organizations

buying and selling is a process, in which many people with differing jobs are involved in both selling and customer organizations

hierarchical multi-level management structures exist in selling and customer organizations

management structures are flat, with few management layers

authority of sales person is minimal, flexibility to negotiate is minimal, approvals must be sought via management channels and levels for exceptions

authority of sales person is high (subject to experience), negotiation flexibility exists, and exceptions are dealt with quickly and directly by involving the relevant people irrespective of grade

selling and buying organization are divided strictly according to function and department, inter-departmental communications must go up and down the management structures

selling organization is structured in a matrix allowing for functional efficiency and also for inter-functional collaboration required for effective customer service, all supply chain processes, and communications

supplier and customer organization functions tend to talk to their 'opposite numbers' in the other organization

open communications to, from and across all functions between supplier and customer organization

the customer specifies and identifies product and service requirements

the selling organization must be capable of specifying and identifying product and service requirements on behalf of the customer

the customer's buyer function researches and justifies the customer organization's needs

the selling organization must be capable of researching and justifying customer organization's needs, on behalf of the customer

the customer's buyer probably does not appreciate his/her organization's wider strategic implications and opportunities in relation to the seller's product or service, and there will be no discussion with the seller about this issues

the seller will help the buyer to understand the wider strategic implications and opportunities in relation to the seller's product or service

the buyer will tell the seller what the buying or supplier-selection process is

the seller will help the buyer to understand and align the many and various criteria within their own (customer) organization, so that the customer organization can assess the strategic implications of the supplier's products or services, and make an appropriate decision whether to buy or not

Nowadays, more is demanded from the selling process. The analysis below refers both to the development in recent decades of what customers require from the selling function, and also to the progression of a relationship between supplier and customer.

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the development of the selling function

1. pure transactionbasic early selling - standard commoditised products, price and reliability - there is little to build on, business may be spasmodic, hand-to-mouth and unpredictable

2. relationship and trust

continuity, consistency, sustainability, and some understanding of the customer's real issues are seen to have a value by both selling and buying organization; intangibles begin to be regarded as relevant benefits

3. management and information

a longer-term supply arrangement is seen as an advantage by seller and buyer, because it brings extra intangible benefits of co-operation and support other areas of the customer's business - eg., training, technology, product development - which improve the customer's own competitive strengths and operating efficiencies

4. partnership

activities of the buying and selling organization become almost seamless where connected; the supplier is virtually part of the customer's organization and treated as such; 'out-sourcing' generally require this degree of collaboration, which involves a level anticipation, innovation and integrated support that is very difficult to un-pick, even if it were in the customer's interests to do so - not surprisingly, in terms of selling relationships this is the pinnacle to aim for....

VI. glossary of sales and selling terms.

This list is not exhaustive, and is not meant to be an endorsement of any of these techniques or terms. See the notice at the foot of the page.

accompaniment visit/accompaniment report - when a manager or supervisor or trainer accompanies a sales person while working on the sales territory, usually while meeting prospects or customers. Typically the manager would complete a an accompaniment visit report on the performance of the sales person, which would be discussed, and suitable follow-up actions or training agreed.

account - a customer, usually a business-to-business organization; a major account is a large organization; a national account is a customer with branches or sites that constitute a nationwide coverage, which typically requires special pricing and senior sales attention.

active listening - term used to describe high level of listening capability and method, in which the sales person actively seeks to understand how the speaker feels, and what their issues are, in which the type of listening extends far beyond common inattentive listening. Related to empathy and Stephen Covey's principles of seeking to understand before attempting to be understood.

added value - the element(s) of service or product that a sales person or selling organization provides, that a customer is prepared to pay for because of the benefit(s) obtained. Added values are real and perceived; tangible and intangible. A good, reliable, honest, expert, informed sales person becomes a

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very significant part of the selling organization's added value, as perceived by the customer, if not by the selling organization.

advantage - the aspect of a product or service that makes it better than another, especially the one in-situ or that of a competitor.

advertising/advertising and promotion/A&P - the methods used by a company to publicise and position its products and services to its chosen market sectors, including product launches, image and brand building, press and public relations activities, merchandising (supporting and promoting the product in retail and wholesale outlets), special offers, generating leads and enquiries, and incentivising distributors, and agents, and arguably sales people. A&P methods are sometimes described as above-the-line (media advertising such as radio, TV, cinema, newspapers, magazines) or below-the-line (non-'media' methods or materials such as brochures, direct-mail, exhibitions, telemarketing, and PR); advertising agencies generally receive a commission (discount 'kick-back') from above-the-line media services, but not from below the line services, in which case if asked to arrange any will seek to add a mark-up.

appointment - a personal sales visit to a prospect, usually arranged by phone. See the appointment-making process.

benefit - the gain (usually a tangible cost, but can be intangible) that accrues to the customer from the product or service.

buyer - most commonly means a professional purchasing person in a business; can also mean a private consumer. Buyers are not usually major decision-makers, that is to say, what they buy, when and how they buy it, and how much they pay are prescribed for them by the business they work for. If you are selling a routine repeating predictable product, especially a consumable, then you may well be able to restrict your dealings to buyers; if you are selling a new product or service of any significance, buyers will tend to act as influencers at most. See decision-makers.

buying facilitation ® - also known as facilitative buying, generally attributed (and registered) to sales guru Sharon Drew Morgen. Extremely advanced form of personal selling, in which the central ethos is one of 'helping organizations and buyers to buy', not selling to them. See collaboration and partnership selling at the end of the section.

buying signal - a buying signal is a comment from a prospect which indicates that he is visualising to whatever extent buying your product or service. The most common buying signal is the question: "How much is it?" Others are questions or comments like: "What colours does it come in?", "What's the lead-time?", "Who else do you supply?", "Is delivery free?" "Do you use it yourself?", and surprisingly, "It's too expensive."

buying warmth - behavioural, non-verbal and other signs that a prospect likes what he sees; very positive from the sales person's perspective, but not an invitation to jump straight to the close.

call/calling - a personal face-to-face visit or telephone call by a sales person to a prospect or customer. Also referred to a sales call (for any sales visit or phone contact), or cold call (in the case of a first contact without introduction or notice in writing).

canvass/canvassing - cold-calling personally at the prospect's office or more commonly now by telephone, in an attempt to arrange an appointment or present a product, or to gather information.

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close/closing - the penultimate step of the 'Seven Steps of the Sale' selling process, when essentially the sales-person encourages the prospect to say yes and sign the order. In days gone by a Sales person's expertise was measured almost exclusively by how many closes he knew. Thank God for evolution. See the many examples of closes and closing techniques in the Seven Steps section, but don't expect to kid any buyer worth his salt today, and using one might even get you thrown out of his office. Use with great care.

collaboration selling - also known as collaborative selling and facilitation selling - very modern and sophisticated, in which seller truly collaborates with buyer and buying organization to help the buyer buy. A logical extension to 'strategic' or 'open plan' selling. See collaboration and partnership selling at the end of the section.

commodities/commoditised (products and services) - typically a term applied to describe products which are mature in development, produced and sold in vast scale, involving little or no uniqueness between variations of different suppliers; high volume, low price, low profit margin, de-skilled ('ease of use' in consumption, application, installation, etc). Traditionally the 'commodities' term applies to the 'commodities markets' which trade and set prices for fundamental commodities such as coffee, grain, oil, etc., however in a more generic sales and selling sense the term 'commoditised' refers to a product (and arguably a service) which has become mass-produced, widely available, easy to make, de-mystified, and simplified; all of which is almost invariably associated with a reduction in costs, prices and profit margins, and which also has massive implications for the sales distribution model and methods for taking the product or service to market. Commoditised products are amenable to mass-market and large-scale sales distribution methods and models, as opposed to specialised or high-complexity products, which tend to require closer customer support and greater expertise and advice at the point of selling and installation, and commissioning and application, if appropriate. An electric battery torch is a commoditised product that is freely available, at competitively low price, 'off-the-shelf' at any supermarket (or via the internet); whereas a holographic projector is only available via a specialised supplier, at relatively high cost and profit margin, potentially without a similar competing product, and requires a significant degree of technical advice and support, and possibly user-training. Similarly, a microwave oven is a commoditised product, widely available, inexpensively, off-the-self from a retail store (or via the internet); whereas an integrated commercial kitchen is a specialised system, requiring a high level of sales and selling expertise, support and installation. Commoditised products sell by the millions; specialised products might only sell in hundreds or less. All consumer products and services become commoditised over time. Virtually all B2B products and services become commoditised over time. Colour TV's are cheaper than they were thirty years ago because they've become commoditised. Same can be said for mobile phones, home security systems, computers; even motor cars are becoming genuinely commoditised. In our lifetimes perhaps so too will houses and buildings.

concession - used in the context of negotiating, when it refers to an aspect of the sale which has a real or perceived value, that is given away or conceded by seller (more usually) or the buyer. One of the fundamental principles of sales negotiating is never giving away a concession without getting something in return - even a small increase in commitment is better than nothing. See the negotiation section.

consultative selling (consultation selling) - developed by various sales gurus through the 1980's by David Sandler among others, and practiced widely today, consultative selling was a move towards more collaboration with, and involvement from, the buyer in the selling process. Strongly based on questioning aimed at gaining useful information.

customer - usually meaning the purchaser, organization, or consumer after the sale. Prior to the sale is usually referred to as a prospect.

cycle - see sales cycle.

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deal - common business parlance for the sale or purchase (agreement or arrangement). It is rather a colloquial term so avoid using it in serious company as it can sound flippant and unprofessional.

decision-make r - a person in the prospect organization who has the power and budgetary authority to agree to a sales proposal. On of the most common mistakes by sales people is to attempt to sell to someone other than a genuine decision-maker. For anything other than a routine repeating order, the only two people in any organization of any size that are real decision-makers for significant sales values are the CEO/Managing Director/President, and the Finance Director. Everyone else in the organization is generally working within stipulated budgets and supply contracts, and will almost always need to refer major purchasing decisions to one or both of the above people. In very large organizations, functional directors may well be decision-makers for significant sales that relate only to their own function's activities. See influencer.

deliverable(s) - an aspect of a proposal that the provider commits to do or supply, usually and preferably clearly measurable.

demonstration/'demo'/'dem' - the physical presentation by the sales person to the prospect of how a product works. Generally free of charge to the prospect, and normally conducted at the prospect's premises, but can be at another suitable venue, eg., an exhibition, or at the supplier's premises.

demographics - the study of, or information about, people's lifestyles, habits, population movements, spending, age, social grade, employment, etc., in terms of the consuming and buying public; anyone selling to the consumer sector will do better through understanding relevant demographic information.

discipline - within the context of an organization this means the same as function, ie job role.

distribution/sales distribution - the methods or routes by which products and services are taken to market. Sales distribution models are many and various, and are constantly changing and new ones developing. Understanding and establishing best sales distribution methods - routes to market - are crucial aspects of running any sales organisation, and any business organisation too. Sales distribution should be appropriate to the product and service, and the end-user market, and the model will normally be defined by these factors, influenced also by technology and social trends. For example, commoditised mass-market consumer products (FMCG - fast-moving consumer goods, household electricals, etc) are generally distributed via mass-market consumer distribution methods, notably supermarkets, but also increasingly the internet. A lesson in changing sales distribution models, and the need for manufacturers and sellers to anticipate changes is found in the switching of book sales and CD sales from retail store distribution to websites, with the resulting demise of many retailers in those sectors. Future changes in sales distribution will see for example music transferring increasingly via online downloads, thus threatening those involved with or dependent upon physical shipping of products. B2B (business-to-business) sales distribution models have their own shape, again dependent on products and services, customer markets, technology, plus other influences such as economical trends, environmental and legislative effects, etc. Examples of B2B sales distribution models are franchising, direct sales forces (employed), direct sales forces (sales agents), telephone sales (call-centres, out-bound and in-bound), the internet (online website businesses), distributors (independent sellers who carry products and services of other manufactuerers and 'principals'), and channel partners and partnering arrangements (prevalent in telecomms and IT sectors).

FAB's - features advantages benefits - the links between a product description, its advantage over others, and the gain derived by the customer from using it. One of the central, if now rather predictable, techniques used in the presentation stage of the selling process.

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feature - an aspect of a product or service, eg., colour, speed, size, weight, type of technology, buttons and knobs, gizmos and gadgets, bells and whistles, technical support, delivery, etc.

field - means anywhere out of the sales office. Field sales people or managers are those who travel around meeting people personally in the course of managing a sales territory. To be field-based is to work on the sales territory, as opposed to being office-based.

forecast/sales forecast - a prediction of what sales will be achieved over a given period, anything from a week to a year. Sales managers require sales people to forecast, in order to provide data to production, purchasing, and other functions whose activities need to be planned to meet sales demand. Sales forecasts are also an essential performance quantifier which feeds into the overall business plan for any organization. Due to the traditionally unreliable and optimistic nature of sales-department forecasts it is entirely normal for the sum of all individual sales persons' sales annual forecast to grossly exceed what the business genuinely plans to sell. See targets.

function - in the context of an organization, this means the job role or discipline, eg., sales, marketing, production, accounting, customer service, delivery, installation, technical service, general management, etc.

gestation period - sale gestation period typically refers to the the time from enquiry to sale, the Sales Cycle in other words, (see Sales Cycle). Awareness and monitoring of Sale Gestation Period/Sales Cycle times are crucial in sales planning, forecasting and management, for individuals sales teams and sales organizations.

influencer - a person in the prospect organization who has the power to influence and persuade a decision-maker. Influencers will be generally be decision-makers for relatively low value sales. There is usually more than one influencer in any prospect organization relevant to a particular sale, and large organizations will have definitely have several influencers. It is usually important to sell to influencers as well as decision-makers in the same organization. Selling to large organizations almost certainly demands that the sales person does this. The role and power of influencers in any organization largely depends on the culture and politics of the organization, and particularly the management style of the two main decision-makers. See decision-makers.

intangible - in a selling context this describes, or is, an aspect of the product or service offering that has a value but is difficult to see or quantify (for instance, peace-of-mind, reliability, consistency). See tangible.

introduction - first stage of the actual sales call (see opening).

LAMP® - Large Account Management Process - sales acronym and methodology for major accounts management developed by Robert Miller, Stephen Heiman and Tad Tuleja in their 1991 book Successful Large Account Management (see the books at the foot of this page). Note that LAMP® and Strategic Selling® methods and materials are subject to copyright and intellectual property control of Miller Heiman, Inc. Also note that LAMP® and Strategic Selling® methods and materials are not to be used in the provision of training and development products and services without a licence. See LAMP® and Strategic Selling® copyright details below.

lead-time - time between order and delivery, installation or commencement of a product or service.

listening - a key selling skill, in that without good listening skills the process of questioning is rendered totally pointless.

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major account - a large and complex prospect or customer, often having several branches or sites, and generally requiring contacts and relationships between various functions in the supplier and customer organization. Often major accounts are the responsibility of designated experienced and senior sales people, which might be formed into a major accounts team. Major accounts often enjoy better discounts and terms than other customers because of purchasing power leveraged by bigger volumes, and lower selling costs from economies of scale.

marketing - perceived by lots of business people to mean simply promotion and advertising, the term marketing actually covers everything from company culture and positioning, through market research, new business/product development, advertising and promotion, PR (public/press relations), and arguably all of the sales functions as well. It's the process by which a company decides what it will sell, to whom, when and how, and then does it. See the marketing section.

margin/profit margin - the difference between cost (including or excluding operating overheads) and selling price of a product or service. Percentage margin is generally deemed to be the difference between cost and selling price, divided by the selling price ex tax (eg something that costs £1 and is sold for £2 plus tax produces a 50% margin - gross margin that is - net margin is after overheads are deducted).

mark-up - this is the money that a selling company adds to the cost of a product or service in order to produce a required level of profit. Strictly speaking, percentage mark-up refers to the difference between cost and selling price as a factor of the cost, not of the selling price. So a product costing £1 and selling for £2 has been given a mark-up of 100%; (at the same time it produces a margin of 50%).

needs-creation selling - a selling style popularised in the 1970's and 80's which asserted that sales people could create needs in a prospect for their products or services even if no needs were apparent, obvious or even existed. The method was for the sales person to question the prospect to identify, discover (and suggest) organizational problems or potential problems that would then create a need for the product. I'm bound to point out that this is no substitute for good research and proper targeting of prospects who have use of the products and services being sold.

negotiation/negotiating - the trading of concessions including price reductions, between supplier and customer, in an attempt to shape a supply contract (sale in other words) so that it is acceptable to both supplier and customer. Negotiations can last a few minutes or even a few years, although generally it's down to one or two meetings and one or two exchanges of correspondence. Ideally, from the seller's point of view, negotiation must only commence when the sale has been agreed in principle, and conditionally upon satisfactory negotiation. However most sales people fall into the trap set by most buyers - intentionally or otherwise - of starting to negotiate before the selling process have even commenced. See the section on negotiation for negotiating theory, rules and techniques.

objection - a point of resistance raised by a prospect, usually price ("it's too expensive"), but can be anything at any stage of the selling process; overcoming objections is a revered and much-trained skill in the traditional selling process.

open/opening - the first stage of the actual sales call (typically after preparation in the Seven Steps of the Sale). Also called the introduction.

opening benefit statement/OBS - traditionally an initial impact statement for sales people to use at first contact with prospect, in writing, on the phone or face-to-face - the OBS generally encapsulates the likely strongest organizational benefit typically (or supposedly) derived by customers in the prospect's sector, eg., "Our customers in the clothing retail sector generally achieve 30-50% pilferage reduction when they install one of our Crooknabber security systems..." - N.B. The OBS is a relatively blunt instrument for modern selling - use it with extreme care for fear of looking like a total twerp.

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open plan selling - a modern form of selling, heavily dependent on the sales person understanding and interpreting the prospect's organizational and personal needs, issues, processes, constraints and strategic aims, which generally extends the selling discussion far beyond the obvious product application; (in a way, it's rather like combining selling with genuinely beneficial, free, expert consultancy). In 'open plan selling' the seller identifies strategic business aims of the sales prospect or customer organization, and develops a proposition that enables the aims to be realised. The proposition is therefore strongly linked to the achievement of strategic business aims - typically improvements in costs, revenues, margins, overheads, profit, quality, efficiency, time-saving and competitive strengths areas. There is a strong reliance on seller having excellent strategic understanding of prospect organization and aims, market sector situation and trends, and access to strategic decision-makers and influencers.

open question - a question that gains information, usually beginning with who, what, why, where, when, how, or more subtly 'tell me about..'

package - in a selling context this is another term for the product offer; it's the whole product and service offering at a given price, upon given terms.

partnership selling - very modern approach to organizational selling for business-to-business sales - see collaboration and partnership selling.

perceived - how something is seen or regarded by someone, usually by the prospect or customer, irrespective of what is believed or presented by the seller, ie what it really means to the customer.

pipeline - see sales pipeline.

preparation - in the context of the selling process this is the work done by the sales person to research and plan the sales approach and/or sales call to a particular prospect or customer. Almost entirely without exception in the global history of selling, no call is adequately prepared for, and sales that fail to happen are due to this failing.

presentation/sales presentation - the process by which a sales person explains the product or service to the prospect (to a single contact or a group), ideally including the product's features, advantages and benefits, especially those which are relevant to the prospect. Presentations can be verbal only, but more usually involve the use of visuals, commonly bullet-point text slides and images on a computer display or projected onto a screen. Can incorporate a video and/or physical demonstration of the product(s). See the presentation training section.

product - generally a physical item being supplied, but can also mean or include services and intangibles, in which case product is used to mean the whole package being supplied.

product offer - how the product and/or service is positioned and presented to the prospect or market, which would normally include features and/or advantages and also imply at least one benefit for the prospect (hence a single product can be represented by a number of different product offers, each for different market niches (segments or customer groupings). One of the great marketing challenges is always to define a product offer concisely and meaningfully.

proposal/sales proposal - usually a written offer with specification, prices, outline terms and conditions, and warranty arrangements, from a sales person or selling organization to a prospect. Generally an immensely challenging part of the process to get right, in that it must be concise yet complete, persuasive yet objective, well specified yet orientated to the customer's applications. An outline proposal is often a useful interim step, to avoid wasting a lot of time including in a full proposal lots of material that the customer really doesn't need.

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proposition - usually means product offer, can mean sales proposal. The initial proposition means the basis of the first approach.

professional selling skills - see PSS

PSS - 'Professional Selling Skills' - highly structured selling process pioneered by the US Xerox (and UK Rank Xerox) photocopier sales organization during the 1960's, and adopted by countless business-to-business sales organizations, normally as the 'Seven Steps of the Sale', ever since. PSS places a huge reliance on presentation, overcoming objections and umpteen different closes. Largely now superseded by more modern 'Open Plan' two-way processes, but PSS is still in use and being trained, particularly in old-fashioned paternalistic company cultures. The regimented one-way manipulative style of PSS nowadays leaves most modern buyers completely cold, but strip it away to the bare process and it's better than no process at all.

prospect - a customer (person, organization, buyer) before the sale is made, ie a prospective customer.

questioning - the second stage of the sales call, typically after the opening or introduction in the Seven Steps of the Sale. A crucial selling skill, and rarely well demonstrated. The correct timing and use of the important different types of questions are central to the processes of gathering information, matching needs, and building rapport and empathy. Questioning also requires that the sales person has good listening, interpretation and empathic capabilities. See the questioning section.

research/research call - the act of gathering information about a market or customer, that will help progress or enable a sales approach. Often seen as a job for telemarketing personnel, but actually more usefully carried out by sales people, especially where large prospects are concerned (which should really be the only type of prospects targeted by modern sales people, given the need to recover very high costs of sales people).

retention/customer retention - means simply keeping customers and not losing them to competitors. Modern companies realise that it's far more expensive to find new customers than keep existing ones, and so put sufficient investment into looking after and growing existing accounts. Less sensible companies find themselves spending a fortune winning new customers, while they lose more business than they gain because of poor retention activity. (The hole in the bucket syndrome, where it leaks out faster than it can be poured in.)

sales cycle - the Sales Cycle term generally describes the time and/or process between first contact with the customer to when the sale is made. Sales Cycle times and processes vary enormously depending on the company, type of business (product/service), the effectiveness of the sales process, the market and the particular situation applying to the customer at the time of the enquiry. The Sales Cycle time is also referred to as the Sale Gestation Period (ie from conception to birth - enquiry to sale). The Sales Cycle in a sweet shop is less than a minute; in the international aviation sector or civil construction market the Sales Cycle can be many months or even a few years. The funnel diagram and sales development process on the free resources section show the sales cycle from a different perspective, (and actually prior to enquiry stage). A typical Sales Cycle for a moderately complex product might be:

receive enquiry

qualify details

arrange appointment

customer appointment

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arrange survey

conduct survey

present proposal and close sale

sales funnel - describes the pattern, plan or actual achievement of conversion of prospects into sales, pre-enquiry and then through the sales cycle. So-called because it includes the conversion ratio at each stage of the sales cycle, which has a funneling effect. Prospects are said to be fed into the top of the funnel, and converted sales drop out at the bottom. The extent of conversion success (ie the tightness of each ratio) reflects the quality of prospects fed into the top, and the sales skill at each conversion stage. The Sales Funnel is a very powerful sales planning and sales management tool. A diagram of a typical basic Sales Funnel appears on the free resources section. Also referred to as the Sales Pipeline.

sales pipeline - a linear equivalent of the Sales Funnel principle. Prospects need to be fed into the pipeline in order to drop out of the other end as sales. The length of the pipeline is the sales cycle time, which depends on business type, market situation, and the effectiveness of the sales process.

sector/market sector - a part of the market that can be described, categorised and then targeted according to its own criteria and characteristics; sectors are often described as 'vertical', meaning an industry type, or 'horizontal', meaning some other grouping that spans a number of vertical sectors, eg., a geographical grouping, or a grouping defined by age, or size, etc.

segment/market segment - a sub-sector or market niche; basically a grouping that's more narrowly defined and smaller than a sector; a segment can be a horizontal sub-sector across one or more vertical sectors.

solutions selling - a common but loosely-used description for a more customer-orientated selling method than the Seven Steps; dependent on identifying needs to which appropriate benefits are matched in a package or 'solution'. The term is based on the premise that customers don't buy products or features or benefits - they buy solutions (to organizational problems). It's a similar approach to 'needs-creation' selling, which first became popular in the 1970's-80's. Solutions selling remains relevant and its methods can usefully be included in the open plan selling style described later here, although modern collaborative and facilitative methodologies are becoming vital pre-requisites.

SPIN® and SPIN® Selling - A popular selling method developed by Neil Rackham in the 1970-80's: SPIN® is an acronym derived from the basic selling process designed and defined by Rackham: Situation, Problem, Implication, Need, or Need Payoff. More detail about SPIN® and SPIN® Selling appears in the Consultative Selling and Needs Creation Selling methods section. Note that SPIN® and SPIN SELLING® methods and materials are subject to copyright and intellectual property control of the Huthwaite organisations of the US and UK. SPIN® and SPIN SELLING® methods and materials are not to be used in the provision of training and development products and services without a licence. See SPIN® copyright details.

steps of the sale - describes the structure of the selling process, particularly the sales call, and what immediately precedes and follows it. Usually represented as the Seven Steps of the Sale, but can be five, six, eight or more, depending whose training manual you're reading.

Strategic Selling® - when used in upper case and/or in the context of Miller Heiman's Strategic Selling® methodology (which features in their books of the same name, first published in 1985) the Strategic Selling® term is a registered and protected product name belonging to the American Miller Heiman training organisation - so be warned. LAMP® and Strategic Selling® methods and materials are subject

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to copyright and intellectual property control of Miller Heiman, Inc., and again be warned that LAMP® and Strategic Selling® methods and materials are not to be used in the provision of training and development products and services without a licence. See LAMP® and Strategic Selling® copyright details below.

strategic selling - you will also hear people (me included) referring to 'strategic selling' in a generic sense, and not specifically referring to the Miller Heiman methods and materials. In a generic 'lower case' sense, 'strategic selling' describes a broad methodology which began to be practised in the 1980's, literally 'strategic' by its nature (the principles involve taking a strategic view of the prospective customer's organisation, its markets, customers and strategic priorities, etc), which is described below and referred to as 'open plan selling'. When using the 'strategic selling' terminology in a training context you must be careful therefore to avoid confusion or misrepresentation of the Miller Heiman intellectual property. If in any doubt don't use the 'strategic selling' term in relation to providing sales training services - call it something else to avoid any possible confusion with the Miller Heiman products, (see the Miller Heiman Strategic Selling® copyright details below.

tangible - in a selling context this describes, or is, an aspect of the product or service offering that can readily be seen and measured in terms of cost and value (eg., any physical feature of the product; spare parts; delivery or installation; a regular service visit; a warranty agreement). See intangible.

target/sales target - in a sales context this is the issued (or ideally agreed) level of sales performance for a sales person or team or department over a given period. Bonus payments, sales commissions, pay reviews, job gradings, life and death, etc., can all be dependent on sales staff meeting sales targets, so all in all sales targets are quite sensitive things. Targets are established at the beginning of the trading year, and then reinforced with a system of regular forecasting and reviews (sometimes referred to as 'a good bollocking') throughout the year. See forecasting.

telemarketing - any pre-sales activity conducted by telephone, usually by specially trained telemarketing personnel - for instance, research, appointment-making, product promotion.

telesales - selling by telephone contact alone, normally a sales function in its own right, ie., utilising specially trained telesales personnel; used typically where low order values prevent the use of expensive field-based sales people, and a recognisable product or service allows the process to succeed.

tender - a very structured formal proposal in response to the issue of an invitation to tender for the supply of a product or service to a large organization or government department. Tenders require certain qualifying criteria to be met first by the tendering organization, which in itself can constitute several weeks or months work by lots of different staff. Tenders must adhere to strict submission deadlines, contract terms, specifications and even the presentation of the tender itself, and usually only suppliers experienced in winning and fulfilling this type of highly controlled supply ever win the business. It is not unknown for very successful tendering companies to actually help the customer formulate the tender specification, which explains why it's so difficult to prise the business away from them.

territory - the geographical area of responsibility of a sales person or a team or a sales organization.

territory planning - the process of planning optimum and most cost-effective coverage (particularly for making appointments or personal calling) of a sales territory by the available sales resources, given prospect numbers, density, buying patterns, etc., even if one territory by one sales person; for one person this used to be called journey planning, and was often based on a four or six day cycle, so as to avoid always missing prospects who might never be available on one particular day of the week.

trial close - the technique by which a sales person tests the prospect's readiness to buy, traditionally employed in response to a buying signal, eg: prospect says: "Do you have them in stock?", to which the

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sales person would traditionally reply: "Would you want one if they are?" Use with extreme care, for fear of looking like a clumsy desperate fool. If you see a buying signal there's no need to jump on it - just answer it politely, and before ask why the question is important, which will be far more constructive.

unique/uniqueness - a feature that is peculiar to a product or service or supplier - no competitor can offer it.

UPB - unique perceived benefit - now one of the central strongest mechanisms in the modern selling process, an extension and refinement of the product offer, based on detailed understanding of the prospect's personal and organizational needs.

USP - unique selling point or proposition - this is what makes the product offer competitively strong and without direct comparison; generally the most valuable unique advantage of a product or service, for the market or prospect in question; now superseded by UPB.

variable - an aspect of the sale or deal that can be changed in order to better meet the needs of the seller and/or the buyer. Typical variables are price, quantity, lead-time, payment terms, technical factors, styling factors, spare parts, back-up and breakdown service, routine maintenance, installation, delivery, warranty. Variables may be real or perceived, and often the perceived ones are the most significant in any negotiation. See the section on negotiation

VII. open plan selling/strategic selling/Miller Heiman's Strategic Selling®

To my best knowledge, the term 'Open Plan Selling' was first coined by a wonderful and inspirational British business consultant and trainer, Stanley Guffogg, during the early-1980's. His ideas and philosophies were many years ahead of their time, and they provide some of the bedrock for what is written here. Strategic selling (lower case generic description) is also commonly used today to describe similar selling ideas and processes, but be very careful not to confuse this with Miller Heiman's registered and protected 'Strategic Selling® (upper case trademark) sales training methods and products.

The American Miller Heiman organization uses the term Strategic Selling® to describe its own particular sales training methods and products, first published in the Miller Heiman book Strategic Selling® in 1985, and more recently updated and revised in The New Strategic Selling® by Stephen Heiman, Diane Sanchez and Tad Tuleja (1995 and later revisions). See the books below, see the explanations of the strategic selling terminology in the glossary above, and see the Miller Heiman copyright details.

The explanation in this section is concerned with 'open plan selling' and 'strategic selling' (lower-case generic descriptive in the sense of selling strategically), and is not an attempt to summarise or describe Miller Heiman's sales training methods or products in any way. For that you'll need to buy the books or the Miller Heiman materials, and a licence as well if you seek to sell or provide Miller Heiman products.

VIII. open plan selling and strategic selling (lower case descriptive )

Open plan selling is in many ways a completely different approach to the old prescriptive and relatively rigid Seven Steps of the Sale, and the Professional Selling Skills model, that began in the 1960's. Open plan selling is also more advanced than most consultative selling methods being practiced today, largely because of the strategic aspects of the open plan approach.

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Open plan selling is especially suited to the business-to-business major accounts selling function - which is now the principle domain of the field-based sales person (because field-based sales people are very expensive people and low-value business can't recover their costs). However, the open plan selling principles - not the full-blooded structure - can and should be readily adapted for all other types of selling, including even telesales (selling by telephone).

In modern business-to-business selling, successful sales people and organizations provide a tailored product or service which delivers a big measurable strategic improvement to the customer's own businesses. This implies that the customer contact should be a strategic buyer - usually at least a director, or in a small company the finance director or CEO. Nobody lower in the organization has the necessary authority and budget.

The only way to develop tailored strategic offerings is by researching the market and understanding the customer's business, which means the sales person must understand business, and be comfortable talking at director level. When you do business at this strategic level you are at a higher level than your competitors, who are still selling ordinary products and services to middle managers and buyers without true authority. Selling strategically takes time - time to train sales people, and time for selling opportunities to be identified and researched.

The open plan or strategic selling (lower case - not Miller Heiman) process and summary below assumes a major account scenario, whose size and complexity let's say does not enable a sales proposal to be formulated at the first meeting.

For smaller-scale opportunities the middle stages numbers 4 to 7 are effectively compressed or leap-frogged so that the formulation of the proposal and its presentation happens at the first appointment (stage 3) or soon after it.

1. open plan selling process :

- research and plan - market sector, prospect, and decide initial approach - make the appointment - attend appointment to build rapport and credibility, gather information about business needs, aims

and process, and develop/agree a project/product/service specification - agree survey/audit proposal (normally applicable) - carry out survey/audit (normally applicable) - write product/service proposal - present proposal - negotiate/refine/adapt/conclude agreement - oversee fulfilment/completion - feedback/review/maintain ongoing relationship

2. open plan selling in summary :

- research and plan - open plan selling - step 1

In open plan selling, research and planning is a very important part of the process. The bigger the prospect organization or potential sale, the more planning and preparation is required. Major accounts need extensive researching before any serious approach is made to begin dialogue with an influencer or decision-maker. This is to enable the sales person to decide on the best initial approach or opening proposition. Implicit in this is deciding what is likely to be the strongest perceived organizational benefit that could accrue from the product or service in question, as perceived by the person to be approached (different people have different personal and organizational views and priorities). Generally it is best to

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concentrate on one strong organizational benefit. A benefit-loaded 'catch-all' approach does not work, because it's impossible to make a strong impact while promoting lots of different points - people respond most to a single relevant point of interest (see the advertising tricks of the trade for more detail on this).

Assuming a large account is being targeted, the sales person must acquire as much as reasonably possible of the following information about the prospect organization:

the organization's size and shape (turnover, staff types and numbers, sites, management and corporate structure, subsidiaries and parent organization)

strategy and trading situation (main business aims, issues, priorities, trends of business and sector, a profile of the organization's customers and competitors, and what the company considers important for its own customers)

current and future demand, volume, scale for the product/service in question

current supply arrangements and contract review dates

decision-making process (who decides, on what basis, when and how)

decision-makers and influencers (names, positions, responsibilities and locations)

the organization's strategic implications, threats and opportunities that the product/service in question affects or could affect (in terms of the organization's strategic aims, operating efficiency, product and service quality, staff reaction and attitudes, and particularly how the product/service in question affects or could affect the organization's own competitive strengths and added value to its own customers)

The final point in bold is the really special part, and obviously requires a good insight into the prospect's business and market. The other information is what all good sales people will be trying to discover, but only the open plan sales person will look for the final point. The final point is absolutely pivotal to the open plan selling process. When the sales person moves the dialogue with the prospect into this area then the sale takes on a completely different complexion; it completely transcends and surpasses any benefits, USP's or UPB's, that other sales people might be discussing.

These days it's easier to research and plan for a sales call than it used to be, because of the wealth of information available in company brochures, websites and from the organization's own staff, notably in customer service, press relations, and from the relative openness of most organizations. Trade journals and trade associations are other useful information sources for building up a picture. Depending on the particular product or service, different people in the prospect organization will potentially be able to provide company-specific information about important matters such as contract review dates, purchasing procedures and authority, even sometimes very useful details of attitudes, politics, the styles of the key people, and their priorities.

With a sensitive approach it's often possible obtain the trust and co-operation of somebody in the prospect organization, so as to provide this information, particularly if the discussion is positioned as non-threatening, empathic and of some strategic potential for the prospect. The rules of AIDA apply even to this information gathering element alone.

The secretaries and personal assistants of the influencers and decision-makers are generally very helpful in providing information to sales people once an appointment has been made - assuming they are asked politely and given proper reason - because they know that a well-informed visitor is more likely to enable a productive meeting, thereby saving the boss's time. It's often worth approaching these people for

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information and guidance even prior to making the approach for an appointment. Again the justification needs to be sensitively and professionally positioned.

It's important to strike the right balance between researching prior to the first appointment, and researching during the first appointment. The sales person should take advantage of all information that is obtainable easily and leave the rest to be filled in at the first meeting - as a rule, prospects respect and respond well to a well-prepared approach because it shows professionalism, and allows a relevant and focused discussion. Conversely, a prospect responds poorly to a 'blind' approach because it suggests a lack of care and it usually produces a vague, ill-informed discussion, which wastes time.

A good technique for planning and research is to design a 'pro-forma' or checklist of items to be researched for new prospects. This template will be different for each sales organization and product and maybe sector, but once designed serves as a really useful tool, both to gather the right data and to provide the discipline for it to actually be done.

Here's a sample research and planning template:

organization name  

decision-makers, titles, locations, phone and address data

 

influencers, titles, locations, phone and address data

 

decision-making process information  

budgetary issues, inc financial year-end  

current supplier(s) and contracts  

volume and scale indicators (staff, sites, users, etc)

 

special criteria (eg supplier accreditations)  

 trading and strategic pointers  

the organization's strategic implications, threats and opportunities that are affected or potentially affected by the product/service in question (in terms of the organization's strategic aims, operating efficiency, product and service quality, staff reaction and attitudes, and particularly how the product/service in question affects or could affect the organization's own competitive

 

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strengths and added value to its own customers)

other notes  

Having researched and gathered information from various sources, the sales person is better informed as to how and whom to approach in the prospect organization.

Generally the first serious approach should be made to a senior decision-maker, normally the finance director/chief financial officer or the managing director/CEO. This is because only these people have the authority to make important strategic budgetary decisions in the organization; other managers simply work within prescribed budgets and strategies established by the FD/CEO.

There are other reasons for planning to make the approach at the highest strategic level:

If the sales person begins a sales dialogue with a non-decision-maker, it is very difficult to raise the contact to the necessary higher level afterwards. This is due to the perfectly normal psychology of politics and pecking-order in organizations. Everyone, when presented with a proposition which concerns their own area responsibility, by a person who reports to them, is prone to the initial "not invented here" reaction. The reaction of the recipient is largely dependent not on the nature of the proposal, but upon their relationship with the proposer.

The sales person's proposition should ideally be based on serious strategic implications and benefits, which will not typically match the motives of a lower-ranking influencer.

The sales person must avoid a situation developing where he is reliant upon someone in the prospect's organization having to 'sell' the proposition to a decision-maker on the sales person's behalf. This is because it rarely succeeds, not least due to the 'not-invented-here' reaction of higher ranking people in the prospect organization.

- make the appointment - open plan selling - step 2

The most important rule about appointment-making is to sell the appointment and not the product. The sales person must never get drawn into having to sell the product or service, either in writing or on the phone, while trying to arrange an appointment. The sales person cannot sell without first understanding the real issues, and the real issues may not even be apparent at the first meeting, let alone before even making an appointment.

Appointment-making is a skill in its own right. Some selling organizations use canvassers or telemarketing staff to do this for the sales person, but for large prospects it's useful for the sales person to combine the appointment-making with the initial researching activity. When combined in this way it helps to build initial relationships with helpful people in the prospect organization, and the sales person can collect additional useful information that would otherwise be missed or not passed on by a separate appointment-maker or canvasser.

Introductory letters are a useful and often essential requirement before an appointment can be made. See the section on introductory sales letters. Generally the larger the prospect organization, then the more essential an introductory letter will be. This is mainly because pa's and secretaries almost always suggest that any approach to a decision-maker (ie the boss, whose time the secretary is protecting) be

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put in writing first. It's simply an expected part of the process by which credibility and level of interest is assessed by the prospect.

Remember AIDA - it applies to the appointment-making process as well. The aim is the appointment not the sale. When telephoning for an appointment, with or without a prior letter, the sales person typically must first speak to a switchboard operator or receptionist, then be put through to the targeted person's secretary or pa.

Bear in mind that the pa is there as a defence for the boss, and rightly so, or the boss would never get anything done. So for any approach to succeed in getting through to the boss, the pa must effectively endorse its credibility. Whether by writing or telephoning, the reason for wanting to meet must be serious and interesting enough, which is why researching and understanding the organization's strategic priorities are so crucial. Generic product and service approaches do not work because the are not seen to relate or benefit the prospect's own strategic priorities.

A carefully thought-through UPB (unique perceived benefit) forms the basis of the appointment approach. If it strikes the right chord the appointment will be granted. A good introductory letter may win an appointment without the need even to speak to the decision-maker. Imagine what happens: the letter is received by the pa. If it looks interesting and credible and worthy, the pa will show it to the boss. If the boss is interested, and in the event that the pa keeps the boss's diary (as is often the case), the boss often instructs the pa to make an appointment when the phone call from the sales person is received.

Calling early or late in the day, or at lunchtimes, often enables the sales person to circumvent the pa, but generally it's best to work with secretaries and pa's; they are usually extremely capable and knowledgeable people. They can be immensely helpful, so it's best to work with them and certainly not to alienate them.

In modern appointment-making, calling out of normal hours is advisable only in instances where both pa and boss are extremely difficult to reach during normal working hours.

The sales person's attitude towards the pa is very important. Imagine a pa who has taken a dislike to a pushy arrogant sales person - even if the approach is enormously well researched, relevant and appealing, the pa will for certain tell the boss about the sales person's attitude, and it is virtually inconceivable for the boss then to agree to an appointment. The sales person should always assume that the loyalty and mutual trust between boss and pa are strong. Most pa's can exert positive influence too; some will even make appointments for the boss with little reference to the boss, so there are lots of reasons for a sales person to make a favourable impression with a pa.

The use of serious-sounding language is important also in presenting the reason for wanting the appointment. The pa will generally try to divert the sales person's approach to a less senior member of staff. By orientating the reason to fit into the contact's responsibility, there is less chance of the approach being diverted. So it's important to tailor the approach to fit with the level of, and functional responsibility of the person being approached for the appointment.

For example, a managing director's pa will refer anything purely functional to the functional department concerned, ie., HR issues will be referred to personnel; IT issues will be diverted to IT department; sale sales and marketing will be referred to those departments. The only issues which will win appointments with MD's, CEO's, or FD's (the main decision-makers) are those which are perceived to significantly affect or benefit the profit and/or strategy of the business.

Therefore if the sales person seeks an appointment with one of these decisions-makers, the approach must be orientated to have a potentially significant affect or benefit upon profit or strategy.

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On occasions, the sales person will not be granted an appointment with the targeted main decision-maker, but instead will be referred by them to make an appointment with a lower ranking manager or director. If this happens it's no problem - the sales person then proceeds with the MD's or FD's endorsement to develop the situation with the lower ranking contact. The fact that it's been referred by the MD or FD gives the sales person vital authority and credibility.

Being referred down is fine; but trying to refer upwards for eventual purchase authorisation or budgetary approval is nearly impossible, which is why appointment-making should always aim high, with a strategically orientated proposition.

Avoid scripts - everyone recognises and reacts against a script. Just be your honest self. You must, however, smile and mean it. If you don't feel like smiling, then don't do any sales calling - do some paperwork instead until you cheer up. If you rarely cheer up then you should get out of selling, because unhappy people can't sell. You must also smile on the phone, because words spoken with a smile or a grimace sound different, and people can tell which is which. Just say "Hello, I'm/this is (first and last name), from (your organization), can I take a couple of minutes of your time please?", or "are you okay to talk for a minute?"

Let your personality shine through - don't force it, don't try to be someone that you're not, just be you. If you are door-knocking and personal cold-calling - which is only recommended for smaller prospects - be professional, enthusiastic and straight-forward. Resist any temptation to employ gimmicks, jokes and flashing bow-ties - your credibility will be undermined before you even open your mouth.

Some trainers talk about PMA - Positive Mental Attitude - and suggest that this is some kind of magic that anyone can simply turn on and off at will. For all but the most experienced practitioners of self-hypnosis or neuro-linguistic programming, this is nonsense. If you're not feeling good, don't force it or you'll waste the call and feel worse. Just wait until you're in the right mood and everything will be fine.

Sales people were, and still are, taught to use an alternative close when making appointments, eg., "What's best for you, Tuesday morning or Thursday afternoon?..." This can be quite insulting to another person, who'll have heard the technique about a thousand times just in the past week, so it's best avoided these days. Just ask when would suit best; or initially, "What week are you looking at?..", and then take it from there.

Don't suggest appointments at 9.00am or 4.30pm, or at lunchtime, but if they're offered don't quibble.

Here is a simple stage-by stage 'script' for beginning the initial approach to a new prospective company, through the PA:

telephone sales/telemarketing flexible 'script' for initial sales approach

There is no magic, secret or trickery involved - the process is based on straight-forward logic, and straight open, honest, professional language. It also helps to have done some research before-hand about the company, and to think about what sort of proposition is likely to be of interest, but do not make assumptions of what needs or opportunities will arise.

First you'll normally speak to the person on switchboard. Introduce yourself - full name and company - and ask to be put through to the PA (personal assistant - or secretary) of the director/VP for the function that you believe makes the strategic decision about your offering (if in doubt ask for the PA to the CEO/MD/President/General manager:

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" Hello, this is (your full name) from (your company name) - could you put me through to the PA for the (relevant function, eg Sales, Finance, IT, Operations, etc) director/VP, thanks - what is the PA's name please?" (Ask this last thing while you are being put through - it will help you to know the PA's name now and in the future should you call back - this person is there to help his/her boss - don't try to by-pass him/her - ask for their help - that's their job - to be a vital link in the communications between their boss and everyone else).

When put through: "Hello, this is (your name) from (your company name) - is that (name)/are you the PA for the ............. director/VP? (depending on whether you have the PA's name or not.)

If no, ask when/if he/she is available and if applicable if you can be transferred to them. If yes -

Ask the PA: "I wonder if you could help me please?"

PA will normally say: "Sure/I'll try/it depends/what's it about?"

You say,"I'd like to submit a strategic proposition to (company) concerning (briefly describe your area of interest using professional straight language, but do not go into great detail, and try to use a description that is unlikely to attract the response: 'we've already got that covered thanks') - could you tell me to whom I should initially approach that has a strategic view of this?"

Or:

"I'd like to open dialogue with (company) about (again describe your area of interest using professional straight language, but do not go into great detail, and try to use a description that is unlikely to attract the response: 'we've already got that covered thanks') - could you advise how best to do this, to whom I should write or speak, and when's the best time to reach them on the phone afterwards?"

Or:

"I wonder if you can advise me on what's the best way to find out who, when and how for (company) determines strategy and decides solutions and providers in the area of (again, briefly describe your area of interest using professional straight language, but do not go into great detail, and try to use a description that is unlikely to attract the response: 'we've already got that covered thanks')."

And then take it from there - be guided by the PA. Fitting in with their communications and decision-making processes and systems is as important as your proposition and service, and the PA is the best one to help you begin to understand about this.

- the appointment - open plan selling - step 3

There are some obvious things to do pre-appointment which can be overlooked, so here they are:

establish how long the meeting will last and who'll be there

confirm the appointment in writing - keep it brief, professional, and you can even provide an agenda for the meeting, which shows you've thought about it, and prepares the contact for what's to come

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gather any more information that you need - the willingness of the contact's support staff to help will be quite high at this stage, but don't be a nuisance

ensure you've prepared everything that you might need for the meeting - broadly, you must be able meet the expectations that your contact has for the meeting, mainly this will be information about the company, its products and services; maybe relevant case history examples (if any exist - summaries of successful supply contracts to similar organizations)

learn anything you need to know to avoid being late - map and directions; security gate check-in procedure; car-parking; journey and travel time - allow sufficient time for delays

The sales person's aims at the first appointment are to

complete the gaps in the basic research and planning template, ie the basic company profile (though not necessarily any mundane points, which could be provided later, but certainly the strategic information and views)

establish personal rapport and trust, and the credibility of the sales person and the selling organization

learn about the prospect's business, priorities, problems, trends and issues, and especially the corporate aims and objectives of the main decision-maker(s)

gather relevant information about the strategic needs, implications and potential benefits linked with the product/service

understand the prospect's buying process, including people and the role of influencers, budgets, timescales, procedures, internal politics and attitudes, competitors and existing supply arrangements

understand the trading preferences of the prospect - purchase vs lease vs rental - long term partnerships vs short term contracts - payment, ordering, lead-times, inventory, one-stop-shop vs dual or multiple supplier arrangements, etc

agree a way forward that progresses the opportunity in a way that suits and helps the prospect, in whatever areas of help that are useful to the prospect

The sales person's aim at this stage is absolutely not to launch into a full-blown presentation of the product/service features advantages and benefits. Sales people who do this will be listened to politely, ushered out and forgotten. (They'll then wonder why the once attentive, interested prospect afterwards won't return the sales person's phone calls, let alone agree to another meeting.)

The sales person must be prepared to talk about the relevant technical aspects and benefits if asked, but typically this will not happen in major account situations, because the prospect will know that the sales person is in no position yet to present a relevant solution or proposition of any kind.

The sales person will be expected to know about and refer to some examples of how the product/service has produced significant strategic benefits (profit and/or quality - making money or saving money) in similar organizations and in similar industrial sectors to the prospect's organization. This is more proof of the need for good industry knowledge - beyond product knowledge and FAB's - this is knowledge about how the prospect's organization could significantly benefit from the product/service.

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It may be also that the sales person is able to convey and interpret issues of legislation, health and safety, or technology, that have potential implications for the prospect's organization. This is a great way to build both credibility and added value for the sales person and the selling organization.

At the beginning of the appointment explain what you'd like to achieve - broadly a summary of the points above (essentially to understand all the relevant issues from a strategic perspective - and to what end - which is to identify how best to progress the situation in a way that will be most helpful to the prospect.

And then you're into the questioning phase, which has already been outlined in the Seven Steps of the Sale.

Where questioning differs in major accounts selling compared to the style within the Seven Steps, is that the prospect's perspective and situation are wide and complex, so more care and time needs to be taken to discover the facts. If the appointment is with a senior decision-maker the breadth of implications and issues can be immense. Any product or service can have completely surprising implications, when an MD or CEO explains their own position. For example, a purely technical product sale lower down the organization, where specification and price appear to be the issues, might have enormous cultural and cultural implications for a CEO. A new computerised monitoring system for example, would again simply have price and technical issues for a middle-ranking technical buyer, but there could be massive health and safety legislative compliance issues (threats and potential benefits) for the CEO.

Only by asking intelligent, probing questions (mostly open questions, and use of the phrase 'why is that') will the issues and opportunities be uncovered.

Sales people really only need a pad and pen for the great part of the first meeting (ask if it's okay to take notes - it's a professional courtesy). The sales person should actually try to adopt the mind-set and style of an 'expert consultant', specialising in the application of the particular product or service to the prospect type and industry concerned - and not behave like a persuasive sales person. The appointment process and atmosphere should be consultative, helpful and co-operative. Steven Covey's maxim 'Seek first to understand before you try to be understood' was never more true.

Senior experienced decision-makers will provide a lot of relevant information in response to very few questions. Lower ranking influencers need to be asked more specific questions, dealing with an issue at a time, and they will often be unable to give reliable information about real strategic decision-making motives and priorities, because they simply do not operate at that level.

There is twin effect from asking and interpreting strategic questions: first, vital information is established; second, the act of doing this also establishes professional respect, rapport and trust. Combine these two and the sales person then has a platform on which to build the next stage.

- agree audit or survey - open plan selling step - 4

For anything bigger than a simple small business prospect, normally the stage after the appointment is to survey, audit or gather necessary data to be able to produce a sales proposal. Therefore at the appointment it is important for the sales person to agree the survey or audit parameters: exactly what is to happen, how it is to be done, whether a cost is attached (rarely, but can be if significant expertise and input is required), a completion date, who is to be involved, and what the output is at the end of it, which is normally a detailed sales proposal.

The survey will normally take place some time after the appointment; it would be rare in a large account situation for the sales person to be able or to be asked to carry out a survey immediately.

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Therefore, after the appointment the sales person needs to summarise very concisely the main points of the meeting and the details of the survey, particularly focusing on its purpose and outputs, from the prospect's viewpoint. This confirmation must include all necessary parameters to ensure no misunderstandings develop and that seller's and buyer's expectations match.

The document outlining the survey parameters and aims should be copied to the relevant people in the seller's and buyer's organizations.

- carry out the survey or audit - open plan selling - step 5

This part of the process will depend on the type of product or service, and the process of the selling organization. Some will have dedicated survey staff; in other situations the sales person may carry out the survey.

For a large prospect organization this survey stage can be protracted and complex. It may be necessary for reviews during the survey process to check understanding and interpretation. Permissions and access may need to be agreed with different sites or locations in the prospect's organization, and this should all be managed sensitively by the sales person.

It is essential that the sales person manages this stage properly, thoroughly and sympathetically. This is because the way that a survey is conducted serves as a very useful guide to the prospect as to the potential supplier's quality, integrity and professionalism.

- write the product/service proposal - open plan selling - step 6

The sales person is responsible for writing the sale proposal, which should reflect the findings of the survey.

Some sales organizations have dedicated people who write project proposals or quotations. In this case the sales person should ensure that what is written is relevant and concise, factually correct, and outlines the organizational benefits clearly stemming from the product or services being proposed.

It may be possible for the sales person to involve an influencer or decision-maker in the drafting of the proposal, so that it is framed as suitably as possible to meet the requirements of the prospect organization. Getting some help in this way is ideal.

Proposals that are necessarily lengthy and very detailed should begin with an executive summary showing the main deliverables, costs and organizational benefits.

The sales person should always try to present the sales proposal personally, rather than send it. The prospect may agree to, or actually ask for, a presentation to a group of people in the prospect organization including influencers and decision-makers, which is ideal.

The sales person should try to avoid any situation where a proposal is presented on the sales person's behalf in their absence, by an influencer to the decision-maker(s).

If the open plan process has been applied thus far then it's actually unlikely that the prospect would not want the sales person's involvement at the presentation stage.

See the tips on writing.

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- present the sales proposal - open plan selling - step 7

The aim of the presentation must be based on whatever is the next best stage for the prospect, not for the seller. Large organizations will not be pushed, and to try to do so often risks upsetting the relationship and losing the opportunity altogether.

It may be that just one presentation is required and that approval can be given there and then, or the sales process may warrant several more refinements to the proposal and more presentations or meetings. It could be that the decision-maker is advising and needing the sales person's help in how to achieve positive approval for the proposal from the influencers. Or the decision-maker may have given agreement to the concept already, subject to cost and being able to implement without disruption. Whatever the aim is, the sales person needs ensure that the presentation is geared to achieving it.

The presentation can take place in widely different circumstances, depending on what suits the prospect.

Groups of influencers and decision-makers need to be handled very carefully, and the sales person must by now understand the roles and motives of all the people present, in order to present and respond appropriately.

The presentation must be professional and concise, whatever the format. Adequate copies, samples, reference material must be available for all present.

The sales person must enlist help with the presentation from colleagues if required and beneficial, which will generally be so for large complex proposals, in which case all involved must be carefully briefed as to what is expected of them, overall aims and fall-backs etc.

The presentation must concentrate on delivering the already agreed strategic organizational needs. People's time is valuable - keep it concise and factual - don't waffle - if you don't know the answer to something don't guess or you'll lose your credibility and the sale for sure. Preparation is crucial.

See the page on creating and giving presentations.

- negotiate/refine/adapt/conclude the agreement - open plan selling - step 8

In open plan selling it is common for agreement in principle to be reached before all of the final details, terms and prices are ironed out, and if the opportunity arises to do this then such as understanding should be noted and then confirmed in writing. Moreover, in very complex situations it is certainly advisable to try to obtain provisional agreement ('conditional agreement' or 'approval for the concept in principal') as soon as the opportunity arises.

In this event the sales person must agree and confirm the various action points necessary for the conclusion of the agreement to the satisfaction of the customer.

A similar process takes place when the prospect seeks to negotiate aspects of the deal before finally committing. Some situations develop into negotiations, others into more of a co-operative mutual working together to agree points of detail. Generally the latter is more productive and by its nature avoids the potential for confrontation. However some prospects will want or need to negotiate, in which case it's essential at this stage to follow the rules of negotiating.

It's critically important at this point to establish conditional commitment for the sale in principle, ie., that subject to agreeing the points to be negotiated, the deal will proceed. Do not begin to negotiate until you have provisional or conditional agreement for the sale.

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As with the other stages of open plan selling, it's important to adapt your responses and actions according to what the prospect needs, especially in meeting their specific organizational needs in the areas of operating, communicating, processing and implementing the decision.

Management of the introduction, change, and communication of implications (specifically training) are all likely to be important (and often late-surfacing) aspects of the prospect's requirements when agreeing any major new supply arrangement. So be on the lookout for these issues and react to meet these needs. The supplier's ability to anticipate and meet these requirements quickly become essential facets of the overall package - often extra potential added value - and actually contain some of the greatest potential perceived benefits of all.

When the negotiation or agreement is concluded it is the sales person's responsibility to confirm all the details in writing to all concerned on both sides. Deals often fall down in the early stage of implementation through the sales person's failure to do this properly. Expectations need to be clearly understood to be the same by both sides at all times.

The modern sales person needs to be an excellent internal communicator these days (ie., to the selling organization's people, as well as the prospect's). All big deals will invariably be tailored to suit the customers needs, and this will entail the sales person being able to agree and confirm requirements and deliverables with the relevant departments of the selling organization.

This implies in turn that the sales person has a good understanding of the selling organization's strategy, capabilities, costs, prices and margins, so as to know what is realistically achievable, strategically desirable, and commercially viable. The customer may always be right, but this does not automatically imply that the supplier should do everything without question just because the prospect needs it - often there are limits, and these need to be managed and explained. (See ways of saying 'no' in the negotiating section.)

- oversee the sale's implementation/fulfilment/completion - open plan selling - step 9

Even if the concluded sale is to be passed on to another department in the selling organization for implementation, the sales person must always remain the guardian of that customer and sale. The sales person will have won the sale partly by virtue of their own credibility and personal assurances, so it's unforgivable for a sales person to 'cut and run' (see the derivations section if you're interested in the origin of this expression).

The sales person must stay in touch with the decision-maker and give regular updates on the progress of the sale's implementation. There may be ongoing issues to manage - in fact there will be.

If the implementation is very complex the sale person must ensure a project plan is created and then followed, with suitable reviews, adjustments and reporting.

Upon implementation the sales person must check and confirm that the prospect is satisfied at all levels and at all points of involvement, especially the main decision-maker and key influencers.

- feedback/review/maintain ongoing relationship - open plan selling - step 10

In many types of business, and especially major accounts selling, the sale is never actually finally concluded - that is to say, the relationship and support continues, and largely customers appreciate and need this enormously. Good sales people build entire careers on this principle.

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Arranging regular reviews are vital for all service-type arrangements. Customers become disillusioned very quickly when sales people and selling organizations ceased to be interested, communicative and proactive after the sale is concluded or the contract has been set up.

Even for one-off outright sale transactions, with no ongoing service element, it's essential for the sales person to stay in touch with the customer, or future opportunities will be hard to identify, and the customer will likely go elsewhere.

These days, most business is on-going, so it needs looking after and protecting. Problems need to be anticipated and prevented. Opportunities to amend, refine, develop and improve the supply arrangement need to be reviewed and acted upon. This must always ultimately be the sales person's responsibility - and it should have been part of the original product offer after all. Even if a whole team of customer service people are responsible for after sales implementation and customer care, the sales person must keep a strategic 'weather eye' on the situation - not to manage day to day issues, but to ensure that the supply arrangement and relationship remain high quality, better than the potential competition and relevant to the customer's needs.

3. selling strategically - summary of the open plan selling process

Selling strategically, using an open plan approach requires a lot of thought and expertise. The rewards are well worth the effort though - the sales person is seen more as an advisor, and the selling process becomes more of a co-operation and partnership, which is altogether much more of a professional and civilised way of doing business. Sales management methods which are aimed at increasing a sales team's strategic business development responsibilities, opportunities and capabilities (as entailed within the process of selling strategically), generally have good motivational effects on the sales people, because they enable personal growth, extra responsibility, and higher level achievements.

- research and plan - market sector, prospect, and decide initial approach

- make the appointment

- attend appointment to build rapport and credibility, gather information about business needs, aims and process, and develop/agree a project/product/service specification

- agree survey/audit proposal (normally applicable)

- carry out survey/audit (normally applicable)

- write product/service proposal

- present proposal

- negotiate/refine/adapt/conclude agreement

- oversee fulfilment/completion

- feedback/review/maintain ongoing relationship

IX. Prospecting & The Power of One by Bill McCormick, President, Sales Training And Results, Inc. (STAR)     In today’s business environment, most organizations now have to deal with factors such as market maturity, customer consolidation and increasing global competition.   These industry

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challenges make prospecting for new business even more difficult then ever, and all the more necessary for growth.  Most sales managers claim that their sales people spend too much of their time in their comfort zone and not enough time prospecting.    Just take a moment to think about the power and the results of one great inventor or one successful businessperson, one charismatic leader, or even the power of one amazing idea.  People like Thomas Edison, Henry Ford, Amelia Earhart, Martin Luther King, and Bill Gates come to mind.   

The Power of One Great Sales Person

 The results generated by one single high performing sales person can be remarkable.  Managers report that their top performing salespeople are not only highly skilled at their jobs, but they generate a disproportionate amount of sales results, such as profit growth and number of new accounts. Don’t underestimate the power of one great salesperson!  Now how can you get your entire sales team to do this?

 The Power of One Great Coach When surveyed, most sales managers cite that it is outside the comfort zone of their sales people to prospect for new business. As such, a sales managermust coach and develop the prospecting capabilities of each sales person.  Just because a sales person does a great job at account management, does not necessarily mean that this same person is comfortable and competent at business development.   Research demonstrates that frequent coaching by a manager correlates to a significant increase in the skill and strategy level applied by a sales person.  Managers need to coach their salespeople in two ways.  First, they need to help the salesperson develop a strategy and plan which includes clear business goals and targets.  Second, they need to ensure that their salespeople have the necessary capabilities and skills needed for success.   

What Are The Most Common Mistakes Made by Sales Professionals?

 Sales people often make the same common mistakes when prospecting.  First, they don’t spend nearly enough time on prospecting for new business.  And when they do put forth the time and effort, they tend to go after the wrong types of prospects.  Sales people need to know how to identify and gain access to the best prospects.   

Not All Prospects are Created EquallyA common mistake is to go after the wrong prospect.  Not only will this waste time andmoney, but if you do succeed in making a sale you will likely regret it.        

Key differentiating factors that distinguish a great lead or prospect

 The prospect has a genuine need or interest for your service or product

 The potential size of the sale justifies your selling effort and resources

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 The timing is right (in terms of the "decision process" and deadline for decision)

 Your contact(s) have the authority to buy

 The money or funding is available in the budget

 The prospect values what you provide and is not just interested in price

 Another mistake is to rely on non-productive and outdated prospecting methods.  Sales people need to understand and become proficient atcreative and more productive ways to prospect, rather then relying on conventional methods such as cold calling over the telephone and just stopping in (what some firms call “smokestacking”).  

                 The best sales professionals use creative methods to prospect, such as:

Stay active at industry associations (join a committee, give a speech, network, etc.Ask for referrals from current customers and others

Use the Internet to research and identify the best sales opportunities

Send targeted mailings and emails

Conduct informational seminars (not a sales pitch, but an educational event) 

Preparation for prospecting sales calls also differentiates the best sales professionals.  Average sales people ‘wing it’ whereas the best sales people prepare and practice what they will say, notably their “elevator speech”. Sales people who can describe in two minutes or less the value that their company, products and services can offer a potential customer are more likely to gain access and advance the sale. Conversely, those who have not formulated and practiced their value statements and  “elevator speeches” are not likely to get a second appointment. 

Similarly, since you may only get one chance to speak with a new prospective client, it is essential to prepare and ask the right questions in order to qualify the sales opportunity.  The best sales professionals ask the best questions. It sounds like common sense, but it is not common practice.  

The Value of One New Customer for Manufacturers and Distributors

 Of course not all prospects are created equally.  Now take a moment to think about how much one good prospect is worth to your company.  Manufacturing clients report that the average new account brings in between $75,000 -$100,000 annually.  Similarly, distributors and brokers report that on average one new account brings in $25,000 or more.   The chart below summarizes the cumulative results that can be achieved through increased prospecting activities by one effective sales professional. Hence, the Power of One! The Power of One   

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Annual Activity by One Sales Professional

Before Coaching & Training 

 After Coaching & Training

 Percent Improvement

 Increase in New Accounts

 Proposals Submitted

 40  60  50%  

Win Ratio (# proposals to win 1 new customer)

 5:1  4:1  25%  

Cumulative Results (# of new customers)

 8 15   87%  7

Your results can be even more impressive!  What is one new account worth to your organization?  Imagine the impact if all of your salespeople increased their new business by a similar amount.   Instead of the Power of One for one salesperson, strive for the Power of One for your entire sales team.

                          “However beautiful the strategy, you should                            occasionally look at the results.”

                                              -          Winston Churchill  Sales managers need to lead the effort to coach and support everyone…top sales performers included…to do a better job at selecting and winning new business.  

The power of good prospecting can and should result in steady growth and improvement, producing dramatic results for you.  A combination of proactive coaching and sales training will increase the confidence and competence of your sales force to do prospecting well.

X. Qualifying - The Critical Selling Skill

Marketing Tip

Learn About Your Prospect To Make The Sale

Selling is not a favourite task for many entrepreneurs and small business owners. We picture sales people as greedy, unethical, unscrupulous individuals who are determined to close a sale at any cost. Yet we cannot survive without generating sales so selling skills are a critical competency we need to acquire.

Selling is an honourable profession and everyone who operates a business should learn some fundamentals. From my perspective as a small business owner, sales trainer and consumer, the most important selling skill to learn is how to effectively qualify your prospect.

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The most common mistake sales people make is to immediately launch into a product presentation or “pitch” when they first meet their prospect. They extol the virtues of what they sell and tell the prospective buyer how good, fast, reliable, inexpensive or easy to use their product is.

They talk, talk and talk hoping they’ll convince the buyer that their product is of value.

The problem with this approach is that the “pitch” seldom addresses the issues or concerns of the buyer. Because their needs have not been addressed, there is no compelling reason for them to consider using your machines or to change vendors. If you really want to give prospects a reason to buy from you, you need to give them a reason. One of the most effective ways to do this is to ask a few well thought-out questions to uncover what is important to the prospect. Here are a few examples:

“I notice you currently use XYZ Vending. How long have they been your supplier?”

“What do you like most about them?”

“If you could change one aspect about your current arrangement, what would it be?”

“What are the most important issues for you?”

“What have your experiences been with ABC Vending?”

“How many…do you sell in an average week/month?”

“Who is your primary customer?”

“Where have you had the most success with your machine(s)?”

Notice that each of these is an open-ended question which means it begins with “who”, “what”, “where”, “why”, “when” or “how.” These types of questions encourage the prospect to open up and share information of what their needs and wants are. An important note here is to be cautious you don’t inadvertently turn these open questions in to closed ones by saying something like;

“What are the most important issues for you? Timeliness of service? Income?”

This is a very common mistake that now gives the prospect an answer. I don’t know about you, but selling is hard enough without making it even more difficult. Never assume you know how they are going to answer. Ask your question and wait patiently for the answer. Even if you have been in the industry for ten years or longer and think you’ve heard it all, don’t make the mistake of assuming you know what the prospect’s needs are. Let them tell you, rather than you telling them.

One of the most important lessons I’ve learned about selling is that people will tell you ANYTHING you want to know. All you have to do is ask. Most people love to talk about themselves and want to share information about their current situation, their challenges or problems, likes and dislikes. But, in most cases, they need prompting. This prompting comes from you in the form of asking the right questions in the proper tone and manner.

It amazes me how few sales people actually take the time to learn about their customer before they launch into their presentation. In fact, not long ago I was interviewing several companies for a training

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initiative I working on. The first two salespeople I met rambled on at great length about how good their companies were, how long they had been in business, how they could help me, and so on.

Not once during these discussions did the sales people ask me what I was looking for. Not once during these monologues did they address any of the issues that were floating through my mind. Finally, after thirty minutes, I called the interviews to a close. From my perspective, they had just wasted half an hour of my time and, like most people in today’s business climate, my time is valuable and I simply don’t have enough of it.

If you really want to begin differentiating yourself from your competitors take the time to learn about your prospect’s situation. By doing so, you’ll begin to give them a reason to do business with you instead of someone else.

XI. Selling on Value - The Three Principles of Value Selling

 The Difference Between Price And ValueIf you are a professional salesperson today, you know the difference between price and value. The challenge is to SELL THE VALUE to the customer. If you can't do this and your sales strategy is based only on "sell low" or "sell on price," you will set yourself and your company up for failure.

In our experience, there is no doubt that the process of selling has evolved. Regardless of whether you are new to sales or are a sales veteran, you must incorporate value added selling into your sales toolkit. To do this, a good starting point is to look at the three key principles behind every value added sales strategy.

Three Principles of Value Selling

Principle #1: Look at value from the customer's perspective.

This is the most important principle because you can't apply the other principles if you don't or can't identify a particular customer's value drivers. A product or service has value only when the customer perceives it to be so. This may sound like common sense, but surprisingly, it is not common practice. Avoid these two common mistakes: first, offering something to a customer that is value-less; and, second giving something of value for nothing.

What are the key skills needed to implement this principle? Quite simply, the ability to ask good questions, what we call "value creation questions," is essential as the first step in your value selling strategy.

Principle #2: Sell to the highest decision-maker possible.

Higher level decision-makers are more likely to appreciate the value elements of your offer. Conversely, lower level contacts tend to look at price and cost only. We realize that you shouldn't ignore lower level customer contacts, but you limit yourself if you don't sell "up."

Of all the principles, this is often the most frustrating and difficult for salespeople. For example, here are some of the challenges that we've heard from other sales professionals:

how do you identify the key decision-makers?

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how do you gain access to the higher level decision-makers?

what should you do if a "gatekeeper" is blocking access?

how do you influence a committee?

if you succeed in getting in front of the decision-maker, what should you do?

Principle #3: Quantify your value proposition.

After you succeed in getting an appointment with the decision-maker, the last step is to communicate your "value proposition" as persuasively as possible.  One guideline that will help you to do this is to use specific, quantifiable terms that are in "units" that the customer will appreciate (such as revenue gain, productivity increases, market share growth, and so on.)

An example illustrates this point. Which of these two statements is most persuasive? Assume that both statements are true and that the same customer is listening to each of the statements.

"We have experience in helping pharmaceutical companies work with regulatory agencies such as the FDA."

"We can generate $30 million in additional revenue for you by accelerating your ability to get new drugs approved by the FDA."

XII. Ten Powerful Marketing Tips for the Small Business

Print your best small ad on a postcard and mail it to prospects in your targeted market. People read postcards when the message is brief. A small ad on a postcard can drive a high volume of traffic to your web site and generate a flood of sales leads for a very small cost.

No single marketing effort works all the time for every business, so rotate several marketing tactics and vary your approach. Your customers tune out after awhile if you toot only one note. Not only that, YOU get bored. Marketing can be fun, so take advantage of the thousands of opportunities available for communicating your value to customers. But don't be arbitrary about your selection of a variety of marketing ploys. Plan carefully. Get feedback from customers and adapt your efforts accordingly.

Use buddy marketing to promote your business. For example, if you send out brochures, you could include a leaflet and/or business card of another business, which had agreed to do the same for you.

This gives you the chance to reach a whole new pool of potential customers.

Answer Your Phone Differently. Try announcing a special offer when you answer the phone. For example you could say, "Good morning, this is Ann Marie with Check It Out; ask me about my special marketing offer." The caller is compelled to ask about the offer. Sure, many companies have recorded messages that play when you're tied up in a

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queue, but who do you know that has a live message? I certainly haven't heard of anyone. Make sure your offer is aggressive and increase your caller's urgency by including a not-so-distant expiration date.

Stick It! Use stickers, stamps and handwritten notes on all of your direct mail efforts and day-to-day business mail. Remember, when you put a sticker or handwritten message on the outside of an envelope, it has the impact of a miniature billboard. People read it first; however, the message should be short and concise so it can be read in less than 10 seconds.

Send A Second Offer To Your Customers Immediately After They've Purchased Your customer just purchased a sweater from your clothing shop. Send a handwritten note to your customer thanking them for their business and informing them that upon their return with "this note" they may take advantage of a private offer, such as 20% off their next purchase. To create urgency, remember to include an expiration date.

Newsletters Did you know it costs six times more to make a sale to a new customer than to an existing one? You can use newsletters to focus your marketing on past customers. Keep costs down by sacrificing frequency and high production values. If printed newsletters are too expensive, consider an e-mail newsletter sent to people who subscribe at your Web site.

Seminars/ open house Hosting an event is a great way to gain face time with key customers and prospects as well as get your company name circulating. With the right programming, you'll be rewarded with a nice turnout and media coverage. If it's a seminar, limit the attendance and charge a fee. A fee gives the impression of value. Free often connotes, whether intended or not, that attendees will have to endure a sales pitch.

Bartering This is an excellent tool to promote your business and get others to use your product and services. You can trade your product for advertising space or for another company's product or service. This is especially helpful when two companies on limited budgets can exchange their services.

Mail Outs Enclose your brochure, ad, flyer etc. in all your outgoing mail. It doesn't cost any additional postage and you'll be surprised at who could use what you're offering.

XIII. the product offer

FAB's, USP's and UPB's (Features Advantages Benefits, Unique Selling Propositions/Points, and Unique Perceived Benefits)

The product offer, or sales proposition, is how the product or service is described and promoted to the customer. The product offer is what the sales person uses to attract attention and interest in verbal and written introductions to prospects - so it has to be concise and quick - remember that attention needs to be grabbed in less than five seconds. It's also used by the selling company in its various advertising and promotional material aimed at the target market. Traditionally the selling company's marketing department would formulate the product offer, but nowadays the sales person greatly improves his selling effectiveness if he able to refine and adapt the product offer (not the specification) for targeted sectors and individual major prospects.

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Developing and tailoring a product offer, or proposition, is a vital part of the selling process, and the approach to this has changed over the years.

1. FAB's

The technique of linking features, advantages, and benefits (FAB's) was developed in the 1960's and it remains an important basic concept for successful selling and sales training. FAB's were traditionally identified and by the company and handed by the training department to the sales people, who rarely thought much about developing them.

Here is the principle of using Features, Advantages, Benefits:

Customers don't buy features, they don't even buy the advantages - what they buy is what the product's features and advantages will do for them, which in selling parlance is called the benefit.

For example: A TV might have the feature of internet connectivity and a remote control qwerty keyboard; the advantage is that the customer can now access and interchange internet and TV services using a single system; and the benefit is that the customer saves money, space, and a lot of time through not having to change from one piece of equipment to another.

It's the saving in money, space and hassle that the customer buys. A sales person who formulates a sales proposition or product offer around those benefits will sell far more Internet TV's than a sales person who simply sells 'TV's with internet connectivity and remote qwerty keypads'. In fact lots of customers won't even have a clue as to what a 'TV with internet connectivity and remote qwerty keypad' is, particularly when it's packaged, branded and promoted as the latest 'WebTV XL520 with the new Netmaster GT500 Supa-consul'....

Moreover the few customers who recognise the product benefit by its features and advantages will also recognise all the competitors' products too, which will cause all the sales people selling features and advantages to converge on the most astute purchasing group, leaving the most lucrative uninformed prospects largely untouched.

The aim is to formulate a product offer which elegantly comprises enough of what the product does and how, with the most important or unique benefits for a given target market or prospect type.

2. USP's

The strongest benefit for a given target sector is often represented by the term USP, meaning unique selling point or proposition (for many companies no real uniqueness exists in their USP's, so the term is often used rather loosely where the word 'strongest' would be more apt). Real or perceived uniqueness is obviously very important because it generally causes a prospect to buy from one sales person or supplier as opposed to another. If there were umpteen WebTV's on the market, the ones that would sell the best would be those which had the strongest unique selling points.

Price is not a USP; sure, some people only buy the cheapest, but most do not; most will pay a little or a lot extra to get what they want. As with the example of the WebTV, an advantage that produces a money-saving benefit is different to straight-forward price discounting. A low price is not a benefit in this context, and any product that is marketed purely with a low-price USP will always be vulnerable to competition which offers proper user-related benefits, most of which may come in the form of a higher value, higher price package.

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What makes it difficult to succeed all the time with a fixed USP or series of USP's is that one man's USP is another man's dead donkey - USP's by their nature fail to take account of a prospect's particular circumstances and detailed needs. The name itself - unique selling point - says it all. Purchasers of all sorts are more interested in buying, not being sold to.

Each type of prospect has different reasons for buying. Market sectors or prospect types with smaller houses and fewer rooms are more likely to respond to the space-saving benefit of the WebTV as the product's main USP. Market sectors or prospect types with big houses and lots of big rooms are more likely to regard the time-saving benefit as the key USP instead. A sector which comprises people who are not technically competent or advanced, may well respond best to a USP that the supplier could fail to even mention, ie., installation, training and a free technical support hotline. Where does that leave the sales person if his marketing department hasn't included that one on the list?..

3. UPB's

This leads us to the UPB, meaning unique perceived benefit - a modern selling concept which has naturally evolved from FAB's and USP's.

A UPB is essentially a customer-orientated product offer.

The problem with USP's and FAB's is that they are largely formulated from the seller's perspective; they stem from product features after all. So if instead of looking at the product from the seller's viewpoint, we look at the need, from the customer's viewpoint, we can build up a UPB-based product offer that fits the prospect's situation and motives much better than any list of arbitrary FAB's and USP's.

First it comes down to knowing the target market segment, or the targeted prospect type, extremely well. This implies that we should first decide which sectors or segments to target, and it also shows why the planning and preparation stage in the selling process is far more significant and influential than it ever used to be.

Each targeted segment or prospect type has its own particular needs and constraints, and these combine to create the prospect's or target sector's very specific buying motive. So if we can identify and then formulate a unique perceived benefit to meet or match a known or researched sector's specific buying motive, we can create a very well-fitting and easily recognisable product offer indeed.

For instance, a likely attractive target sector for the WebTV could be families with limited space and little technical confidence. With children at school learning how to use computers, their parents (the decision-makers) would likely be interested in improving their children's access to internet services at home, given no requirement for extra space, and in a way that didn't put pressure on their limited technical know-how at the time of installation and for ongoing support. If the package enabled the parents to upgrade their TV as well for not much more than the cost of a conventional TV, then we're certainly likely to get their attention and interest, and we're a short step away from creating some real desire. The UPB for this particular prospect type might look something like:

"You can now give your children important educational access to the Internet at home, if you know nothing about computers, and don't even have room for one."

The product offer above is described so that the prospect type in question identifies with it, and can immediately match it to his own situation. The WebTV's relevant benefits - ie., you save space and you don't need to spend time understanding the technicalities - have been translated to match exactly why we believe that the prospect might be motivated to consider buying it. The 'important educational' reference is an example of developing the UPB further, ie., that your children's education will be improved. The

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trade-off is that more words reduces impact and attention; only by using the UPB in various forms can we see what works best.

It's now clear to see the difference now between a basic technical feature ('a TV with internet connectivity and remote qwerty keypad) and an unique perceived benefit (your children will be better educated). The feature does nothing to attract the buyer; the UPB does a lot.

There's another important reason to use tailored perceived benefits, rather than focus on FAB's and unique selling points: it's easy for prospects to compare and put a price on what a product is (FAB's and even USP's), but it's very difficult to value a real UPB. This means that sales people who sell UPB's are far less prone to competitor threat.

Developing strong meaningful unique perceived benefits is not easy - it requires good insight and understanding of the prospect or sector to be approached, and a lot of thought, trial and error to arrive at something that works well.

XIV. Time Management - Time Wasters Salespeople Can and Should Avoid

1. A Downward Trend

In spite of technological advancements such as email and cell phones, salespeople today have less contact time with customers than they did five or ten years ago.  This means less time to build relationships with current customers and less time to develop new business.

Wouldn't it be nice if you and your sales force could free up more time to spend on productive activities such as customer contact? An effective place to begin is to identify some common sales time wasters.

2. About Time Wasters

Time wasters don't just happen. Some common time wasters are caused by other people. For example, a colleague telephones you about something that isn't critical. Of course, many common time wasters are self-imposed.  It is easy to rationalize time wasters and accept them as inevitable. However, keep in mind the one trait that differentiates successful sales professionals:

The best salespeople manage time well. Average sales people let time manage them.

3. Sales Time Wasters

What are the most frequent time wasters for sales people?  We have identified over twenty common sales time wasters and based on a poll conducted in our workshops, here are the four most common time wasters:

#1 The salesperson is asked to do too many administrative tasks.  For example, working on paperwork.  Sometimes the solution to this time waster is out of the salesperson's control, but there are ways to minimize, and in some cases, eliminate this time waster. 

#2: Inefficient use of email and voice mail. This time waster is not unique to sales professionals. The nature of selling tends to make this time waster a particularly acute problem. There are many effective

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ways to use email and voice mail, and to free up a corresponding amount of time that can be spent more productively elsewhere.

#3: Spending too much time with the wrong customers. Obviously, if a sales person spends too much time with the wrong customers, he or she is not spending enough time with the right customers. Every sales person has the capability to eliminate this time waster.

#4: Attending internal meetings. This is a doubly negative time waster. First, time spent at meetings is time not spent on higher gain activities. Second, meetings themselves tend to be poorly planned and facilitated, so the meeting itself takes longer than it should and doesn't generate the results that were intended

XV. Top 5 Mistakes Made in Marketing

Guide Picks

Here is a checklist of 5 mistakes commonly made in marketing.

1) Lack of Research and Testing

Research and testing should be done to determine the performance of every marketing effort. This takes the guesswork out of what your potential customer or client wants. Always make sure you have done your due diligence when it comes to testing different offers, prices, and packages. Get the input of your customers.

2) Improper Focus and Positioning

Don't market to build up the company, but approach marketing to demand an immediate response from the recipient. Improper focus and positioning can be avoided by following the proper solution positioning of marketing.

3) Marketing without a USP

Your USP is your unique selling proposition. It is the one single statement that will single you out amongst the competition. It should be used in every piece of marketing material. Think of your USP as the philosophical foundation of your business. Don't market without it!

4) Failing to Capture Repeat Customers

Keep in mind that when marketing 80% of your business comes from existing customers and 20% comes from new customers. Failing to resell to your current customer base could have a detrimental effect on your profits. It will cost you 5 times the expense to sell to a new customer than to sell to an existing customer.

5) Lack of Focus on Potential Customer's Needs

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Do you really know what your potential customers need and want? If so you are ahead of the ballgame and probably don't need to be reading this article. Truth is very few businesses have a good grasp of what it is that their customer needs from them. The secret to avoiding this common error is to find a need you can fill and then fill that need better than anyone else.

XVI. Understanding, Predicting, and Influencing Customer Loyalty

Why is loyalty so important? Does it deserve all the focus it’s getting? The answer is simply, “Yes, it does.” Over time, loyal customers deliver more revenue, create more profit, and add more shareholder value than other customers. They often make better targets for selling additional products and services, and they tend to use more profitable channels.

While the answer to why loyalty is important is simple, answering the question “What does it mean to be a loyal customer?” is not quite as easy. In fact, a fairly acrid debate exists about the “true” definition of loyalty. Some see loyalty as an attitude people have toward a brand that makes them feel closer to it and, therefore, more likely to continue using it. These people propose simplistic ways of measuring attitudinal loyalty, often relying on only three questions. Others consider loyalty to be purchase behavior, or the act of buying a product or service regardless of how one feels about the company. After all, this group’s reasoning goes, you can’t put attitudes in the bank. So, can a single definition adequately capture loyalty?

Smart companies avoid a simplistic definition of loyalty. They recognize it for what it is—a cluster of related concepts involving people’s thoughts, feelings, and ultimately, behavior. Companies need a comprehensive understanding of loyalty, and to do this they must measure both attitudinal and behavioral loyalty and understand the relationship between the two. Intentions based on positive attitudes do not always translate to behavior. And, behavior in the absence of a strong attitudinal foundation is highly vulnerable to competitive threats.

Attitudinal Loyalty—The Multidimensional Loyalty Model“What is attitudinal loyalty and what drives it?” Maritz Research has been studying this question for the past 18 months, reviewing academic research on the topic and conducting research with over 4,500 customers in 14 product and service categories. This investigation has led to an new understanding of loyalty, a greater appreciation for the complexity of the construct, and a new model for understanding how customer satisfaction drives attitudes and how attitudes interact with internal and external factors to drive behavior. We’ve named this model the Maritz Multidimensional Loyalty Model.

The model deconstructs attitudinal loyalty into distinct psychological components and employs them, along with market factors and individual psychographic differences, to understand and predict loyalty. It measures nine factors and uses them to predict customers’ loyalty.

The first three factors represent three different “types” of attitudinal loyalty:

- Cognitive loyalty (thoughts) – what customers think about a product or service - Affective loyalty (feelings) – how customers feel about a product or service - Normative loyalty (social norms) – what customers think they should buy

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These three factors alone produce a fuller and more complete understanding of attitudinal loyalty than competitive models. However, we know that attitudes do not always result in the expected behavior. For this additional insight we looked to other factors, “market factors” and “individual differences.”

Market factors describe market conditions relevant to loyalty:

- Availability – is the brand readily, conveniently available for customers to purchase again? - Price – is the brand reasonably priced? - Loyalty program – is the customer a member of a loyalty program for the brand?

Availability and price are two factors that often trump a customer’s intentions when he/she is ready to make a purchase. Loyalty programs are designed specifically to influence behavior, whether offering immediate gratification such as a discounted price or longer term types of rewards, e.g. airline miles or points toward a free hotel stay.

The last three factors are called “individual differences” because they measure customer psychographics that may affect loyalty:

Risk aversion – to what extent is the customer likely to stick with a brand out of fear that other brands might be worse, or out of the perception that switching would be a hassle?

Variety seeking – to what extent does the customer prefer variety for its own sake?

Involvement – to what extent is the customer interested in or involved with the product/service category?

If you use these nine factors you can predict customers’ behavioral intentions, also called intentional or “conative” loyalty. The industry standard for measuring conative loyalty is three questions (in varying combinations)—overall satisfaction, willingness to recommend, and likelihood to return/buy again. Our research finds this to be an insufficient measure. It is significantly related to behavioral loyalty, but the scales are so positively biased that they are not as sensitive as they might be. Moreover, the measure is not as highly related to actual behavior as are other measures of conative loyalty.

Lastly, the Maritz model incorporates perceptions typically measured in customer satisfaction research to provide the information needed to identify and prioritize the aspects of the customer experience that influence loyalty. When these attributes are teamed with behavioral data (either self-reported information obtained in longitudinal research or from a client’s behavioral database), we can supplement intentional loyalty with actual customer behaviors.

The Maritz Multidimensional Model is illustrated below:

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The output from the Maritz Multidimensional Model is an explanatory/predictive hierarchy of customer loyalty showing the relationships among the various loyalty constructs for your customers.

Other information can include:

Loyalty segments Segments based on the three types of attitudinal loyalty, market factors, and individual differences help companies to effectively target their customers, thereby maximizing this component of its marketing spend.

The raw material for a loyalty index When behavioral data are available, an index that is predictive of loyalty can be created and used to “score” the members of the survey sample (and/or an internal customer database). When these data are not available, a behaviorally based measure Maritz tested has been shown to be a better predictor of behavior than traditional attitudinal indices and can provide the foundation for this index.

An interactive simulatorA simulator is a powerful management tool that clearly illustrates which elements of the customer experience are most impacting loyalty, and allows users to play ‘what-if’ games.

By viewing loyalty as a complex, multidimensional construct, it becomes easier to use the research to drive changes that maximize customer loyalty in multiple ways:

“Customer Care” standards and procedures

- Product enhancements - Internal operations - Mass media (advertising, promotion) - Targeted (one-to-one) communications and dialogue marketing efforts - Loyalty programs - Incentives

Employee training programs

How Attitudes Relate to Behavioral LoyaltyThe Multidimensional Model provides a robust and powerful understanding of the relationship between attitudinal loyalty and customer intentions (conative loyalty). Although the measures of customer intentions can serve as a substitute for behaviors, the full value of the model is realized when it can be integrated with actual behaviors. Behavioral data is many times gathered either through a longitudinal study or accessing a database.

A Longitudinal ModelLongitudinal research involves two surveys administered to the same set of respondents at different points in time. The amount of time between the two surveys depends on the category.

Longitudinal research using the Multidimensional Loyalty Model in the first wave is the best way of doing loyalty research because it answers the behavioral question empirically:

In the initial research phase, the model describes the relationship between attitudinal loyalty and customer intentions (conative loyalty).

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Although measures of customer intentions can provide an interim proxy for behaviors and our research has shown these measures are highly correlated with actual behavior, the maximum benefits of the model are realized when it is combined with actual customer behaviors.

Once behavioral data are obtained, typically through a longitudinal study or accessing a behavioral database, the model can be recalibrated and validated.

Survival AnalysisSometimes we have the data available for more intensive longitudinal analysis. For this kind of study we need:

Loyalty — relevant measures, at a specific point in time, about individual customers, some of who will defect over time.

Knowledge that a customer defects (or not) and when.

The most obvious situation in which these conditions will be met is for continuing service categories (e.g. telecom, media subscriptions, financial services) wherein the company maintains a customer database. Ideally the database contains variables about customers that are relevant to their loyalty. These may or may not be supplemented with survey measures such as attitudes, perceptions, demographics, and lifestyles.

Survival analysis is the statistical engine for this kind of loyalty modeling. It uses the loyalty-relevant database variables, perhaps integrated with supplemental survey research variables, to predict observed defection behavior. The resulting model can be applied to predict the probability of defection (and time to defection) for each record in the customer database.

SummaryIn today’s hyper-competitive environment, loyalty is critically important to most businesses and is an important key to increased profitability and long term survival. Companies that do not actively measure and manage loyalty do so at their own peril.

There are many competing models of customer loyalty in the marketplace. At Maritz, we avoid oversimplifying this important concept. We recognize it for what it is—a cluster of related concepts involving people’s thoughts, feelings, and ultimately, behavior. Companies need to measure both attitudinal and behavioral loyalty and to understand the relationship between the two. The Multidimensional Loyalty Model is our answer to the question “What is attitudinal loyalty and what drives it?” There are also a range of other types of loyalty research and analysis to address behavioral loyalty questions, lost customers, and the optimization of effective loyalty programs

XVII. The power of pricing

Transaction pricing is the key to surviving the current downturn—and to flourishing when conditions improve.

Michael V. Marn, Eric V. Roegner, and Craig C. Zawada

2003 Number 1

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At few moments since the end of World War II has downward pressure on prices been so great. Some of it stems from cyclical factors—such as sluggish economic growth in the Western economies and Japan—that have reined in consumer spending. There are newer sources as well: the vastly increased purchasing power of retailers, such as Wal-Mart, which can therefore pressure suppliers; the Internet, which adds to the transparency of markets by making it easier to compare prices; and the role of China and other burgeoning industrial powers whose low labor costs have driven down prices for manufactured goods. The one-two punch of cyclical and newer factors has eroded corporate pricing power and forced frustrated managers to look in every direction for ways to hold the line.

In such an environment, managers might think it mad to talk about raising prices. Yet nothing could be further from the truth. We are not talking about raising prices across the board; quite often, the most effective path is to get prices right for one customer, one transaction at a time, and to capture more of the price that you already, in theory, charge. In this sense, there is room for price increases or at least price stability even in today's difficult markets.

Such an approach to pricing—transaction pricing, one of the three levels of price management (see sidebar "Pricing at three levels")—was first described ten years ago.1 The idea was to figure out the real price you charged customers after accounting for a host of discounts, allowances, rebates, and other deductions. Only then could you determine how much money, if any, you were making and whether you were charging the right price for each customer and transaction.

A simple but powerful tool—the pocket price waterfall, which shows how much revenue companies really keep from each of their transactions—helps them diagnose and capture opportunities in transaction pricing. In this article, we revisit that tool to see how it has held up through dramatic changes in the way businesses work and in the broader economy. Our experience serving hundreds of companies on pricing issues shows that the pocket price waterfall still effectively helps identify transaction-pricing opportunities. Nevertheless, in view of evolving business practice, we have greatly expanded the tool's application. The increase in the number of companies selling customized products and solutions or bundling service packages with each sale, for instance, means that assessing the profitability of transactions has become much more complex. The pocket price waterfall has evolved over time to take account of this transition.

Today, it is more critical than ever for managers to focus on transaction pricing; they can no longer rely on the double-digit annual sales growth and rich margins of the 1990s to overshadow pricing shortfalls. Moreover, at many companies, little cost-cutting juice can easily be extracted from operations. Pricing is therefore one of the few untapped levers to boost earnings, and companies that start now will be in a good position to profit fully from the next upturn.

1. Advancing one percentage point at a time

Pricing right is the fastest and most effective way for managers to increase profits. Consider the average income statement of an S&P 1500 company: a price rise of 1 percent, if volumes remained stable, would generate an 8 percent increase in operating profits (Exhibit 1)—an impact nearly 50 percent greater than that of a 1 percent fall in variable costs such as materials and direct labor and more than three times greater than the impact of a 1 percent increase in volume.

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Unfortunately, the sword of pricing cuts both ways. A decrease of 1 percent in average prices has the opposite effect, bringing down operating profits by that same 8 percent if other factors remain steady. Managers may hope that higher volumes will compensate for revenues lost from lower prices and thereby raise profits, but this rarely happens; to continue our examination of typical S&P 1500 economics, volumes would have to rise by 18.7 percent just to offset the profit impact of a 5 percent price cut. Such demand sensitivity to price cuts is extremely rare. A strategy based on cutting prices to increase volumes and, as a result, to raise profits is generally doomed to failure in almost every market and industry.

2. Following the pocket price waterfall

Many companies can find an additional 1 percent or more in prices by carefully looking at what part of the list price of a product or service is actually pocketed from each transaction. Right pricing is a more subtle game than setting list prices or even tracking invoice prices. Significant amounts of money can leak away from list or base prices as customers receive discounts, incentives, promotions, and other giveaways to seal contracts and maintain volumes (see sidebar "A hole in your pocket").

The experience of a global lighting supplier shows how the pocket price—what remains after all discounts and other incentives have been tallied—is usually much lower than the list or invoice price. This company made incandescent lightbulbs and fluorescent lights sold to distributors that then resold them for use in offices, factories, stores, and other commercial buildings. Every lightbulb had a standard list price, but a series of discounts that were itemized on each invoice pushed average invoice prices 32.8 percent lower than the standard list prices. These on-invoice deductions included the standard discounts given to most distributors as well as special discounts for selected ones, discounts for large-volume customers, and discounts offered during promotions.

Managers who oversee pricing often focus on invoice prices, which are readily available, but the real pricing story goes much further. Revenue leaks beyond invoice prices aren't detailed on invoices. The many off-invoice leakages at the lighting company included cash discounts for prompt payment, the cost of carrying accounts receivable, cooperative advertising allowances, rebates based on a distributor's total annual volume, off-invoice promotional programs, and freight expenses. In the end, the company's average pocket price—including 16.3 percentage points in revenue reductions that didn't appear on invoices—was about half of the standard list price (Exhibit 2a). Over the past decade, companies have tried to entice buyers with a growing number of discounts, including discounts for on-line orders as well

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as the increasingly popular performance penalties that require companies to provide a discount if they fail to meet specific performance commitments such as on-time delivery and order fill rates.

By consciously and assiduously managing all elements of the pocket price waterfall, companies can often find and capture an additional 1 percent or more in their realized prices. Indeed, an adjustment of any discount or element along the waterfall—either on- or off-invoice—is capable of improving prices on a transaction-by-transaction basis.

3. Embracing a wide band

The pocket price waterfall is often first created as an average of all transactions. But the amount and type of the discounts offered may differ from customer to customer and even order to order, so pocket prices can vary a good deal. We call the distribution of sales volumes over this range of variation the pocket price band.

At the lighting company, some bulbs were sold at a pocket price of less than 30 percent of the standard list price, others at 90 percent or more—three times higher than those of the lowest-priced transactions (Exhibit 2b). This range may seem spectacular, but it is not very unusual. In our work, we have seen pocket price bands in which the highest pocket price was five or six times greater than the lowest.

A wide band shows that certain customers generate much higher pocket prices than do others

It would be a mistake, though, to assume that wide pocket price bands are necessarily bad. A wide band shows that neither all customers nor all competitive situations are the same—that for a whole host of reasons, some customers generate much higher pocket prices than do others. When a band is wide, small changes in its shape can readily move the average price a percentage point or more higher. If a manager can increase sales slightly at the high end of the band while improving or even dropping transactions at the low end, such an increase comes within reach. But when the price band is narrow, the manager has less room to maneuver; changing its shape becomes more difficult; and any move has less impact on average prices.

Although the lighting company was surprised by the width of its pocket price band, it had a quick explanation: the range resulted from a conscious effort to reward high-volume customers with deeper discounts, which in theory were justified not only by the desire to court such customers but also by a lower cost to serve them. A closer examination showed that this explanation was actually wide of the

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mark (Exhibit 3): many large customers received relatively modest discounts, resulting in high pocket prices, while a lot of small buyers got much greater discounts and lower pocket prices than their size would warrant. A few smaller customers received large discounts in special circumstances—unusually competitive or depressed markets, for instance—but most just had long-standing ties to the company and knew which employees to call for extra discounts, additional time to pay, or more promotional money. These experienced customers were working the pocket price waterfall to their advantage.

The lighting company attacked the problem from three directions. First, it instructed its sales force to bring into line—or drop—the smaller distributors getting unacceptably high discounts. Within 12 months, 85 percent of these accounts were being priced and serviced in a more appropriate way, and new accounts had replaced most of the remainder. Second, the company launched an intensive program to stimulate sales at larger accounts for which higher pocket prices had been realized. Finally, it controlled transaction prices by initiating stricter rules on discounting and by installing IT systems that could track pocket prices more effectively. In the first year thereafter, the average pocket price rose by 3.6 percent and operating profits by 51 percent.

In addition to these immediate fixes, the lighting company took longer-term measures to change the relationship between pocket prices and the characteristics of its accounts. New and explicit pocket price targets were based on the size, type, and segment of each account, and whenever a customer's prices were renegotiated or a new customer was signed, that target guided the negotiations.

Pocket margins become more relevant

For companies that not only sell standard products and services but also experience little variation in the cost of selling and delivering them to different customers, pocket prices are an adequate measure of price performance. Today, however, as companies seek to differentiate themselves amid growing competition, many are offering customized products, bundling product and service packages with each sale, offering unique solutions packages, or providing unique forms of logistical and technical support. Pocket prices don't capture these different product costs or the cost to serve specific customers. For such companies, another level of analysis—the pocket margin—is needed to reflect the varying costs associated with each order. The pocket margin for a transaction is calculated by subtracting from the pocket price any direct product costs and costs incurred specifically to serve an individual account.

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One North American company, which manufactures tempered glass for heavy trucks and for farm and construction machinery, sharply increased its profits by understanding and actively managing its pocket margins. Each piece of the company's glass was custom-designed for a specific customer, so costs varied transaction by transaction. Other costs differed from customer to customer as well. The company's glass, for example, was frequently shipped in special containers that were designed to be compatible with the customers' assembly machines. The costs of retooling and other customer-specific services varied widely from case to case but averaged no less than 17 percent of the target base price (Exhibit 4a).

A fuller picture emerges when a company examines each account and creates a pocket margin band

As with pocket prices, a fuller picture emerges when a company examines each account and creates a pocket margin band. The glass company's pocket margins ranged from more than 60 percent of base prices to a loss of more than 15 percent of base prices (Exhibit 4b). When fixed costs were allocated, the company found that it required a pocket margin of at least 12 percent just to break even at the current operating level. More than a quarter of the company's sales fell below this threshold.

Traditionally, the pricing policies of the glass company had focused on invoice prices and standard product costs; it paid little attention to off-invoice discounts or extra costs to serve specific customers. The pocket margin band helped it identify which individual customers were more profitable and which should be approached more aggressively even at the risk of losing their business. The company also uncovered narrowly defined customer segments (for example, medium-volume buyers of flat or single-bend door glass) that were concentrated at the high end of the margin band. In addition, it evaluated its policies for some of the more standard waterfall elements to ensure that it had clear objectives, accountability, and controls for each of them—for instance, it decided to base volume bonuses on stretch performance targets and to charge for last-minute technical support. By focusing on and increasing sales in profitable subsegments, pruning less attractive accounts, and making selective policy changes across the waterfall elements, the company pushed up its average pocket margin by 4 percent and its operating profits by 60 percent within a year.

4. Taming transactions

The game of transaction pricing is won or lost in hundreds, sometimes thousands, of individual decisions each day. Standard and discretionary discounts allow percentage points of revenue to drop from the

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table one transaction at a time. Companies are often poorly equipped to track these losses, especially for off-invoice items; after all, the volumes and complexity of transactions can be overwhelming, and many items, such as cooperative advertising or freight allowances, are accounted for after the fact or on a company-wide basis. Even if managers wanted to track transaction pricing, it has often been impossible to get the data for specific customers or transactions. But some recent technical advances have helped remove this obstacle; enterprise-management-information systems and off-the-shelf custom-pricing software have made it easier to keep tabs on transaction pricing. Managers can no longer hide behind the excuse that gathering the data is too difficult.

Current price pressures should go a long way toward removing two other obstacles: will and skill. In the booming economy of the 1990s, robust demand and cost-cutting programs, which drove up corporate earnings, made too many managers pay too little attention to pricing. But now that a global economic downturn has slowed growth and the easiest cost cutting has already occurred, the shortfall in pricing capabilities has been exposed. A large number of companies still don't understand the untapped opportunity that superior transaction pricing represents. For many companies, getting it right may be one of the keys to surviving the current downturn and to flourishing when the upturn arrives. It has never been more crucial—or more possible—to learn and apply the skills needed to execute superior transaction-price management.

5. Pricing at three levels

Transaction pricing is one of three levels of price management. Although distinct, each level is related to the others, and action at any one level could easily affect the others as well. Businesses trying to obtain a price advantage—that is, to make superior pricing a source of distinctive performance—must master all three of these levels.

Industry price level. The broadest view of pricing comes at the industry price level, where managers must understand how supply, demand, costs, regulations, and other high-level factors interact and affect overall prices. Companies that excel at this level avoid unnecessary downward pressure on prices and often emerge as industry price leaders.

Product/market strategy level. The primary issue at this second level is pricing a product or service relative to the competition. To do so, companies must understand how customers perceive all offerings on the market and, most particularly, which attributes—product as well as service and intangible attributes—drive purchase decisions. With this knowledge, companies can set visible list prices that accurately reflect the competitive strengths (or weaknesses) of their offerings.

Transaction level. The focus of transaction pricing is to decide the exact price for each transaction—starting with the list price and determining which discounts, allowances, payment terms, bonuses, and other incentives should be applied. For a majority of companies, the management of transaction pricing is the most detailed, time-consuming, systems-intensive, and energy-intensive task involved in gaining a price advantage.

6. A hole in your pocket

Many on- and off-invoice items can easily lead to price and margin leaks. Here we provide a nonexhaustive list:

Annual volume bonus: an end-of-year bonus paid to customers if preset purchase volume targets are met.

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Cash discount: a deduction from the invoice price if payment for an order is made quickly, often within 15 days.

Consignment cost: the cost of funds when a supplier provides consigned inventory to a wholesaler or retailer.

Cooperative advertising: an allowance paid to support local advertising of the manufacturer's brand by a retailer or wholesaler.

End-customer discount: a rebate paid to a retailer for selling a product to a specific customer—often a large or national one—at a discount.

Freight: the cost to the company of transporting goods to the customer.

Market-development funds: a discount to promote sales growth in specific segments of a market.

Off-invoice promotions: a marketing incentive that would, for example, pay retailers a rebate on sales during a specific promotional period.

On-line order discount: a discount offered to customers ordering over the Internet or an intranet.

Performance penalties: a discount that sellers agree to give buyers if performance targets, such as quality levels or delivery times, are missed.

Receivables carrying cost: the cost of funds from the moment an invoice is sent until payment is received.

Slotting allowance: an allowance paid to retailers to secure a set amount of shelf space.

Stocking allowance: a discount paid to wholesalers or retailers to make large purchases into inventory, often before a seasonal increase in demand.

XVIII. The 8 Essentials of Corporate Gift Buying

Buying the perfect corporate gift for your clients has never been easier with the availability of products online and retail. However, with the vast selection of gift ideas comes a dizzying array of choices. Before you set out to find the perfect corporate gift for your clients, know the essentials of corporate gift buying.

Corporate gift giving is on the rise, up to 71% in 2005, according to OPEN from American Express(SM) 2005 Semi-Annual Small Business Monitor. The Monitor rates the top corporate gifts as:

cards or calendars (49%) gift certificates for retail or restaurants (26%) company branded items (23%) fruit/food basket or charity donation (both 18%) flowers/plants and wine/liquor (tied at 10%)

Before you run out and buy the "tried and true" corporate gift, consider these 8 essentials of buying business gifts.

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Check Corporate Policies: Many companies and government offices will have a gift policy limiting the dollar value of a gift or prohibiting gifts.

Be sure to check with your recipients to determine the limitations of gift giving so they don't have to return the item.

Determine Wants: Knowing what to buy a corporate client is the biggest challenge of business gift buying. It's difficult to know your clients on a personal level in many cases. The best bet is to call your customers and ask them what they like, their hobbies, etc., to give you a great idea of what to buy.

Consider Cultural Differences: Each country and culture will have their own rules for corporate gift buying. For instance, in China, a gift should never be wrapped in white since it symbolizes death.

Go for Quality: Any business gift you send reflects on the image of your company. Avoid lower quality gifts that can impair your image. Purchase quality products without breaking your budget.

Use Hand Written Cards: It's far too easy in this Hallmark age to simply send a card with your gift and signature. For a more lasting impression, add a hand written note sharing your thoughts.

Spend on Packaging: As important as choosing the right corporate gift for your client is the packaging of the gift itself. Spend the time and money on the wrapping to reflect your value on client relationships. If you lack the talent for gift-wrapping or have no time, use the many gift-wrapping services available from retailers and shopping malls.

Deliver Personally: If your business gift list isn't too large, consider personally delivering the gift to the intended party. A personally delivered gift will keep you at the top-of-the-mind with your clients.

Know IRS Deductions: Business gifts in the U.S.A. are tax deductible up to $25 per person for the tax year. This doesn't include incidentals such as packaging or mailing the gift. The type of business structure (i.e. partnership) you have can be subject to different rules. Be sure to review the IRS Publication 463.

Corporate gift giving is an opportunity to connect with your clients, strengthen ties, and share your holiday cheer. Adopting an attitude of giving will make the act of corporate gift buying less stressful and more fun.

XIX. uses of Incentives and Premiums

We all want to feel that we're being rewarded, whether it's for a job well done or for buying the "right" brand of toothpaste. As one of the oldest forms of promotion, premiums and incentives have likely been used for centuries to induce a desired behavior.

When was the last time you purchased a certain brand of jelly just to get that collectible?

Before the phrase B-to-B was even coined, incentives were being used as a means to reach measurable business goals, improve business relationships and motivate employees and the sales force.

The premium and incentive trend has so captured the American spirit that an entire industry has been built to help support premiums and incentives including promotion agencies, premium development and production companies (domestic and off-shore) and fulfillment companies. Regardless of the level of sophistication, premiums and incentive programs can yield incredible results.

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- Industry Trends- In 2000, the Premium and Incentive market was a $29 billion* industry. In 2000, industry spending

by type was as follows:

- Sales Incentives -- $8.7 billion (or 33%)* - Dealer Incentives -- $8.3 billion (31%) * - End User (B-to-C and B-to-B) -- $6.3 billion (23%)* - Non-sales Employee Incentives -- $3.6 billion (13%)* - The industry is growing, with more companies offering incentives and others spending more on

premiums and incentives in 2000 versus 1999: - 50 percent of businesses are spending about the same - 35 percent spent more - Only 5 percent spent less - Source: * Promo Magazine - Industry Report - May 2001 - Uses of Premiums and Incentives- Premiums and incentives can be used strategically to meet a wide range of marketing objectives,

some of which include: - Employee, Sales force, Distributor, Dealer Objectives: - Maximizing sales - Rewarding loyalty or performance - Gaining share of focus from employees, sales force or distributors - Adding value to defend against competitive promotions, programs or pricing - Educating target audiences - Customer Objectives: - Gaining Product awareness or trial - Increasing sales or market share - Differentiating your product from the competition - Reinforcing brand attributes - Encouraging retail display - Increasing consumer loyalty - Adding value to defend against price reduction strategy

1. Premiums and incentives can also be used against a whole range of tactics including some of the following:

- In-Pack -- a free gift is packed inside the actual product  

- On-Pack -- a premium is affixed to the package 

- Banded Multi-Packs -- the premium is banded to a multi-pack 

- Special Packaging -- the premium is the packaging with the brand being marketed in that special packaging, such as a collectible jelly jar 

- Near Packs -- a premium is featured on the display (but not affixed to the brand) and the consumer takes one premium when they purchase the featured / displayed item

All of the above tactics are used to encourage impulse purchase, gain in-store display visibility and retail support.

- Mail-in / Bounce-back offers -- These offers take various forms with the consumer mailing a request, proof-of-purchase or money to receive the premium.  

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- Catalog/Point loyalty program -- A catalog program typically offers multiple items for escalating levels of purchase.

Mail-in/bounce back offers and catalog programs can help increase product awareness, trial, increase sales and market share, encourage retail display and maximize consumer loyalty. Premium and catalog programs can be offered a number of different ways:

- Free offer -- the consumer receives the item(s) free with or without proofs-of- purchase.  

- Self-liquidating offer -- the consumer funds the entire cost of the premium.  

- Partially self-liquidating offer -- the consumer and marketer share the cost of the premium.  

- Speed plan -- Catalogs often include a speed plan where consumers can redeem points or proofs-of-purchase plus cash to receive the item(s) more quickly.  

- Sampling / Event Gift s -- a premium is given to attendees to reinforce the interactive experience / brand.  

- Direct Mail Gifts -- a "free inside" premium message is flagged on the outer envelope to encourage the recipient to open the envelope

2. There are two kinds of incentives: performance incentives and prizes. Performance incentives are awarded when consumers perform certain actions. Prizes are awarded through games of chance or contests.

a. Performance Incentives

Travel -- incentive trips can range from very low cost local getaways to around-the-world incentives

Merchandise

Gift Certificates

Trade Incentives such as dealer loader and in-store merchandising support (Win-It-Here Sweepstakes, Gift with Purchase, etc.)

b. Prizes:

Sweepstakes / Games of Chance Skill Contests

Prizes are typically offered in a tiered, pyramid structure with one or more major prizes and many supporting prizes. The top prizes will encourage the consumer to enter because they want to win that prize. A large number of supporting prizes also is important so the consumer feels that she has a chance to win. The number of prizes offered and the type of prizes will depend on the type of program, audience and objectives.

Premiums and incentives range in value from high-value incentives such as $10,000 cash, travel and cars to low level merchandise items such as a 50-cent key chain. The type of incentive / premium used will vary widely depending on your target audience and objectives.

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High-Cost Category

In the high-cost category, cash is the most broadly appealing incentive. Cars and travel are the next popular high-value incentives. The range of cars and travel is immense and again, brand image should align with the vehicle or trip that you offer.

Mid-Tier Category

In the mid tier, cash is still important but merchandise is used frequently and takes on more appeal. In this category, there is tremendous opportunity to reinforce a brand's image.

Lower-Cost Category

In the lower tier merchandise can also be a strong motivator, especially since the perceived value of an item is often much higher than a comparable cash incentive. The retail value or perceived value of merchandise is often 50 percent higher than the actual cost.

Cash rebates and coupons are also prevalent in this tier. While they can certainly generate sales if used on a consistent basis, they can also detract from a brand's image (rather than adding value). It's important to determine at which point a cash incentive will be perceived as a product discount. If a discounting strategy is used on a regular basis, brands train consumers to purchase the item on deal as well as train retailers to expect future discounts or deal periods.

This discounting strategy has been used extensively in many categories, including lingerie. Lingerie manufacturers have been so successful in generating sales via "Buy 1 Get 1 Free" offers, that 80 percent of consumers now purchase lingerie on deal. Retailers have come to actually market a category deal period and all manufactures go on deal at the same time. The brands need to discount just to stay at parity with the competition

Regardless of the amount of money spent, to achieve success any incentive / premium reward must be appealing to your target audience and be consistent with your company imagery.

Appealing to your target audience

Many programs are structured based on assumptions rather than actual research. Wherever possible, conduct research to be sure you're offering the best item possible.

For programs targeted towards employees, research can be as simple as having one-on-one discussions with key members of your target. Don't be afraid to ask key members of your team about a potential program and rewards.

For example, one of our clients had been using travel rewards over a period of a few years to incent sales performance. The programs achieved some success, but the results were diminishing each year. By speaking with some key sales people they learned that trips were great but the sales force wasn't able to get time off to take the trip. So, instead of being a reward, the incentive was actually creating bad will among top performers.

When the company launched the next program, they combined the trip with a guaranteed week off for reaching quota. Sales and morale increased dramatically.

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If you're creating a consumer program, understand your consumer. A "sanity check" for premiums can be as simple as an on-line survey with a list of premium choices or as complex as a series of focus groups with brand users and competitive users complete with concept boards and live premiums.

Research can also reveal new premium options. A client conducted focus groups and found out that instead of giving high-cost trips, low-cost VIP access to local events was the preferred incentive for top-tier customers. Research can also give a company a sense of the liability that a program could entail. When developing a program budget, it's important to gauge the costs of redemption.

Consistency with Company / Product Imagery

One of the most important, yet underrated considerations is for a premium / incentive is to reinforce brand imagery.

Not only will a poorly selected premium or incentive not motivate the target, but also it can actually do harm to a company or brand image. Regardless of the cost of the incentive, it should always be consistent with your branding message.

Before selecting any incentives, it's important to assess your brand assets and determine what you really want to communicate to your audience. Is your brand prestige-priced, fun and edgy, exotic? Be sure that your premium and incentive program reinforces that identity.

Imagine a very expensive, upscale chocolatier offering a $1.00 neon pink plastic key chain. That company could spend the same $1 on a "Guide to Elegant Entertaining" and create a completely different result

3. I. Determine Your Objectives - What are you trying to achieve? - How are going to measure your achievement? - Who is your target -- current consumers, competitive users, light, medium, heavy users,

retailers, sales force, or potential business partners? - Do you have multiple targets and can you attract these targets with a single program or

do you require separate efforts? - When do you need sales support? Is there anything else planned for that time period? - How is the competition likely to react to your offer and do you also have a plan for that

situation? - Do you have the support within your company to develop and execute a program?

4. II. Select the Tactic that Best Meets your Objectives

5. III. Determine Your Budget

Planning and program development

Research

Agency Fees -- If you're executing a complicated program, an agency can assist in developing the program structure and manage the program.

Redemption analysis -- Have you developed calculations for redemption and liability models relying on experts and past history? Is over-redemption insurance warranted?

Premiums

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Premium customization with graphics and logos

Shipping -- Include the costs of shipping from the manufacturer to the fulfillment company. Also be sure to have the necessary insurance.

Program support such as advertising and point of sale displays

Packaging charges

Fulfillment costs such as program set-up, packaging for shipment, servicing, postage, order returns, storage and management fees

6. IV. Create Measurement / Success Criteria

Develop specific criteria.

Be sure that criteria is measurable.

Determine points to adjust budget, program support and other elements.

Update budgets throughout the program.

7. V. Time Line

Be realistic. A simple program with domestically sourced premiums can be put together relatively quickly. However, complex programs with packaging changes, offshore sourcing or printed loyalty catalogs can take six to twelve months to prepare.

Make sure that your time line is detailed and that all parties involved in your program understand and have approved their role in the time line

Update time lines throughout the program.

8. VI. Source Premiums / Incentives

Conduct research to make sure the premium is an item that your customers want.

Source the items for the best value, but don't sacrifice quality for price.

Determine minimum efficient quantities.

Check references on manufacturers for financial stability and track records.

Determine order and reorder time lines.

Arrange a backup product line.

Do you have detailed specifications and contracts with each of your suppliers?

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Negotiate a payment schedule with the manufacturers up front, but don't pay too much up front. Get a letter of credit instead.

Ensure that manufacturers have product warranty and product liability coverage.

Test for product safety, especially with toys.

9. VII. Create Support Materials

The offer and premium should be the focus of all materials.

Check the legality of the promotion for trademarks, copyrights, state and federal laws.

Consult a lawyer.

10. VIII. Set Up Program Fulfillment

Check the fulfillment company's financial background and track record.

Know who will be on the account team, and make sure they are experienced.

Run the program by the account team to troubleshoot.

Monitor progress. Small problems are easier to fix while they're still small.

11. IX. Program In-Market

Monitor what's happening in the field. Don't rely on the fulfillment company to do the work.

Solicit reactions from the entire team.

Keep the team updated on progress.

Make corrections ASAP.

Revise forecasts continually

12. X. Evaluation

Follow-through on your commitment to measure the program

If a program is a success, be sure that everyone on your team knows it and understands their contribution to that success.

Evaluate your forecasting process.

Revise your forecast and keep "Lessons Learned" to help form the basis of planning future programs.

XX. Sales More

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Life is sales.

You are either bringing them in or chasing them away. Unfortunately, it is often difficult to know the difference. But there are some key factors that can make a big difference.

At the most basic level, sales is just a conversation. But to close on a sales opportunity, it has to be an effective conversation. The foundation for providing any service or product is to have a strong basis from which to build an effective conversation that can address the customer?s needs.

What are the key factors that can make or break a successful sales presentation? The first key is knowledge. A strong knowledge base provides a means of accelerating the sales process. Having the ability to provide the appropriate information in the most efficient manner eliminates or reduces the time needed to complete the sales process

?I don?t know, but I?ll find out and get back to you? is always better than ?I don?t know.? But it's never as good as having the answer on the spot. Not knowing often stops the sales process like a pause button.

1. Know Your Product

You must be the expert on the product or service that you sell. At the least, know the sources of expertise and build a relationship with them so you can get information in a timely manner. Product knowledge is where features and benefits come into play. The ability to address the strengths and weaknesses of your products enables you to move through a conversation to the sales opportunity.

2. Know Your Company and Theirs

Have a working understanding of your company. Where it has been? Where it is going? What is its focus and core competencies? Make an impression and know what your customer is doing. This knowledge highlights the best approach for a sales presentation and helps determine what to present first. If you can identify potential needs based on the customer?s business model and current circumstances, you can bring forward a more focused approach for sales.

3. Know Your Customer

Find out more about whom you will be addressing and as much about their current projects and circumstances as possible. By having a sense of what they are striving to accomplish, you can present your products and services in a way that will seem more relevant.

4. Know Your Competition

More often than not, customers are looking at multiple solutions. Ultimately they will have to choose what they perceive to be the best solution to address their needs. Help them with this chore by being the one to distinguish what you provide from the other products or services on the market. Go through the decision point-by-point. By helping a customer work through the decision, you also give them the ammunition they need to justify their decision to themselves, or their managers.

5. Knowledge can be a Weakness

Sales professionals must have knowledge to succeed, but an over-reliance on your own knowledge often proves to be a weakness. No matter how much of an industry expert you become, your customer always knows more about his own business and circumstances. Nobody likes a know-it-all anyway.

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6. Listen Don?t Speak

In the sales conversation, the most powerful tool is being able to listen more than you speak. The ultimate best source of information is the customer. By asking probing questions and listening to the answers, you achieve two objectives. The first is to determine the customer's need, which leads to how you can help. The second is to enable the customer to discover for himself that you are presenting the appropriate solution.

7. Questions Not Answers

Questions bring people together, and answers take them apart. In the sales process, well-intended questions can be effective in forwarding conversations. For example, you might want to ask a customer to give you a more in-depth view of his industry. Even better, ask a customer to tell you what their customers want. This enables you to support the customer's ultimate goals.

8. Uncover the Problem, Don't Cover It

Customers are often bombarded with a sales approach that says ?what you have is wrong,? followed by ?what you really need, I have.? Then the salesman launches into a long, generic presentation. Get potential customers to talk about their company problems in detail. Use questions and examples to enable the customer to discover how to accomplish their objectives with your products and services. They will fight for that solution if they can claim credit for it.

Often, the salesmen with the best companies and products never get to first base because they never bothered to build a personal relationship with potential customers.

The ability to pick up on the identity of the customer and know what is important from her perspective is an invaluable skill. Some customers are detail people, others are more interested in finding a vendor they can relate to before making a purchase decision.

Know the difference. The personable customer will be bored by the statistics, and the detail person will not appreciate an attempt to be 'buddies.'

9. Stay in Communication

Persistence can be a great strength in sales. Often potential customers don't have an immediate need for your services and reminders make a big difference in staying on the radar screen. There are numerous resources for staying in communication with your customers such as direct calls, e-mail, written communications, literature, and industry interactions. Just be wary of the line between persistence and pestering.

10. Be on Time

Punctuality is your first opportunity to show a potential customer that you are a person they can count on. That reputation for reliability then applies to your company and products as well. Often circumstances will come up to make you late, and when they do it is critical to call ahead and reschedule. Take responsibility for whatever caused the breakdown - company business, a manufacturer, traffic or the weather.

11. No Effort Goes Unnoticed

It is often easier to justify why we didn?t do something extra than to justify why we did. However, in establishing a reputation for yourself and your company, going the extra distance often is what separates the wheat from the chaff at the time the critical decision is made as to what to buy. Assume that an extra effort gets noticed and present it in a way that can be recognized as being beyond the call of duty. It always comes back to you: front, side, or center.

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12. The Customer Is Always Right Even When He?s Dead Wrong

It is easy to say that the customer is off base, doesn?t have a clue, and you could fix them and their problems if they would just let you. This attitude leaves little room to establish a long-term relationship for business.

13. Get the Referral

One of the best resources that you have is your existing customer base -- the satisfied ones. They can provide an unbiased endorsement for your products and services. More importantly, customers often know people who have similar needs. The key is that you have to ask for the referral. Waiting for a referral will almost always take much longer than making the request up front.

14. Follow up

The sales conversation, like all conversations, fades over time. A critical step to successful sales is keeping the dialogue and actions moving forward. Even when the answer is not now, it is important to know when to follow up, or when to follow up on the actions taken to move the process forward.

15. Add-ons

The best source for new business is often expanding the current business with your existing customer base. Having an assessment of what they are currently buying from you, buying from someone else, sourcing internally, or leaving out is a resource. If you have, or can create, alternative products, improvements, or integration, you have a pathway for additional sales. Sources for additional sales include products, services, and strategic alliances for other products and services.

16. Build a Rapport with Your Peers - They Will Be on Your Side Tomorrow

Inside any industry, there are almost always other products or people providing similar services. Any industry has a certain amount of churn. People often find new jobs with another company in the same industry, or at least in a related industry. Therefore the guy on the other side may be on your side tomorrow. It is also possible that they may be in a related field, which means they are a potential source of new business opportunities either as customer, referral, alliance, or recommendation.

17. Join Your Customer?s Organizations

Potential customers often belong to various professional organizations. Join them. Having access to these groups is an effective way to connect with potential customers and enhance your rapport with existing ones. Go either as a supplier or as someone committed to the field with the intention and goal of being an industry peer. This also will keep you current on industry trends.

18. Use Every Chance to Acknowledge Your Customers

Recognizing customers for their accomplishments is a powerful way to build a relationship. During the sales conversation, the customer told you what they wanted to accomplish, and how they hoped your product would help them reach that goal. Be sure to congratulate them when they hit those goals.

19. When to Say, "Thank You. No."

Win-win is a two-way street. There are times when a potential customer will continue to make requests such as asking for information, resources, and services without any intention of buying. This behavior is not easy to distinguish at first, but over time it becomes clear. In these circumstances, either say "no," or offer what is needed along with the associated costsSales and marketing are often spoken of in the same breath, and for good reason. Effective marketing is key to successful sales. In sales there are some guidelines for assessing how to effectively sell and market you products and services.

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20. What Have You Got to Work with?

Assess your company's current marketing plan to know if you are focused on the same markets as your company. Review the marketing materials, so you know what to choose for the sales conversations. Be able to make recommendations for future marketing materials based on a sales perspective and the requests of customers.

21. What Can You Create or Gather?

Often by knowing what marketing materials are available now and from the past, you can also know what to ask for or what materials to put together to meet your specific needs.

22. Are They Accurate and Up-to-Date?

If materials are out-of-date, push to get new materials printed. Brochures covered with stickers ? even if it is just for a change of address -- look unprofessional.

23. How to Package and Present It?

Know how your company's marketing materials are supposed to be presented. Your presentation will be more effective if the brochure or quotation you leave behind reinforces the same message.

24. What?s Enough?

It is often difficult to gauge what is going to be the appropriate marketing materials for a particular customer. Often it is better to have a conversation first, then present the materials that are best suited to their needs. Otherwise you'll overwhelm the customer with information.

It is important to have the right and reliable tools to get the job done.

In sales this often includes a car, computer, pens, briefcase, paper and account files. Keep notes and build databases. Over the years, powerful businesses have been built through the collection of data and the subsequent integration of that data into information.

Information on your customers and their companies, products, services, connections, needs and wants, as well as what is coming up in the immediate, near-term, and long-term futures are critical tools for successful sales. There are many systems to do this: database programs, Palm Pilots, note cards, Day-Timers, etc. Find one and use it.

25. Set Up a System

Put a method to the madness. While every sale is different, there are a number of processes that are similar or the same from one situation to the next. Being able to look at what is involved in each sale and see where the processes can be streamlined or made more efficient is an important means of increasing the throughput of the sales process. What are your resources? Take an inventory, then evaluate, sort, and choose. In sales there are always a lot of potential resources.

- Literature: Old literature, new literature, corporate media, annual reports, industry reviews, etc.  

- Customers/Accounts: Existing customers, lost customers, potential customers, leads, referrals, cold calls, etc. Track your success.  

- Customer Interactions: Conferences, interactions, presentations, displays.  

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Human Resources: From inside ? executives, sales and marketing management, product management, technical support, research and development. From outside ? sales force, field support, maintenance.

The key is to be able to access what is potentially available and then establish a hierarchy of what is going to lead to sales on short- and long- term tracks, small- and large-volume sales and minimal to grueling effort.

26. Set Goals

What is the real purpose of goals? They pull you forward like a bungee cord. Having a sales target is essential to establish a sales plan. I often recommend looking at what is beyond reasonable, as it will create unreasonable results. There are some key things to consider. One is who can work with me to achieve these goals and what incentive is there for them? The other is how can I communicate my goals to my customers so that they can support me in winning.

27. Track Your Success

If you have no compass, you can?t tell if you?re moving in the right direction. One of the pitfalls of sales is focusing on the sales and not on where you are in moving each conversation forward. Have a system to know where each existing and potential sale is in the sales process. That allows for prioritization.

Other Issues

Appearance Looking good, smelling good, sounding good, and smiling ear to ear. First appearances, second appearances, and every appearance count for a lot. Presenting yourself is often as important as presenting your products. Being well groomed is extremely important. Continuing Education The only problem with a learning curve is that it stops when you think you are at the top. In any field there are always great resources to make yourself more useful to your company, your customers, and yourself. Sources include formal educational institutions, certification courses, self education, corporate training initiated by the company or yourself, industry organizations, industry publications, seminars, conferences, and, most important, your customers. It is difficult to be a resource for that which you do not understand

Ask for the sale! Ask for the sale! Ask for the sale!

This is the ultimate test. It is always important to ask for the sale.

The point is not so much the answer as it is a chance to give the customer an opportunity to make the commitment to buy or not, and to find out what are the appropriate actions needed to complete the process or when to follow up. Unless you check on where you are in the process, it can be difficult to know where to go or what to do next.

Finally, remember that the big sale you have been waiting for is only a conversation away. It is just a matter of having the right conversation. The question is always going to be which conversation are you in?

One of the best ways to determine this is to ask yourself: ?What am I focused on?? Is it the customer or yourself? Whose issues and concerns are you addressing, the customer?s or yours?

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You can only be in one conversation at a time. If you are focused on yourself, your issues, your concerns, what you have to do in an hour, next week, etc., you will not be focused on the customer, his needs, issues, or concerns. Effective sales are directly proportional to the amount of time you spend focused on your customers.

XXI. Taking the Mystery from Product Naming   By James Twerdahl and Leland Shaeffer

 1. PART I: Pre-Planning Sets the Stage

With the great proliferation of brands and products and growth of worldwide marketing, product naming has become a more difficult task than ever. Some turn to outside firms that specialize in product naming, others turn to their advertising agencies for help, and still others go it alone and work to develop good names in house.

No matter which course you take, however, there are a number of steps that you should take before the arduous task of naming (a subject that will be explored in the second part of this two part article) begins. First, it is very important that you have agreement among marketing team members about the critical elements of the product and how it will be marketed. If a complete marketing plan for the product has been developed, many of the following questions will already have been answered. If not, it is doubly important that they all be asked and answered.

The following questions should be answered before you begin searching for names, and should be revisited when tentative names are selected. These questions become the criteria against which names can be judged and compared.

What is your company's mission or statement of purpose, its vision and its statement of values? Does the product's division or group have its own mission statement?As with all marketing activities, it is tough to do a good job unless you firmlyunderstand who your company is, what it stands for and where it's going.

Who are the target customers for the product? Who will your channel partners be and what various forms of distribution will you use? Who are your end customers or users—both demographically and psycho-graphically.Clearly, product names have to be appropriate for the customers that will purchase them. The response to the name by channel members, who may have different perceptions than your target customers, can influence their effectiveness in representing your product.

How would a buyer or consumer describe the product in his/her own terms?Having knowledge of the product, your company and your industry may be a disadvantage since you may not see the product the same way as your potential customers. Make very sure you are objective and think about those less well informed than you.

What makes the product unique? How is it differentiated from others in your company and from those of your competition?In Marketing 101 you learned about the need to have unique selling propositions to make your product stand uniquely apart from your competition. The name can certainly be one of the marketing mix variables to help you do that. A clear understanding of your product's uniqueness, however, will help assure that the name chosen is appropriate.

Why would a buyer or consumer buy the product? What pain does it ease, problem it solves, satisfaction it gives?Being unique may not be enough to get a buyer motivated to buy your product. Clearly state the reasons why a buyer would chose your product.

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List other product names in your department, division and company.

Is it important that the product name have any association to any other product or family of products?

Is it important to avoid any connection to other products?

Who are the competitors and what are the names of their products that are or may be competitors for this product?To clearly differentiate your product from competitors' it is necessary to have a full understanding of their products with their respective strengths and weaknesses.

Should the name strongly differentiate your product from others? If not, why not?Sometimes having an association or similarity with existing products can be an advantage (as long as you are not infringing on their trade names and trademarks), and sometimes it is best to be as far as possible from associating with them.

9. What is the product positioning desired for this product? (E.g., high tech, low cost, status, image, high quality, value, etc.)Because names carry many connotations and help position the product, it is very important to have clearly thought through the positioning you hope to achieve with the product.

10. Describe how the product will actually be used by the end user.The actual use of the product may seem obvious, but think through how the product is intended to be used and also think of other ways it might be used. Will the name have any impact on either?

11. Describe how the product will be merchandised by the company and any channel members.While the entire marketing plan for the product may not be completed at the time you are trying to name it, you should at least have a general idea of how it will be advertised, promoted and merchandised. Is the name consistent with the way in which you will promote it.

Are there marketing campaigns or themes which currently exist or are planned for other products into which this product will be marketed?Most products do not stand in isolation. Consider how the marketing of other products will impact this product and vice versa.

Describe the overall objectives and goals for this product. What are the sales and the market share goals of this product?While sales and share goals in themselves may not impact the name, other less tangible goals could be impacted. It also goes without saying that the greater the sales and the greater the market share planned will dictate the time and resources spent in naming the product.

Should the name connote any particular feeling or emotion to the user/buyer? Are there any emotions or feelings that should be avoided?Many people identify with product and brand names and they become a part of their personality. Clearly understanding the kind of emotive impact you would like on your customer can help guide the development of names.

15. Will the product ever be marketed internationally? Will it be marketed locally to the black or Hispanic market or any other ethnic markets?

Today more than ever it is important to consider the various markets to which a product will be marketed. Because ethnic markets have become very important in building brands, it is especially important to become sensitive to them.

16. How will the pricing for your product compare with others of the company's and with those of competition?Pricing is an important variable in product positioning. Understanding the price position may help in focusing on names.

17. What principal media will be used to promote the product—print, video, audio, multi-media?

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Names may be interpreted differently when seen in print, heard aurally, and pronounced orally.

18. Many products are given nicknames by other company personnel, distribution channel partners and even by end users. Do similar products have nicknames, and if so what are they? Is it likely that whatever name you give the product will be shortened by people in actual use?

Whether you plan for it or not, others may call your product differently than you first intended. "Coca-Cola" quickly became "Coke." Be sure to think through all of the possible ways in which people may interpret your product.

Once you have answered these questions, you will be half way to getting a great name for your new product.

2. Part II: Seven Steps to Follow in Product Naming

After having a thorough understanding of your product, how it will be used, your target market and your overall objectives, you are now ready to tackle the creative but disciplined task of developing and validating product names.

Product naming requires both the left and right sides of the brain. On the one hand it requires intuition and creativity with lots of free thinking, but on the other it calls for great attention to detail and careful discipline to avoid problems and unnecessary cost. Here are our steps for successful product naming—again, after having very thoroughly laid the groundwork.

a. Develop Tentative Lists Naming strategies will vary some, depending on whether or not you are developing names for new brands, new product lines or additions to existing product lines.

Obviously, developing new brands requires much more careful and extensive planning than line additions. Developing new brands, for example, should definitely have top management involvement and may include the use of outside resources both in developing branding and marketing strategies and in developing new names. Product line extensions, on the other hand, may appropriately be delegated to product managers and their supervisors and most often will be done internally.

In most cases, the process will begin, following appropriate strategic discussions and goal setting, with the development of tentative lists. Having set the boundaries through careful pre-planning can control and direct brainstorming without limiting creativity.

Typically develop a list of 20 to 30 names using both internal and external sources.

If the project is not confidential, customer and channel member suggestions can be helpful. Employee suggestions and contests can also generate good names if the process is carefully monitored. If you involve resources outside your department, it is very important to state that you may or may not use any of the suggestions given and carefully thank participants whether or not you use their suggestions.

Next, prioritize the names. One easy way is to ask your team individually to rank their preferences. An even better way is to ask individual to indicate their preference between just two choices, and continue substituting a new potential name for the less favored of the pair until they are all reviewed.

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With the top 4 to 5 choices, consider all of the strategic implications of the names and review them against your initial screening criteria developed in the planning stage. When adding to lines of existing products, consider the impact on existing products as well as the new names.

b. Begin Preliminary Research (or, What to Do Before Calling Your Attorney) Before calling your attorney, there are a number of steps you can take to save time and hefty legal fees. Here are some recommended steps:

Research your preferred name(s) on the Patent and Trademark Office website. Click on "Search" and you will be able to enter your name to see if others are using it. A site that is a little easier to use is Name Protect. In either case, you will need to give yourself a little education in trademark classes to see if there are conflicts in categories relevant to your product. Also, be sure to enter your name with various spellings, with and without hyphens, etc., to see if there are similar names.

Next, do a domain name search, not only because you may want to have a website for your new product, but also to see if there are others marketing products under your name or a similar one. Go to Register.com or to Network Solutions to check your name.

For a new business or brand, you might also want to see if there are any company names using your tentative selection. You can visit the Secretary of State's office in your home state and those in Delaware and Nevada to see if anyone has registered your name as a company name.

Last but not least, enter your name in a few popular search engines—Google,MSN, Yahoo!, etc. Read the resulting listings, at least on the first few pages, to see how others may be using your name.

The final step in preliminary research is to determine meanings of your name in foreign languages. While we'll get more into this later, you might try a site like Free Translations. Enter your name and then have it translated into Spanish, French and other languages where you think you may someday market. Once you have the translations, then reverse the process and see how the name translates back into English. Make sure to enter all of the secondary definitions if something pops up.

c. Call Your Attorney Once your name(s) has/have passed all of the hurdles listed above, it is time to call your trademark attorney to have a comprehensive search done. Skilled attorneys will work with you on class designations, alternate spellings and other factors that could create future problems. You might also check (and consider registering) names representing shortened pronunciations that may be used when referring to your product. A comprehensive search may cost US$ 250 to 350 per name.

If you plan to market your product in other countries, you may wish to have searches conducted in those countries as well. Because the process can get expensive, start with those countries where you plan to sell either now or in the future.

Once your attorney has completed a comprehensive search and counseled you on the best choices, then you can ask him/her to file trademark applications for you in the most appropriate countries.

There are Internet sites and other do-it-yourself trademark registration services, but we would strongly caution their use. Having an experienced attorney can be well worth the fees.

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One note, you may use the designation ™ to indicate your use of the name as a trademark, but you should not use the ® designation until the trademark is actually registered with the Patent and Trademark Office.

d. Work with Graphic Designers Unless your name is a line extension with graphic standards already set, it is a good idea to work with your design team to make sure the name is presented in the best possible way to create the image and merchandise the product as you would like. Consider all of the ways in which the name will be used. Determine typestyles and colors, and decide whether or not the name should be developed into or in conjunction with a logotype.

Once you have developed the standards for use, it is a wise idea to develop a stylebook, so everyone in your organization always uses the name in exactly the same way to build brand consistency.

e. Conduct Informal Primary Research Before spending a great deal on formal research, we suggest you do as much informal research as time allows.

Present the name and graphic treatments to your business associates. Show it to some with the logic of why you did what you did, and to others with no explanation and see how both groups react to it. If the later group says, "I don't get it," you have some additional work to do.

If not confidential, present it to key customers to gauge their reactions. Do not overly sell the concepts, however, since you do not want to prejudice their initial responses.

Informal focus groups with cross sections of potential customers or users can also yield valuable information, but be wary of placing too much importance on the results if it is done in an informal, unstructured way.

Send the name and graphic treatments to your international agents, distributors and possibly customers in other countries. Check to make sure that the name in other languages and in other countries conveys the meaning you would like it to have. Again, be a little cautious because your middle-aged distributor may not be aware of the hip slang used by twenty-somethings. There are many cases where marketers unknowingly presented a product whose name translated into an obscenity in another language.

Finally, but not to be dismissed, trust your instincts. One must always be cautious in bringing their own beliefs to marketing decisions, since most often we do not represent all of the customers who may be targets for the product. At the same time, however, if you know your market and your customers and have had lots of experience in the business, your judgments should be pretty sound. If your "gut" speaks, you should at least listen.

f. Conduct Formal Research The decision on whether or not to conduct formal research will be based on several factors. Perhaps the most important is the amount of financial risk you will have in naming the product. If the future of your company or tens of millions in sales hang on the value of the name, you must be much more careful in its selection. You would hate to invest untold sums in product identification, packaging, advertising, merchandising and other brand building activities only to learn that your potential customers are turned off by the name or that it is confusingly similar to someone else's. In general, the more at risk, the more careful you must be.

g. Finally, Pray There Are No Changes Because the naming process takes time and because there are lots of other people developing

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new products and services all the time, someone may be concurrently working on the same name as you are and you may not discover that fact until you are way into the process. If so, take your licks and don't be afraid to start over.

Yes, all of this is a great deal of work, but consider the possible costs on the downside and the benefits on the plus side. The Business Week /Interbrand 2005 annual study of the world's most valuable brands indicated that the value Coca-Cola was nearly US$ 70 billion. A high percentage of that is due to the Coca-Cola name.

XXII. Top Tips for Selecting a Brand Name  

By Rick Jacobs  

Developing a name for your company or product is crucial in brand building. It's not a process to take lightly, nor is it wise to rush to a decision because letterhead needs to be printed or the website is ready to launch. Here are 11 tips to help you successfully develop a brand name:

a. Don't describe—distinguish. The biggest mistake companies make is being too descriptive with their names. A name should not attempt to simply describe; it should have the ability to suggest the essence (the unique characteristics) of your company. To be effective, a name must have brand potential. A name that is narrow or too descriptive does not have the depth or dimension to become an effective brand.

b. CEO involvement is key. Because selecting and adopting a new name is a highly emotional and political decision, you will not succeed without support from the top. Be sure that you have buy-in from the "C-Suites" in the beginning and that you keep them on board throughout the process.

c. Avoid alphabet soup. Names that are composed of initials are meaningless. They get lost in the marketplace clutter and they are extremely costly to support and promote. Jack Trout says in The New Positioning, "A no-name name is the corporate equivalent of a disguise." Unless you are a GE or an IBM with millions to spend on advertising, avoid initials. Real or invented words are many times easier for consumers to remember.

d. Research cannot replace decision-making. While research is a valuable tool to test for unforeseen red flags in a potential new name, there is a tendency for many to fall back on research to select the name. No one understands your organization and your positioning objectives better than you do. Don't allow popularity to determine the name. The most popular name is not necessarily the strongest name for the long-term.

e. If it's comfortable—forget it. Everyone else will. The most successful names over the long-term are often those that are initially the most controversial (think Google, Yahoo!, Chipotle, and Ikea). When you select a name, you are looking for something to punch through the marketplace clutter, not add to it. Overtly literal meanings can sometimes limit growth and show a lack of company creativity.

f. Keep it brief. One word brands are most effective. Lengthy, multiple word names lead to truncation. When people abbreviate your name, you lose control over your brand.

g. Employee contests don't work. While they are often well-meaning, they do not result in names that are based on the appropriate strategic rationale.

h. It's about strategy, not emotion and politics. Many clients are surprised that selecting a name is such an emotionally charged decision. Naming decisions are fraught with politics, turf issues, and individual preferences. Stick to the strategy and do not allow the lowest common denominator solution.

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i. Manage the decision-making process. There is always someone who will try to derail the process. Determine at the outset who the decision makers will be, and then work diligently to keep the decision-making process on track.

j. Always be prepared for leaks. It is very difficult to keep a new name a secret. At the beginning of the naming process, prepare your press release and press kit in the event of a leak.

k. Don't expect unanimity. In the first few weeks following introduction, there is often a lot of discussion and publicity about a new name. Familiarity breeds comfort. As people become more familiar with the name, they will become more comfortable with it.

XXIII. Technology Brands Meet the Bottom Line

 Introduction

The technology industry’s Chief Marketing Officer (CMO) Council last fall released its Measures+Metrics study, which showed branding at the bottom of the barrel when it comes to measuring marketing performance. Technology CMOs also said that brand equity is one of the least reported measurements to senior management. Following the heady days of the late 1990s when money was plentiful and brand was king in the technology kingdom, branding has deflated on the same curve as bottom lines.

What’s behind the slide in brand importance within the tech industry? There are three key reasons why companies are not spending a lot of time or money on developing their brands: economic climate, lack of measurement techniques and lack of understanding about what branding is.

1. Descent into the Valley of GloomThe recent recession hit the technology industry harder than other industries. When money flowed branding was a top priority, but when budgets were in freefall and survival was often at stake, brand got the boot and lead generation got the money. The inescapable fact is that many technology companies view branding as a luxury.

This change was evident in a worldwide study of Strategic Branding within High Technology firms conducted by Socratic Technologies and nelsonbranding (the author’s company) and released in early 2003. The study showed a statistically significant drop in the number of companies implementing brand strategies from the benchmark study released in 1998, a period of fast growth for the industry. The retreat from branding was most noticeable in small and medium-size companies.

My company’s strategic branding practices study also confirmed the CMO Council’s MPM research findings that companies are not spending time or money trying to measure brand impact on company performance.

Clearly, when the good times roll, brand rolls right along. When the music stops, however, all the marketing budget chairs are filled. Not long ago, as the Marketing Performance Measurement (MPM) task force leader for the CMO Council, I asked a senior marketing person in a very large tech firm if her company was maintaining its brand program. She replied, “Brand is a dirty word around here. We don’t even talk about it any more.”

The past recession left an indelible mark on marketing. Accountability for marketing results and ROI now is job number one for most organizations. The discipline of technology marketing has changed

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permanently in the “post bubble” era. The benchmark of success in the marketing function is now verifiable and repeatable financial performance.

Accountability is the new watchword for the Chief Marketing Officer. Marketing Performance Measurement (MPM) is a new and powerful discipline. At its simplest MPM is about the mindset that marketing can and should be measured with an eye to justifying its activities and programs. But, MPM is not about measurement for the sake of measurement. Many marketers measure a lot—too much in fact. It’s not the data the executive team wants, it’s the business outcomes associated with these programs and activities.

2. Hard Is Always Better Than SoftIf it can’t be measured, it is unlikely to receive funding. Measuring the value of brand has never been easy. Historically, brand awareness and associations (two key communications-driven brand equity components) have been the primary metrics used to determine brand success. The problem is: How do you translate awareness and positive brand associations into ROI? CEOs and CFOs are rather skeptical of any measurements that can’t be related to business performance.

One of the key findings from the CMO Council’s Measures+Metrics study was that marketers retreat to those activities that can be quantified with hard numbers and demonstrable impact on results. When the bottom line is sinking or bouncing along the bottom, hard is better than soft.

3. What Is Brand?Ask that question and you’ll get many different answers. In our Socratic Technologies and nelsonbranding study two years ago, we learned that most tech marketers equated brand with marketing communications activities or just the brand name and identity. Equally distressing was the level of brand understanding by senior management. Seven in ten respondents felt top executives had limited or no understanding of branding. This was especially true in small and medium-size companies. No wonder brand support evaporates when budgets dwindle.

Nelsonbranding defines brand as “the promise that you keep.” The behavior behind the brand determines the customer’s experience and the customer’s experience determines how well your brand performs.

The very best companies understand this definition of brand and live it every day. That’s why they are profitable during both the good times and bad times. Think Southwest airlines, for example. Southwest understands that the brand experience is tied directly to the business success of the company and, therefore, the entire focus of the company is on delivering brand satisfaction.

4. Optimizing Your BrandMarketers today face far greater demands for accountability and proven return on investment than ever before. There is increasing pressure from the executive team to measure and articulate the benefits of each marketing program. Given the demonstrated lack of understanding of branding and brand issues within high technology company executive suites, brand support can only be earned by clearly linking brand performance with company performance.

Here are a few suggestions for getting brand back into the technology marketing ball game:

Redefine Branding: Think holistically. Branding is a business strategy that impacts the company and its long-term revenue stream. Brand is the promise you keep, not just make. That means the CEO is the chief brand steward and each and every employee is the brand. In technology companies, the corporate brand most often is your brand. Every minute of every day brand touchpoint connections are made. It’s your job to work with the executive team to create the promise and the framework to deliver on the promise to delight customers. There is no higher calling.

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Optimize Your Brand: Keep promises. Marketing has the responsibility to ensure that the customer experience with the brand is always superior. That’s how brand promises get kept. Use research to monitor your brand touchpoints to see if the promise is being kept. If you find brand gaps between what you promise and what you deliver, prioritize the gaps and develop new strategies and programs to close the gaps. Then, continue to monitor internally and externally and make adjustments as required to meet the ever-changing needs of your customers.

Demonstrate Results: Internal touchpoint metrics can be put in place. Customer service, shipping, and other internal functions can be measured against keeping the brand promise and delivering a superior customer experience. This is the front line in brand promise delivery, so choose wisely and reward generously. Use customer brand experience research to benchmark and track both internal and external touchpoint performance and to adjust strategies and programs. Most importantly, focus on brand loyalty and retention measurements. Awareness, associations, and quality perceptions need to be measured and managed as key components of long-term brand equity, but the brass ring is brand loyalty.

Promises kept equals delighted customers who not only stay with you as long as you keep your promise, but also tell potential customers about you. Happy, loyal, retained customers continue to fatten the bottom line for a long time. And, they help you acquire new customers at a much lower cost. Make sure you have a system in place that captures retention value.

5. The Bottom LineBrand is not a four-letter word, contrary to what some in the technology industry believe. It is just misunderstood. Brand is your business. By putting brand in its proper context as a business strategy that directly impacts the bottom line, you speak the same language as the executive team and improve understanding of brand and support for brand programs. Brand optimization is all about understanding and delivering the brand experience customers desire. When you continually delight them, they will reward you with increased loyalty, a long-term revenue stream, and new customers built on the strong foundation of a promise kept

XXIV. Super Charge Your Business With Profit Pricing Strategy

The pricing strategy of a small business can ultimately determine its fate. Small business owners can ensure profitability and longevity by paying close attention to their pricing strategy.

Commonly, for many small businesses, the pricing strategy has been to be the lowest price provider in the market. This approach comes from taking a superficial view of competitors and assuming one can win business by having the lowest price.

1. Avoiding the Lowest Pricing Strategy

Having the lowest price is not a strong position for small business. Larger competitors with deep pockets and the ability to have lower operating costs will destroy any small business trying to compete on price alone. Avoiding the low pricing strategy starts with looking at the demand in the market by examining three factors:

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a. Competitive Analysis: Don't just look at your competitor's pricing. Look at the whole package they offer. Are they serving price-conscious consumers or the affluent group? What are the value-added services if any?

b.Ceiling Price : The ceiling price is the highest price the market will bear. Survey experts and customers to determine pricing limits. The highest price in the market may not be the ceiling price.

c.Price Elasticity : If the demand for your product or service is less elastic, you can then have a higher ceiling on prices. Low elastic demand depends on limited competitors, buyer's perception of quality, and consumers not habituated to looking for the lowest price in your industry.

Once you understand the demand structure in your industry, review your costs and profit goals as set in your business plan or financials. The low price strategy is best avoided by small business but there are conditions such as a price war that can drag a company into the lowest price battle.

2. Evading a Price War

A price war can wreck havoc in any industry and leave many businesses, out of business. In the early 90's, I observed the competitive exercise equipment market enter a price war in a large city. Profits were plentiful but a price war took the gross margins from 42% to 12%. In less than 18 months, over 60% of the retailers were out of business while my division went national. Take these tips to evade a deadly price war:

Enhance Exclusivity: Products or services that are exclusive to your business provide protection from falling prices. Drop High Maintenance Goods: There may be products or services in your business that have high customer service and maintenance costs. Drop the unprofitable lines and find out what customers don't want. Value-added: Find value your business can add to stand out in the marketplace. Be the most unique business in the category. Branding: Develop your brand name in the market. Brand name businesses can always stand strong in a price war.

Leave the price-cutting and price wars to big business. Small businesses with solid pricing strategy can escape a price war and low price position. Carefully, consider your price decisions. Your business depends on it.

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XXV. Pricing new products

Companies habitually charge less than they could for new offerings. It’s a terrible habit.

How much should you charge for a new product? Charge too much and it won't sell—a problem that can be fixed relatively easily by reducing the price. Charging too little is far more dangerous: a company not only forgoes significant revenues and profits but also fixes the product's market value position at a low level. And as companies have found time and again, once prices hit the market it is difficult, even impossible, to raise them. In our experience, 80 to 90 percent of all poorly chosen prices are too low.

Companies consistently undercharge for products despite spending millions or even billions of dollars to develop or acquire them. It is true that businesses and private consumers alike are demanding more for less; the prices of personal computers, for example, have been pushed downward despite their higher processor speeds and additional memory. Global competition, increased pricing transparency, and lower

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barriers to entry in many of the most attractive industries have contributed to the trend. But these are not the only problems. Many companies want to make a quick grab for market share or return on investment, and with high prices both objectives can be harder to achieve.

These concerns encourage companies to take an incremental approach to pricing: they use existing products as their reference point. If a new offering costs 15 percent more to build than the older version does, for instance, they charge about 15 percent more for it. Particularly in consumer markets, they might set the price slightly higher or lower than that of their main competitor.

The incremental approach often underestimates the value of new products for customers. One of the first makers of portable bar code readers, for example, calculated how much more quickly its customers would be able to assemble their own products if they used portable readers. The company then took the price of the older, stationary readers and raised it proportionally, solely to account for the time savings. This strategy also fit in with the company's desire to penetrate the market quickly.

But by using an existing product as the reference point, the company undervalued a revolutionary product. The portable reader not only improved existing processes but also enabled companies to redesign their supply chains. Portability and instant access to information prepared the way for real-time inventory control, vastly improved logistics planning, and just-in-time deliveries, thus eliminating the need for large inventories. Buyers quickly recognized a bargain and flocked to the low-priced product. The company, which couldn't keep up with demand, not only failed to capture the full value of its reader but also set the market's price expectations at a very low level. A single bad decision easily erased $1 billion or more in potential profits for the industry.

Analyses based on cost differences and process improvements are parts of the puzzle, and so is an understanding of the competitive landscape. But good pricing decisions are based on an expansive rather than an incremental approach. Before zeroing in on a price that promises the greatest long-term profitability, companies must know both the highest and the lowest prices they could charge. Price-benefit analysis should begin early in the development cycle, when the market is first being probed, for it not only shows companies whether price barriers might make products unfeasible but can also guide their development by indicating which attributes customers are most willing to pay for.

1. Exploring the full range of pricing options

For products that replicate others on the market ("me-too" products) or that offer small improvements (evolutionary products), the room to maneuver is relatively narrow, and incremental approaches may come close to the optimal price (see sidebar "Launch position"). Even then, however, a lot of money can be left on the table. Charging just 1 percent less than the optimal price for a product can mean forfeiting about 8 percent of its potential operating profit.1 And the more novel a product may be, the more important it is for companies to take a broader view of the pricing possibilities.

a.The highest price

Since incremental approaches tend to focus on the lower end of the price range, companies should start by defining the opposite end of the spectrum. Such a price ceiling, based on a product's benefits, may ultimately prove to be unrealistic: there may not be a sufficient market at that level, it may leave too much room for competitors, or customers may be strong enough to demand a greater share of the value the product creates.2 But establishing this ceiling will ensure that each and every potential price point is brought up for discussion.

To establish a price ceiling, a clear understanding of a product's benefits for its customers is essential. The value of some benefits, such as savings on raw materials, can be measured easily. But others,

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particularly process and relationship benefits such as on-line purchasing options or brand reputation, must be evaluated through market research.

Advanced marketing tools—for instance, conjoint analysis and perceptual mapping3—can assess how much value each benefit offers to customers. But companies must see to it that their research does more than make comparisons with known reference points. Many suppliers rely too heavily on their internal perceptions, which sometimes unintentionally skew their efforts to probe the market. While formulating the research and writing the questions for a market test, a company should therefore ensure that they cover a broad range of possibilities; otherwise the work may serve merely to confirm the benefits claimed by the product's developers or anecdotal information brought back by the sales force.

To take an accurate measure of the benefits a product offers—and thereby find its true price ceiling—market research must be designed to elicit more open-ended feedback than can usually be acquired through multiple-choice questionnaires or trade-off techniques, both of which can limit responses. For example, a controls maker's revolutionary high-pressure steam valve for nuclear power plants significantly increased the reliability and reduced the complexity of their water-management systems. At first, trade-off techniques were used to research the market: the company described the technical benefits of the new valve and tried to find out how much customers would pay by comparing it with a valve for another application. Most of them felt that a 20 to 25 percent premium was justified.

The company later redid its research to broaden the outlook, this time asking more open-ended questions to establish how much value the valve would deliver to the business systems of its customers. Instead of first asking them to compare the new valve with an existing one, the company now sought to evaluate the cost of planned maintenance shutdowns and the role the new valve could play in reducing their number. Now that the company had a fuller picture of the new benefits—a picture based on its customers' economics—it asked how much customers would be willing to pay for them. This time, the customers gave a figure that was several times the price of the existing valve. The supplier had a more accurate picture of its pricing options.

b. The floor

Cost-plus pricing is often derided as weak, but it plays an essential role in setting the floor for a company's pricing options. An accurate analysis of costs per unit, plus a margin representing a minimally acceptable return on investment, reveals a new product's lowest reasonable price level. If the market can't bear it, the company must rethink the product's viability.

Companies often do not account for all of the costs that ought to be allocated to their products

Although the cost-plus model is well-known, companies often trip up in two areas when they use it to analyze their costs. First, surprisingly, they don't account for all costs that should be allocated to products; there is a tendency, for example, to overlook R&D expenses associated with a product category (including expenses for incomplete projects) and goodwill linked to acquisitions that lead directly to new products. As a necessary part of any development program, these are legitimate items to bring into the cost calculation. Second, overly optimistic market projections can create false estimates of costs, particularly fixed ones.4

The range of pricing options is usually smallest for me-too products. Companies using them to play catch-up must therefore be particularly careful to assess their costs correctly and to understand the assumptions underlying these calculations; a small error can permanently prevent products from becoming profitable. If a product's viability relies on cost savings generated by economies of scale, for instance, a false estimate of the size of the market or of a customer segment would be disastrous.

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c.The size of the market

Similar research is needed to gauge the size of the market or market segments for various prices at and below the ceiling. Instinct might suggest that the lower the price, the higher the demand, but that isn't always true. Midrange prices, for instance, might put a product in the dead zone—too cheap for quality-conscious customers and too expensive for bargain hunters.

One company, for example, offered a new data-management system that it claimed could save large companies hundreds of millions of dollars a year. But to penetrate the market quickly, it released the core software with an enterprise license fee of less than $100,000.5 Potential customers wouldn't take the company's claims seriously; if the claims were true, the software should have been priced in the same range as other enterprise-resource-planning (ERP) packages, which cost $1 million or more.

Estimating the size of a market at various price points clarifies the range of pricing options, suggests which price models to use at any price and volume point, and increases the accuracy of estimates of profitability along the spectrum and of the unit-cost calculations needed to define the price floor.

d. Setting the release price

After a company has determined the full range of its pricing options and the market's size at various points within that range, it is ready to formulate the release price. Targeting the largest market segment within the range might be tempting, but maximizing volume doesn't necessarily maximize profits (see sidebar "Penetration pricing"). In particular, four aspects of new-product pricing may counsel against targeting the largest market, especially if doing so means setting the price low.

e.Reference price

The release price minus any discounts or other incentives establishes the market's first reference point for the product's true value as judged by its maker. More than any press release, sales pitch, or catalog description, the reference price tells the market what a company really thinks a new product is worth. An excessively low reference price can handicap its long-term profitability—the low price might hasten its penetration of the market, but the resulting lower margins forgo the future profits a higher price would have captured once a customer base had been established. A low reference price is particularly damaging if it conflicts with the value position the company is trying to establish or if market demand has been underestimated.

f. Competitors' reactions

Especially for evolutionary products, a low price that noticeably shifts market share will probably trigger a destructive price war: competitors usually can't react immediately by improving the benefits of their own products, so they often cut prices instead.6 A higher reference price, by contrast, suggests that a company is targeting profits rather than market share and might therefore generate few if any immediate reactions from competitors.

g. Life cycle strategy

If an early-adopter segment is willing to pay a premium for a product, the company that makes it may wish to consider a high release price to capture the extra value, with planned reductions down the road to attract latecomers. Along with capturing more revenue over the life of a product, this strategy can also help companies match demand to production capacity for a new product.

h. Cannibalization

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Companies must also carefully consider how new wares will affect their current ones. If an older product remains viable, a company might try to manage the cannibalization problem by giving its new product a higher release price targeting a smaller segment of customers. By contrast, if a product line is being retired, a lower release price for a new offering may be appropriate to shift customers to it as quickly as possible.

i. Going to market

Presenting a price to the market requires both astute communication with it and patience. It can be especially hard to explain the value and benefits of revolutionary products to often-skeptical buyers, but whatever conditions a new product may face, a faulty pricing strategy shouldn't be allowed to undermine its value message.

A product's fortunes during the first six months to a year after it hits the market have a critical influence on its value position. Especially during this period, companies must keep firm control of their pricing operations, all the way down to individual transactions. For instance, discounting, which could be routine for continuing product lines, might sabotage a new product's reference price.

If managers must push a product quickly, however, they can do so without sacrificing its reference price or the market's perception of its value. One common technique is to offer consumers free samples or to give the product to small groups of customers with a high profile or significant market influence. Another is to offer it to customers for a free-trial period. Both approaches speed up the market penetration of the product without cutting the reference price. Standard discounts or rebates are usually a mistake, however, since they do cut it and also provoke doubts about the product's benefits.

The answers to questions about the price of new products can't wait for the end of the development cycle; the questions are an intricate part of the process of developing them, and the answers are needed to assess their ultimate profitability. At present, companies routinely overlook the higher reaches of their pricing potential. Basing release prices on credible market research and cost analysis can give managers the confidence to ride out the initial turbulence that usually surrounds new products and to claim their true value.

j. Launch position

A critical step—and often the first stumbling block—in releasing a new product is to understand its true nature. Whatever its price category, it hits the market in one of three positions.

Revolutionary: A product is so new that it creates its own market. Quantifying and explaining such a product's benefits to an untested market takes skill.

Evolutionary: Upgrades and enhancements to existing products are evolutionary in nature. If the new product provides too many new benefits at too low a price, a price war can ensue.

Me-too: Painstaking cost analysis and a clear set of target customers are needed to avoid catastrophe with me-too products, which bring a company into line with the rest of the market without adding new benefits.

Too often, companies overplay the benefits of their new products, touting as revolutionary what is at best evolutionary and rarely acknowledging that they are really playing catch-up. But it is important to make an honest internal assessment of a product's position, since different pricing strategies are appropriate for each of the three possibilities.

k.Penetration pricing

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With every new product, companies feel tempted to build market share quickly through aggressively low prices—a tactic known as penetration pricing. But a fixation on volume usually sacrifices profitability and may ignite a price war. As a result, it is generally better to keep upward pressure on prices and to promote good industry pricing behavior. On rare occasions, however, the price lever may be the right tool to undercut competition.

l. High customer value, elasticity

The first kind of legitimate occasion for penetration pricing involves new or underdeveloped markets in which the benefits offered by a new product are high and customers are particularly price sensitive. If a supplier can build a presence in such markets quickly, ahead of the competition, it can disproportionately tap into latent demand, expand its share, and establish itself as the market leader. Price can be the best mechanism for implementing this strategy, especially in a market with high switching costs and no established product standards; AOL, for example, started out with very low prices and raised them over time.

This strategy can be risky, however. If consumer choice is influenced primarily by benefits rather than price, penetration pricing can only be destructive. The media, high-tech, and pharmaceutical industries provide many examples of new offerings and technologies priced aggressively to build share, which was then lost when competitors released newer and slightly better products. In markets focused on technical efficacy, these suppliers needlessly pushed price expectations lower and thus forfeited profits.

m. Cost-to-serve advances

Another possible occasion for penetration pricing comes when a supplier's cost to serve will decline sharply and rapidly—often because of economies of scale or a learning-curve effect—as volume expands and fixed and variable costs per unit drop. If costs fall faster than prices, margins should rise over time.

But as the market share of a company grows, its competitors often react quickly, using low prices to minimize their market loss or to enter the market. The result can be constant downward pressure on pricing that puts target margins out of reach. Remember too that extreme care must be taken if the core driver of a product's acceptance is benefits rather than price.

Limited capacity is another pitfall that can trap a company that is chasing low costs to serve. If penetration pricing ignites demand that can't be met, the supplier is injured twice: margins are lost needlessly because available supplies could have been sold at higher prices, and delivery delays or failures—a factor in the overall perception of a product's benefits—could undermine customer satisfaction.

n. Weak competition

Penetration pricing could also be appropriate if a company's competitors have higher cost structures or are locked into channel agreements that limit their pricing freedom. In the basic-materials industry, for instance, Asian and Eastern European suppliers have frequently captured market share through penetration pricing once their purity and logistics standards reached minimally acceptable levels, because producers in developed countries could not match their low labor costs.

A well-known example comes from the US consumer PC market, in which Dell Computer created a lower cost structure (and eliminated costs associated with intermediaries) by selling built-to-order PCs direct to customers over the phone and the Internet. Since rivals couldn't match Dell's low costs, the company expanded its market share rapidly even as it secured higher margins than its rivals did.

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XXVI. Considering Franchising an Existing Business?

Franchising is the most dynamic method of expanding a business in the twentieth century.  Yet, not all of those that venture upon this strategy will find that to be a "road to riches."  Many companies have tried to franchise only to fail in the attempt.  

When making a decision to franchise, the iFranchise Group believes that business owners must first determine if franchising is even a legitimate option.  With this in mind, the iFranchise Group has developed twelve criteria of franchisability that you can use to test the franchisability of your business.  While not a definitive, applying this test to your business will at least allow you to know where you stand and perhaps provide you with some insight as to how a business must be improved in order to franchise.

Secondly, business owners should gain a thorough understanding of what is involved in franchising , in terms of resources, costs, and personnel.  While your business may be ready to franchise, there may be financial, operational, or resources barriers that should be overcome before proceeding with this strategy.

Finally, assuming that you have a franchisable business and the resources necessary to succeed, your next step should be to determine if franchising is the best strategy based on your own personal goals and objectives.  Just because a business can be franchised does not mean that it should be franchised.  To do this, you will need to measure the advantages and disadvantages of each of your alternative strategies versus the advantages of   franchising .   

Each strategy should then be evaluated based on the goals, objectives, resources, and tolerance for risk.  To best analyze these alternatives, we suggest that you order our free videotape on "How to Franchise a Business."   This videotape will provide you with the framework for analysis that will allow you to understand whether franchising is the best strategy to allow you to reach your business goals. 

1. 12 Criteria of Franchisability

While it is impossible to determine the franchisability of a business concept without a significant amount of analysis, the iFranchise Group has identified a series of 12 predictive criteria that assess the readiness of a company for franchising and the likelihood that it will achieve success as a franchisor.

 

a.Credibility – To sell franchises, a company must first be credible in the eyes of its prospective franchisees. Credibility can be reflected in a number of ways: organization size, number of units, years in operation, look of the prototype unit, publicity, consumer awareness of the brand, and strength of management, to name the most prominent.

b.Differentiation – In addition to credibility, a franchise organization must be adequately differentiated from its franchised competitors. This can come in the form of a differentiated product or service, a reduced investment cost, a unique marketing strategy, or different target markets.

c.Transferability of knowledge – The next criteria of franchisability is the ability to teach a system to others. To franchise, a business must generally be able to thoroughly educate a prospective franchisee in a relatively short period of time. Generally speaking, if a business is so complex that it cannot be taught to a franchisee in three months, a company will have difficulty franchising. Some more complex franchisors offset this handicap by targeting only franchise prospects that are already "educated" in their field (e.g., a medical franchise targeting only doctors).

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d.Adaptability – Next, measure how well a concept can be adapted from one market to the next. Some concepts (e.g., barbecue) do not adapt well over large geographic areas because of regional variations in consumer tastes or preferences. Others (e.g., medical practices) are constrained by varying state laws. Still other concepts work only because they are in a very unique location. And some work because of the unique abilities or talents of the individual behind the concept. Finally, some concepts are only successful based on years of perseverance and relationship building.

e.Refined and successful prototype operations – A refined prototype is necessary to demonstrate that the system is proven, and is generally instrumental in the training of franchisees. The prototype also acts as a testing ground for new products, new services, marketing techniques, merchandising, and operational efficiencies.

f. Documented systems – All successful businesses have systems. But in order to be franchisable, these systems must be documented in a manner that communicates them effectively to franchisees. Generally speaking, a franchisor will need to document its policies, procedures, systems, forms, and business practices in a comprehensive and user-friendly operations manual and/or computer-based training module.

g.Affordability – Affordability merely reflects a prospective franchisee’s ability to pay for the franchise in question. This criterion is as much a reflection of the prospective franchisee as it is of the actual cost of opening a franchise. For example, a multi-million dollar hotel franchise is affordable to real estate developers, whereas a franchise with a $100,000 start-up cost that targets prospects with clerical experience might not be.

h.Return on Investment – This is the real acid test of franchisability. A franchised business must, of course, be profitable. But more than that, a franchised business must allow enough profit after a royalty for the franchisees to earn an adequate return on their investment of time and money. Profitability is always relative. It must be measured against investment to provide a meaningful number. In this way, the franchise investment can be measured against other investments of comparable risk that compete for the franchisee’s dollar. Typically, the iFranchise Group looks for the franchisee to achieve a ROI of at least 20 percent by the second to third year of operations.  To see how your business measures up to this criteria, take the iFranchise Acid Test . 

i. Market trends and conditions – While not an indicator of franchisability as much as a general indicator of the success of any business, these trends are key to long-term planning. Is the market growing or consolidating? How will that affect your business in the future? What impact will the Internet have? Will the franchisee’s products and services remain relevant in the years ahead? What are other franchised and non-franchised competitors doing? And how will the competitive environment affect your franchisee’s likelihood of long-term success.

j. Capital – While franchising is a low-cost means of expanding a business, it is not a "no cost" means of expansion. A franchisor needs the capital and resources to implement a franchise program. The resources required to initially implement a franchise program will vary depending on the scope of the expansion plan. If a company is looking to sell one or two franchised units, the necessary legal documentation may be completed at costs as low as $15,000. For franchisors targeting aggressive expansion, however, start-up costs can run $100,000 or more. And once the costs of printing, audits, marketing, and personnel are added to the mix, a franchisor may require a budget of $250,000 or more to reach its expansion goals.

k.Commitment to relationships – Successful franchisors focus on building long-term relationships with their franchisees that are mutually rewarding. Unfortunately, not all franchise organizations understand the link that exists between relationships and profits. Strong franchisee relationships enable the franchisor to sell franchises more effectively, introduce needed changes into the system more easily, and motivate franchisees and their managers to provide a consistent level of products and services to their customers.

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l. Strength of management – Finally, the single most important aspect contributing to the success of any franchise program is the strength of its management. The iFranchise Group has found that the single most common contributor to the failure of start-up franchisors is understaffing or a lack of experience at the management level. Oftentimes, new franchisors will try to take everything on themselves. In addition to absorbing several new jobs for which the franchisor has little to no time, the franchisor needs to exhibit expertise in fields in which he or she may have little or no experience: franchise marketing, lead handling, franchise sales, ad fund management, training, and multi-unit operations management.

An appropriate first step in the decision to franchise is an examination of the question of whether or not a business concept is actually "franchisable." Any organization seriously considering franchising should undertake this analysis before implementing a franchise strategy.  For further information on whether your business is franchisable, request our free videotape  or schedule a free consultation with one of our Senior Consultants.

2. The Process of Franchising

The first step in franchising a business is to make the decision to franchise. That involves two key questions:

1. Is this business franchisable?2. Is franchising the right strategy?

These questions can only be answered after evaluating your business and determining how franchising fits with your specific goals and objectives.

If the decision to franchise is made, a franchisor should develop a business plan outlining the company's growth and strategy for the next five years. A franchisor needs certain new capabilities and will need to be sure that these capabilities are seamlessly integrated into existing organizational functionality.

To ensure successful franchisees and maintain quality control, the franchisor will need to develop a state-of-the-art operations manual for its franchisees. This manual will serve as a sales tool demonstrating franchisor competence to new prospects, as a training guide for new franchisees, as a reference guide for established franchisees, as a "liability limiter" for the franchisor, and as a legally binding quality control device for the entire chain.

The franchisor should also develop training programs for use in conjunction with the operations manual. Computer-based tools and programs are highly effective, as are training videotapes, and can be used for the franchisee, for the franchisee's employees, and for corporate employees.

To be legally entitled to sell franchises, the franchisor will need to develop a franchise agreement and a Uniform Franchise Offering Circular, and will need to file with appropriate state authorities on a national basis (23 states have such requirements). The franchisor will also need to maintain ongoing compliance (keeping registrations in force while actively selling) and will need to be able to document compliance with state and federal law on an ongoing basis. These legal requirements are relatively easily met through the use of an attorney with substantial franchise experience.

Of course, the new company will also need to sell franchises. This will require a specific marketing plan designed to get the franchisor's message to the targeted franchise prospect.

Once the prospect has been identified, the franchisor will also require marketing tools to assist it in the sale of franchises. For aggressive sales campaigns, the iFranchise Group would recommend the

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development of a mini-brochure (for use in direct mail campaigns and perhaps as a give-away at trade shows), a full-size franchise sales brochure, and a franchise sales videotape.

And of course, the franchisor will need to understand the nuances of the sales process and the legal constraints of franchise sales.

The tools necessary for franchising can be developed in approximately three months from the completion of the implementation plan, although state registrations may delay a company's ability to sell in certain states for another three to four months. Altogether, a new franchisor can anticipate that the franchise program should take between six months and a year to fully implement. The cost of a well-designed program varies substantially, depending on the strategy chosen and the desired speed of expansion.

Companies seriously considering franchising are well advised to seek the counsel of a knowledgeable franchise professional prior to initiating any franchise efforts.

The iFranchise Group provides all of the services listed above, and can customize a program to meet your specific needs and budget. Call us today to see how we can help

3. Advantages of Franchising a Business

While franchising provides franchisees with a proven system and the support of a much larger organization, the advantages to the franchisor are even more significant.

a.Capital - Since franchisees use their own capital, the franchisor has virtually no investment at the unit level. Franchising allows companies to leverage off the assets of franchisees.

b.Return on Investment - Because of this lower investment, ROI will be significantly higher.

c.Risk Reduction - With no capital invested in units, risk is reduced substantially.

d.Limited Contingent Liability - The franchisor will not be signing leases, taking on financing, etc., and will thus expand with limited contingent liability.

e.Speed of Growth - By leveraging off of the time and efforts of its franchisees, a franchisor can grow much faster without adding staff.

f. Reduced Role in Day-to-Day Operations - As a franchisor, your primary concern involves the franchisee's top line performance, reducing the scope of your involvement in day-to-day management.

g.Reduced Vicarious Liability - The liability for acts of employees (e.g., sexual harassment, EEOC violations, etc.) and for occurrences in the unit (e.g., slip-and-fall) accrues to the franchisee, not the franchisor, for the most part.

h.Highly Motivated Management - Franchising can provide a company with highly motivated management who will treat individual units as its own.

i. Quality Control - Franchisees generally keep their units in better operational shape than unit managers and, as a part of the community, are better able to promote these units locally.

j. Long-Term Management - The franchisor can invest in the long-term training of its franchisees, as they are unlikely to leave short-term.

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k.Unit Performance - Units are generally better run, as is reflected in the fact that franchised stores generally outperform company-owned stores in terms of sales volume.

l. Lean Structure - Franchisors can grow the organization without adding significantly to overhead.

m. Brand Building - This ability to grow the organization without substantial additions to overhead will allow franchisors to grow their retail presence and their brand more quickly and effectively.

n.Advertising - Franchisees will often contribute to a common advertising and promotional fund. This fund will be used to promote the brand under the direction of the franchisor.

o.International - International expansion becomes easier, faster, and carries far less risk since a local partner becomes involved.

Moreover, it is important to note that franchising is not an exclusive strategy. Most franchisors use it in conjunction with company-owned growth to compound growth

XXVII. Rechanneling sales A decade of change has upset the industrial producers’ traditional approach to selling. The time has come for many of them to change their sales channels.John M. Abele, William K. Caesar, and Roland H. John2003 Number 3Making industrial products is a tough way to earn a living. Producers of everything from adhesives and chemicals to metals and specialty paper have had to cope with a decade of disruption in their sales channels whether they dealt with original-equipment manufacturers directly, through distributors, or both. Distributors and end customers have consolidated, undermining long-established sales strategies; large customers have adopted increasingly sophisticated approaches to buying; and new technologies have made the producers' pricing schemes more transparent to all.Consider the plight of electrical-wire and -cable producers. In search of economies of scale, distributors of these products consolidated during the late 1990s.1 Utilities—which are the end users of electrical wire and cable—also merged rapidly. Meanwhile, metals and other inputs to wire and cable products began to be sold through on-line marketplaces, which made the producers' cost base transparent. The result was that long-standing customer and supplier relationships were upended and the bigger surviving customers and distributors could extract pricing concessions from producers.Despite these developments, few industrial-products manufacturers have altered their approach to selling. It is easy to understand why. Making changes to sales structures—for instance, by rapidly augmenting or replacing channel partners—is risky. One electrical-equipment manufacturer that had sold its products through third-party sales representatives tried to jump-start its growth by adding a channel and offered its new distributors products on advantageous terms that were then passed on to customers. Savvy buyers, however, continued to obtain information from the old sales reps (value-added resellers that could solve their problems), though they bought from the new, lower-priced distributors. Sales plummeted because many of the best third-party sales reps, which owned key markets, dropped the company's product line in irritation.Fortunately, companies can turn the information transparency tables to their own advantage by using the new technologies themselvesYet doing nothing holds dangers as well. At the very least, manufacturers must review the way they sell their wares, and to whom, if they hope to understand the impact of changing their sales practices. Fortunately, these companies can turn the information transparency tables to their advantage by using the new technologies to assess the performance of their customers, channel partners, and channel practices while learning how to improve their own economics. Armed with such insights, many industrial-products companies can decide whether it would be best to restructure their channels or to manage the existing ones better.New challenges

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Information transparency is the thread connecting the producers' channel challenges. On-line auctions give customers more information than ever about the producers' pricing; rapid data transmission helps purchasing agents do their jobs more effectively; and downstream consolidation makes information move more easily because it moves through fewer companies. The new climate has had its most obvious impact on the prices manufacturers can charge. But it is also testing the channel approaches that many of them have used for decades by influencing which companies they choose as their partners, the way they motivate partners to increase their sales, and the activities the partners undertake.

a. More sophisticated buyers

E-mail, on-line auctions, standardized desktop tools, electronic document sharing, and even mobile phones have made information flow more readily within buyer organizations, across industries, and even, sometimes inadvertently, across competitors. More information is just the beginning. Equally important is what end customers and distributors have done with it by developing detailed data on their purchases, comparing how and how often they buy goods from competing producers, and extracting concessions from these companies.

A second issue is the rise of electronic marketplaces, which enable purchasers to pit producers against one another in reverse auctions, yielding prices that are highly visible and often lower. Although in some sectors the new sales channels haven't caught on, for many industrial-products companies they have quietly become a part of the normal way of doing business. Companies can respond in a number of ways—from retreating upmarket to specialty channels less touched by on-line auctions to using them as a means of cutting out distri-bution intermediaries and pursuing high-volume strategies.

b. Downstream consolidation

As if the new tools and capabilities of industrial distributors weren't enough, they have also consolidated rapidly: by some estimates, the top ten now represent 40 percent of US industry revenues.2 Buyers too have joined forces, some through megadeals, such as the 1998 DaimlerChrysler merger, others through countless smaller arrangements, such as Delphi's acquisition (from TRW) of Lucas Diesel Systems in 2000 and of Eaton's switch and electronics unit in 2001. Finally, the emergence of large retailers in certain industries has had a significant effect. In the home-construction sector, for instance, the top ten distributors (which include certain retailers, such as The Home Depot) command no less than 70 percent of industry revenues (Exhibit 1), and some regional lumberyards and flooring distributors are disappearing.

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Besides weakening the market power of industrial producers, downstream consolidation complicates channels. Markets that were once well covered suddenly become poorly served when distributors merge and shift their product or market focus, manufacturers cut the number of suppliers and distributors they use, or large retailers squeeze out distributors. Continued movement offshore by consolidating manufacturers compounds the problem by forcing them to find new ways of reaching end users as the importance of traditional domestic distributors declines.

c. Responding with insight

Industrial-products companies understand the winds of change and their consequences, but it hasn't always been obvious how these companies should react. Fortunately for them, the very information transparency that has been so vexing in some respects can now be applied to channel analysis, thereby giving them deeper insights into their customers, distribution economics, and competitors.

When distributors controlled access to end customers, producers had difficulty obtaining the information they needed about demand, pricing, and customer-service requirements. To assess the performance of their distributors, they could do little more than determine how many units they sold through each. All that has changed with the coming of better third-party market research, internal data-capture systems, and analytic and on-line tools. Indeed, many companies face a new challenge: too much data. This problem can be so acute for any producer with large numbers of distributors and end-user customers that in many cases it would do well to appoint a special analytic team to study channel issues. Such a team ought to include people well versed in the contents of company databases as well as generalists with the problem-structuring skills to design well-targeted analyses of issues like the profitability of customers and products across and within channels. (Some queries take days to run, so framing questions carefully is vital.) The right team can provide valuable information about a company's customers, channel economics, and competitors.

d. Learn more about customers

Advanced electronic-data-interchange (EDI) and other e-enabled systems now give industrial companies unprecedented access to information about their end-user customers. Cheap forms of communication (such as e-mail) help third-party market research and price-tracking firms assemble more information at lower cost than ever before. Using all this data has become cheaper and easier thanks to increased computer processing power, better software, and tools, such as data warehousing, that have made sophisticated market research techniques (conjoint analysis, for example) more readily available.

Producers can not only create a more nuanced understanding of their customers but also tailor their channel approaches in response

This information not only helps producers build a more nuanced understanding of their customers but also tells them how to tailor their channel approaches in response. One US chemical company used such insights to recast its incentives to distributors. It began by dividing the United States into 15 geographic markets. Then it combined third-party market research (on topics such as the size of its markets, the number of end users in them, and the kinds of end-user segments they include) with its own customer and channel databases (which contained information on the market share of distributors and estimates of end-user penetration and relative brand strength by market). The results were illuminating. In some markets, end users were extremely loyal to their distributors; in others, they pitted distributors against one another to get the best price; and in still others, local consultants advised them on what to buy and how much to pay. The chemical company also learned that its distributors played different roles across geographies, sometimes acting as wholesalers, sometimes as retailers, and sometimes in both capacities.

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One implication of these findings was that to cover the whole country, the company needed no fewer than ten distributors claiming to have national reach. Another was that its one-size-fits-all compensation structure was poorly aligned with the market conditions experienced by some of its channel partners. Tailoring incentive systems to individual markets gave the company opportunities to increase its share of them without changing its products significantly. Like many channel revolutions, the new strategy looks straightforward in retrospect. But ten years ago, the company would have been hard-pressed to decide how many channel partners to keep, much less which ones and what it should do to design the most effective incentives for each of them.

e. Reappraise channel economics

Knowing your customers is only part of the picture; a producer contemplating changes to its accustomed channels must also understand both its own economics and those of its distribution alternatives. This knowledge can help companies evaluate the attractiveness of serving customer segments directly (as against using intermediaries) or of working with particular distributors.

Such diagnoses are now possible because, for many transactions, producers can combine real-time price and volume data (provided by EDI systems) with the internal cost data compiled by enterprise-resource-planning (ERP) systems. Useful information of this kind, which has only recently become available to companies in an easily manipulated form, enables them to determine how much profit they make from their individual channel partners and from the end-user customers for the products and services they offer.

The pocket margin waterfall, a tool commonly associated with pricing analysis, has important applications for companies setting their channel strategy. Its use involves subtracting direct product costs and costs incurred specifically to serve an individual account from the price paid by an end customer.3 The cost of serving individual accounts can be borne by either the producer or its distributors.

An analysis generally shows that the largest cost of working through intermediaries is their discount

Producers can learn a good deal by using the pocket margin methodology to compare the cost of sales made through distributors with the cost of direct sales or to compare costs across different channel partners. An analysis of direct sales versus sales through distributors (Exhibit 2) generally shows that the largest cost of working through intermediaries is their discount—the difference between the price paid by the end customer and the list price the distributor would pay the producer in the absence of other rebates. In most industries, the distributor discount is 20 to 30 percent of revenues; however, it sometimes goes above 50 percent and occasionally dips into single digits. If glaring differences in the discounts of different channel partners cannot be explained by variations in performance, that is an important warning sign of uneconomic arrangements.

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Another red flag is the surprisingly high cost of smaller-ticket items such as order processing or technical and sales support; distributors can be very cost-effective at certain steps of the chain and inefficient at others, especially when it would be necessary to make investments to become a low-cost provider of services used by only a few customers. In some cases—particularly when distributors have trouble covering all locations requiring product deliveries—such inefficiencies prompt producers to remove a costly step in the process by offering some customers new direct-ship or direct-order services. In other instances, producers avail themselves of the services of new kinds of intermediaries, such as consolidated logistics warehouses or credit- or payment-processing specialists, to serve as support resources for some or all of their channel partners. This approach makes sense when the activity in question must be performed only periodically and there are major economies to be had.

f. Know your competitors

Electronic marketplaces, which help purchasing agents extract concessions from producers, also help producers learn about their competitors. One equipment manufacturer exploited this information transparency by analyzing a series of bids it had lost to a competitor. By comparing detailed bid prices with the catalog prices posted on the competitor's Internet sales site, the manufacturer reconstructed the competitor's sales and discounting strategy for each main customer segment. With that information, the manufacturer could teach its distributors how to estimate the likely prices and terms of future transactions and to develop sales strategies in response. The channel partners were thankful for the support of the manufacturer and quietly helped it gain share and boost margins.

g. From insight to action

We have found that a radical shift from one channel approach to another (say, from distribution to direct sales) rarely makes sense

Rarely would an industrial-products company finish reevaluating its channels without finding ways to improve them. Action generally takes any of three forms: restructuring the channel, selecting new partners, or improving the management of existing partners. In our experience, concentrating on one

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form at a time helps companies avoid precipitate actions they might later regret. We have also found that a radical shift from one channel approach to another (say, from distribution to direct sales) rarely makes sense.

Instead, the changes should be subtle, as Okonite, a producer of electrical wire and cable, showed when it developed a new channel strategy. The company responded to consolidation among its distributors by circumventing the traditional two-step ones and deepening its relations with selected utilities; in particular, it supplied municipal utilities with engineering resources to help them plan new projects. These customers came to view the company as their trusted partner rather than just another producer, and this helped it make some valuable discoveries: they needed more flexible and easier-to-install cable, for instance, as well as a more streamlined, service-oriented buying process. No producer was providing these benefits, so when the company did, it flourished even as many competitors foundered on the rocks of commoditization.

h. The restructuring option

Restructuring channels means changing the kinds of channel partners a company uses; for example, it might augment or replace its traditional distributors with value-added resellers, brokers, mass retailers, or on-line channels. If distributors provide inadequate market coverage or if resource constraints make it impossible to expand the existing channel configuration, restructuring could be the answer. In other cases, the impetus to restructure comes from fundamental changes in the nature of end-user demand (such as a desire for solutions) that a company's current channel partners are unlikely to satisfy even if retrained. (An important economic indicator would be evidence that profits were migrating to channel partners or end users.) Finally, competitive research might reveal that other players were adopting new, more successful channel models that called for a response.

One electrical-equipment and -machinery company restructured its channel upon finding that its sales force wasn't active in several attractive regions and that its sales of equipment for systems upgrades lagged behind those of competitors. Rather than expand the sales force, the company developed new channel partnerships—one to create an on-line system for handling all estimates, proposals, and service agreements and another for monitoring customer life cycles and recommending upgrades. Freed of these burdensome tasks, the sales force could expand the company's revenues in new geographies. Meanwhile, equipment-upgrade sales more than doubled thanks to the new channel partnership.

Despite such success stories, it is risky to redesign channels, because doing so requires companies to entrust some or all of their revenues to new partners that lack established relationships with end customers. Testing out new arrangements before implementing wholesale changes can mitigate the risk but never eliminates it.

i. Selecting new partners

Sometimes a company needs better rather than new kinds of channel partners. If customer analysis reveals that end users value skills and services the current partners can't provide, or if the cost structures of some partners are less favorable than those of their peers in the distribution network, it could be time to choose new ones.

Before doing so, however, companies ought to consider investing in their channel partners' skills. Manufacturers should weigh two key questions—how much will the training cost and how likely is it to succeed?—against the risks of cutting loose long-standing distribution partners. In many industries, intermediaries have served a customer base for generations; they know the locations of all prospects in a territory and can predict which of them will and won't buy. In industries ranging from hydraulics to electrical products to heating oil, we have found that when a manufacturer drops a distributor that then

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picks up another line, 20 to 50 percent of the volume the manufacturer used to enjoy in that territory stays with the distributor.

In short, swapping one channel partner for another, like restructuring a channel, is risky. Field research can help—particularly interviews with customers of the distributor in question, for it is vital to know why they buy and how privileged these relationships are. Armed with this information, industrial companies are in a better position to decide which distributors to jettison.

j. Better channel management

Even when analysis shows that a manufacturer doesn't have to restructure its channel or switch partners, it is bound to have opportunities to improve channel management. Doing so is particularly relevant when competitive analysis indicates that other companies are getting better results with similar sets of distributors.

Incentives, for instance, are a vital component of channel management. When one chemical company assessed its rebate program, it found that its salespeople were applying rebates haphazardly, often offering them to weak distributors in hopes of gaining incremental sales in competitive markets or to distributors regarded as loyal (though analysis suggested they weren't). Not surprisingly, these rebates were costly and ineffective. The company's solution was to strengthen the program by standardizing it, which helped the sales reps focus on selling products rather than administering rebates. In other cases, tailored incentives are the key, though channel strategists, not individual salespeople, should do the tailoring.

Again, training is important. When economic analysis reveals that certain customers are putting pricing pressure on distributors, for instance, a manufacturer should arm them with better information: a shortlist of customers whose approach to purchasing appears to be sophisticated, an analysis of those customers' alternatives, and training and materials to communicate the distinctiveness of the manufacturer's offerings.

The risks inherent in channel management differ from those in designing channels and choosing partners. Channel-management initiatives don't introduce new intermediaries to deal with customers, so mistakes are less likely to cause massive shifts in market share. Nonetheless, effective implementation can be tricky and calls for tight monitoring and fine-tuning. To evaluate initiatives, an industrial company can rely on the same tools it uses to identify them.

Channel change is scary. But with the right insights about customers, competitive conditions, and economics, manufacturers can successfully redirect their channel strategies and improve their performance.

INDEX

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I. Dr. Seuss's Selling Technique.........................................................1II. Psychological Tricks in Selling........................................................2III. The Top 7 Sales Blunders...............................................................6

V. The changing face of selling...............................................................................................15VI. glossary of sales and selling terms.....................................................................................18VII. open plan selling/strategic selling/Miller Heiman's Strategic Selling®.........................28VIII. open plan selling and strategic selling (lower case descriptive)......................................28IX. Prospecting & The Power of One......................................................................................41

X. Qualifying - The Critical Selling Skill...............................................................................44XI. Selling on Value - The Three Principles of Value Selling...............................................46XII. Ten Powerful Marketing Tips for the Small Business.....................................................47XIII. the product offer.................................................................................................................48XIV. Time Management - Time Wasters Salespeople Can and Should Avoid......................51XV. Top 5 Mistakes Made in Marketing..................................................................................52XVI Understanding, Predicting, and Influencing Customer Loyalty....................................53XVII. The power of pricing..........................................................................................................57XVIII. The 8 Essentials of Corporate Gift Buying......................................................................63XIX uses of Incentives and Premiums 64 XX Sales More.......................................................................................................................... 71XXI Taking the Mystery from Product Naming..... 76 XXII Top Tips for Selecting a Brand Name............................................................................. 81 XXIII Technology Brands Meet the Bottom Line 82 XXIV Super Charge Your Business With Profit Pricing Strategy 84 XXV. Pricing new products..........................................................................................................85XXVI Considering Franchising an Existing Business? ......................................................... 91 XXVII Rechanneling sales..............................................................................................................95

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