Archive for May, 2010

Sales Myths

Friday, May 28, 2010 by:David Zahn
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The vision many have of sales people

Of all the misconceptions that arise when entrepreneurs or business owners think about starting their own company; no area is more misunderstood than the sales function.  Many business people have a mistaken impression of what it takes to succeed in sales.  Furthermore, what passes for sales training often promotes ideas about the process that are doomed to fail. When uninformed or naive business people follow the formulaic approaches to selling that these trainers present as skill-building, the results are often a disaster.

The truth is that many sales people begin with a strike against them in the eyes of certain buyers because of past interactions with sales people that were less than satisfactory.  When many people think of sales people, the image that comes to mind is that of a fast-talking, manipulative, exploitive, and dishonest person that is focused solely on making a sale and not at all of helping a prospect or customer achieve their objective(s).

Common Sales Myths

  • Myth:  Scan the office and comment on a picture, trophy, or find something that aligns you with the buyer

Reality – Many buyers are offended by this and see it as being a “tactic” that is insincere.  So much so, that Walmart refuses to allow vendors into the buyer’s offices and forces the conversation to occur in a windowless, artless, non-personal space to avoid any chance of that  happening.

One buyer for a major southwest retailer actually would purposely react angrily when a vendor or supplier would comment on what a lovely wife he had or what cute children he had (by looking at the photos in his office) as a way to disarm the vendor.  He would exclaim, “how dare you comment on my wife and my kids – don’t think you can get familiar with me!”  Of course, he was not really offended by the comment, but had heard the same comments over and over and realized that they had been trained to react to the office decorations and he wanted to maintain the control of the sales call.

  • Myth:  Buyers buy from friends

Reality – Buyers buy from people they envision can solve problems within their own organizations. Especially in sales that are heavily technology-based and require purchase of software or hardware that the purchasing organization has not used before – the buyer wants to know that should something go wrong; there is one person that s/he can call to get it fixed.  I had one buyer tell me that he wanted to know that if something went south, he knew which one neck he had to choke to get it right.

  • Myth: Sales were lost because competitor had a better price

 Reality – More sales are lost to “no decision” than to competition.  Even when sales go to the competition, it is not because of price in a large percentage of instances – but because the winning sales person/team did a better job of meeting a need and helping the buyer “visualize” a solution.

  • Myth: Buyers are swayed by product features

Reality – Buyers are buying a business answer and not a product. What the buyer is purchasing is a solution to a problem (losing money because… or, have an opportunity to increase productivity/increase efficiency/reduce turnover/etc.).  Sales will often “blame” marketing for the lack of product features when the reality is that the sales person has not done a sufficient job of converting the prospect’s business issues into a solution provided by the product or service.  No one “buys” a feature – they buy what it provides for them!

  • Myth: Lower price wins

 Reality – if all things are equal, sure a lower price is more attractive.  However, the role of the sales person is to ensure that all things are NOT equal and that there is value to doing business with him/her/the company that exceeds the “savings” of the lower price.

 Insight

There are organizations that are focused on developing sales people and that offer research and training to improve how people perform the sales function (one of them is a division of the American Society of Training & Development).  However, it is essential that people who are involved in selling don’t forget that a sale does not occur UNTIL a buyer is ready to make a purchase.  If the selling approach does not mirror how people wish to buy; then the selling effort will fail.

Finding Improvement Ideas

Tuesday, May 25, 2010 by:David Zahn
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One of the most difficult things for a business person to do; and even harder for a successful business person to perform, is to take stock of their own internal company’s processes, methods, and strategies and crtically assess whether there is room for improvement or the introduction of new ideas.  After all, the business person likely started the business, at least in part, because there had been an identification of some way to better meet the needs of a market than was currently available. 

In fact, if a business is not working hard to evaluate whether it is still as effective as it once was, it is likely losing ground to their competitors that are looking to improve and incrementally add to their products and services.  Therefore, it is essential for the business person to do the following:

  • attempt to buy or use their own business’ offerings as a customer would.  Call in to the business and see how one is greeted, how customer service is handled, how sales people treat customers
  • spend time working on the front lines with employees doing the work, and not just directing or managing from above
  • study how others outside of the direct competition are differentiating themselves from their competition (it is often easier to talk to non-competitors than it is to try to get competitors to share their secrets – and the learning is likely more illuminating from non direct competitors as in most instances, the entrepreneur will be very familiar with direct competitors already and will not likely learn as much by studying their approaches).

CEO of Build-A-Bear, Maxine Clark recently worked in Container Stores to identify business building ideas.

A Day in their Shoes

The website, Marketing Profs recently shared how the CEOs of The Container Store and Build-A-Bear agreed to spend a day in the other’s company.  However, rather than staying in the executive suite; the CEOs spent the day on the front lines working with employees serving customers.  Not unlike the popular television show, “Undercover Boss” where the CEO consents to work within his or her own company to learn more about the challenges inherent in their own company’s policies and procedures; the two CEOs learned much about how to improve their own company’s offerings by spending time working in a non related company.

The Learning

Among the things the website shared were that both CEOs came to appreciate how important employee commitment is to the success of the endeavor.  Without the employees performing at their peak, the businesses lost their edge and point of difference.

The different; incentives, performance measures used to evaluate employees, motivation, etc. that each was exposed to led to their re-assessisng their own employee management approaches.  Each CEO found at least a few things to include within their own company that they saw work elsewhere.

The merchandising, techniques communication standards, and sales discipline demonstrated were other areas that each CEO believed they could incorporate into their company successfully and improve upon.

Improvement is not Always Organic

There is a tendency among successful entrepreneurs to begin to believe that they are the origin of all good ideas and that they are smarter than others.  So much so, that they will often exclude ideas offered by others as being lesser than those ideas that are “home grown.”  Progressive CEOs are well aware that this is a dangerous habit to fall into, and work diligently to seek ideas from all sources.  If one relies solely on the ideas that are self generated, it is hard to break out of the established ways of looking at problems and employing the standard approaches to solving them.  The truly revolutionary ideas are the ones that propel a business forward, and those are as likely to occur outside the industry as within (and may actually be more likely to come from people who don’t know, “that is how it has always been done”).

Product Promotion Pause

Monday, May 17, 2010 by:David Zahn
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When running a business in tough economic times there are challenges that are even more critical to meet than at other times. Among the most essential challenges are:

  1. Acquiring new customers
  2. Holding on to existing customers and reducing the chance that they will choose to purchase with a competitor
  3. Getting existing customers to purchase from a business through either more frequent shopping occasions, or by maximizing the purchase or transaction size on each purchase occasion.

Of course, this is all easier said than done when competition for the consumer’s dollar is so high and consumers are cautious about the choices they make for essentials and discretionary products.

The competition for the shopper's spending has increased and led to promotions.

Promotion

One of the tried and true ways of attracting a shopper’s attention to a business is for that company to run some promotion (often price discount, though not exclusively, as prominently displaying a product either in a store or in marketing materials sent to prospects and customers can also be used) on a product that is likely to be of interest to a great nmber of prospective customers.  By promoting a product, the business is either educating new customers to the availability of the product or reminding existing customers that the product is available and is priced more competitively than it is available at the competition.

In the ideal scenario, customers will flock to the business in search of the promoted product and sales will increase as customers purchase the promoted product.  A secondary benefit is that the customer may choose to make additional purchases either on impulse, or even planned purchases with that business as a result of choosing to shop with that business on the basis of the attractiveness of the promoted product’s availability at the price.

Promotion Considerations

However beneficial a promotion may seem on the surface, there are considerations that the business owner would be wise to consider before deciding to run any particular promotion:

  1. Is the promotion attracting NEW shoppers that would otherwise not shop with that business, and are therefore incremental sources of revenue?  Does it appeal to existing shoppers or customers of the business, but gets them to buy products that might not otherwise have purchased?  If all tht is occurring is that existing customers of that product are forming the universe of shoppers, the promotion is ineffective.
  2. How much business is being subsidized? – When the promotion is run, do existing customers respond with additional purchases?  For instance, if a store were to reduce the price of an item by 20%, does it lead to shoppers choosing to purchase additional units of the product, or do they choose to only purchase the same quantity as they ordinarily would?  The ideal would be to incent the shopper to make additional purchases, or again; it is deemed an ineffective promotion.
  3. Impact to forecast – If the promotion were not to be run, what would a reasonable forecast of sales for that product project?  As a result of the promotion, what is the expected level of sales for that product?  If the difference is insignificant or marginal, then the promotion should be reconsidered as it is not driving sufficient increase in business

Promotions are an often used tool to try to generate excitement within a targeted base of shoppers, customers, or prospects.  However, there is more to running a promotion than simply reducing the price paid by the customer of a business wants to be successful in their promotional efforts.  Running a poor promotion will just serve to further reduce the profitability of a company as one’s costs increase, but there is no additional revenue received to offset it.  An interesting perspective on this challenge is offered up in a podcast found on this site http://www.cpgmatters.com/051710.html

In subsequent articles the issues of shopper loyalty, conversion, and leakage will be addressed as they pertain to building solid relationships with shoppers and maintaining the strength of the business.

Having What It Takes

Friday, May 7, 2010 by:David Zahn
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Of all the questions posed about business, start-ups, entrepreneurialism, and deciding whether to embark on working for oneself; none is asked more frequently than how to determine if someone has what it takes to go into business for him or herself.  It seems that any time two people get together to talk, the conversation will at some point to turn to a discussion about, “someone ought to open a business to…”  And, every now and again, an enterprising person does just that, and opens a business to do whatever that idea encompasses.

Before opening a business, be certain you have what it takes.

Why being an Entrepreneur is NOT for you

There are a whole host of businesses that are doomed from the start because the entrepreneur had stars-in-the-eyes syndrome and did not have a realistic vision of what it means to be in business for oneself.  Among the mistakes that occur often:

  • Thinking that because you are talented or “good” at something, that you can succeed in business.  Running a business requires more than just being competent at sales, or being artistic, or having a handle on how to budget.  It means you have to manage ALL of those things and more.
  • Putting your needs first, ahead of a customer’s.  Far too many would-be business owners think of the business in terms of what it will do for them, how it will provide for them, and give only cursory attention to how the business will meet a need in the marketplace.  If the customer’s requirements are not driving the purpose for the business, it will be very hard to succeed.
  • Believing that there will be minions available to do the work “for” the boss.  Few start-up businesses have large staffs, and even those that do have employees are still going to require that the entrepreneur do or be familiar with all tasks – no mattter how distasteful, boring, or confusing they may be to the business owner.
  • Assuming that owning a business will be less work than previous salaried jobs included.  With rare exceptions, the business owner will have to devote MORE time to the business than they would have when working for someone else.  Especially in the early stages of a business, there is a tremendous amount of work and dedication that often goes into launching a business before it can even approach being self-sustaining.

Why being an Entrepreneur IS for you

Being an entrepreneur offers the business owner a whole host of benefits that are only available to one who chooses to own a business and not work within one.

  • For those that want to meet a customer need that is unfulfilled or only partially being met, the chance to be the first to market or to improve upon existing options for the market is thrilling.
  • If living with the ambiguity of not having a paycheck arriving at regularly scheduled intervals is not overly frightening and may even be motivating and provide impetus for the entrepreneur to work harder, faster, longer.
  • The idea of being self-reliant appeals and the requirement to mutli-task across all aspects of a business is exciting.  At any given time, the entrepreneur will have to juggle; marketing, operations, finances, selling, hiring, and business planning.  There rarely are large staffs available to provide that.  Even when there are; the entrepreneur still is ultimately responsible for making those decisions.
  • The desire to create value and have an asset that can be sold, traded, or passed on to the next generation is more attractive than the simple pursuit of a large retirement party and a corporate gift upon termination of employment.

If one is considering starting a business and is seeking some guidance on what questions to ask and what insights one should have before launching a business, a good starting place is the Small Business Administration website. It is chock full of ideas, assessments, and tools to guide the decision-making process.

What you can Expect

Making the jump from a salaried position to owning a business means being willing to challenge oneself to rely on; wit, guile, persistence, identification of opportunity, decision-making, and the capacity to juggle competing pressures in real-time.  It is not for everyone and not everyone can do it equally well.  However, for those that choose to pursue it, being in your own business is a chance to do things your way – and allow those decisions to be weighed on the most important scale known to business people - the customer’s.

Are Niches Ditches or Riches?

Tuesday, May 4, 2010 by:David Zahn
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It is uttered so often now, it is almost a cliche, it is critical that a business be focused on serving a particualr niche or perhaps a very manageable (small) number of niches to succeed.  Try to cast a net too wide or address too broad of a marketplace, and the business will suffer from being too difuse and unable to meet any particular customer’s needs.  In essence, being a jack of all trades, and a master of none.

Is it better to cast many lines in the water, or focus on just a few?

Defining The Term

A niche is defined as an area of the market specializing in one type of product or service.  Said another way, it is appealing to a subset of the entire marketplace through a targeted offering. 

Why it is Helpful

Thinking in terms of a niche forces a discipline upon the company’s processes that serve to crystallize how that company’s products or services can be best positioned.  Whether it is in reference to product features, marketing messages, sales efforts, or any other aspect of the companay’s offerings – it is helpful to think about how the targeted user or users will evaluate or assess the product/service.

Commonly, business owners will assume that the product or service can “sell itself” and will be easily recognized as providing value to the prospect without needing to be clearly articulated as to how to use the product/service, when to use it, how to assess it, etc.  Unfortunately, the prospect is rarely as expert as the provider in understanding product features, competitive analysis, or being able to cost justify it.  So, the effort to think about a particular niche (specific industry, job function, experience of prospect, etc.) within the market and tailor a message to that audience is helpful.  Recognizing that not all audience segments will respond similarly to the same messages, product features, or uses of a product/service and choosing those aspects that will resonate most postively with the targeted niche can, and often do, serve the business well.

Focusing attention on the needs of the customer or prospect and not merely on the wants of the supplier is useful and helps focus the efforts and energies of the business to prevent missing important requirements or expectations.  Frustrating a prospect by demanding that they figure out how a product/service can best be used to meet a need rarely leads to a positive outcome.

Why it is not Always Beneficial

On the other hand, if you narrow the target down to finitely, you run the risk of squeezing the potential buyers into niches that cannot sustain a business. For example, it might be too broad to try to market to a target of “Mothers.”  Not all Mothers have the same needs or wants, there are Mothers of infants, teens, and adult children.  There are Working Mothers, Single Mothers, Adoptive Mothers, etc.  Trying to appeal to all of them with a single message will be difficult. The target may be too broad.  On the other hand, if a target market was, “left-handed Mothers of children between the ages of 2 and 6, living in apartment buildings” it might be way too narrow to generate enough sales to be a worthwhile niche.

Finding a market target that shares enough commonalities or similarities to be large enough to create sufficient volume, while not being too large that the business cannot comprehensively address their needs with a single product or a marketing approach is as much as art as it is market research science.  It should be carefully considered and not left to hunches or assumptions.

So, What to do?

To be sure that you are able to mine the riches of appealing to a niche, and avoid falling into the ditch of a niche that is too small, it is helpful to ask three simple questions:

  1. What problem does the prospect have that the product  or service can address?
  2. Who within the prospect’s business is responsible for addressing this issue?
  3. What is the likelihood of that person buying?

Be aware that you may have multiple targets or niches, but each may (likely will) require different messages to attract or appeal to them.  For more details, see StartUpBuilder website.