Neil Rackham

7/28/2019 Neil Rackham

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1999 Neil Rackham, John DeVincentis

Creating Value through theSales Force

Neil RackhamAuthor of lots of stuff


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In one sentence:

Whats the purpose

of a sales force?

In one sentence:

Whats the purpose

of a sales force?

Station Break . . .


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Whats the purpose of a sales force?

The reason for a sales force is to ensure that the

customer has the right information about theadvantages of your products at the right time, so that

the purchasing decision is influenced in your favor.

Regional Sales ManagerPrinting Equipment Company

The reason for a sales force is to ensure that the

customer has the right information about theadvantages of your products at the right time, so that

the purchasing decision is influenced in your favor.

Regional Sales ManagerPrinting Equipment Company

Some answers . . .

The sales force convinces the client to buy from you

rather than from a competitor by showing how yourservices are superior.

Senior Consultant

Systems Integration and Software Company

The sales force convinces the client to buy from you

rather than from a competitor by showing how yourservices are superior.

Senior Consultant

Systems Integration and Software Company


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Whats the purpose of a sales force?

The sales force exists to show customers that youhave something worthwhile to offer that meets their

needs.

SalespersonOffice Products Company

The sales force exists to show customers that youhave something worthwhile to offer that meets their

needs.

SalespersonOffice Products Company

The sales function is like a translator: its job is to

take your products and services and translate theminto language that the customer understands.

Sales Manager

Control Systems Manufacturer

The sales function is like a translator: its job is to

take your products and services and translate theminto language that the customer understands.

Sales Manager

Control Systems Manufacturer

The purpose of a sales force is to communicate to

customers the value of your offerings.

Senior Vice President

Sales and Marketing, Large Regional Bank

The purpose of a sales force is to communicate to

customers the value of your offerings.

Senior Vice President

Sales and Marketing, Large Regional Bank



The common factor:

Each definition is about



The shifting marketplace

numerouscompetitors

buyer has many

options/choices

no perceived

uniqueness

no competitors

buyer has no

alternative

source perceived

uniqueness

Substitutable

products/services

Unique

products/services

10 9 8 7 6 5 4 3 2 1



Where are you?

In 3 years

Today

3 years ago

Substitutable

products/services

Unique

products/services

10 9 8 7 6 5 4 3 2 1

10 9 8 7 6 5 4 3 2 1

10 9 8 7 6 5 4 3 2 1



Whats happening in the USA

In 3 years

Today

3 years ago

Substitutable

products/services

Unique

products/services

10 9 8 7 6 5 4 3 2 1

10 9 8 7 6 5 4 3 2 1

10 9 8 7 6 5 4 3 2 1

6.4

4.5

3.7

SSI Data: 47 corporations 773 salesexecutives



Why are productsand services in

most marketsbecoming less

unique?

Why are productsand services in

most marketsbecoming less

unique?

Station Break . . .



New products/services Value-added services and

support

Product bundling & pricing

Customized options

Create Differentiation

Market Forces

Corporate Strategies

Decrease Differentiation Products/services look moresimilar

More of them (Increasingcompetition)

More demanding clients

New Technologies (quickertime to market, internet, etc.)



Creating value vs. Communicating value

Selling processmust create value

for clients

Not enough forsalespeople tocommunicate

value

Salespeople mustbecome valuecreators

Market Forces

Product/servicecreates thevalue

Salespeoplecommunicateproduct

benefits

Salespeoplesucceedthrough valuecommunication

Corporate Strategies

Substitutable

products/services

Unique

products/services

10 9 8 7 6 5 4 3 2 1



Station Break . . .

and customers are changing too.

Whats the biggest difference in

how major customers behave

today compared with 3 years ago?

and customers are changing too.

Whats the biggest difference in

how major customers behave

today compared with 3 years ago?



Most people agree that

Customers are getting tougher to dealwith

They treat you more like a commodity

But they also demand more expertiseand support than ever before

They are using new purchasingtechniques to force greater concessions

from their suppliers


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Buying strategies in the new purchasing world

Difficulty of obtainingsubstitute product/service

Strategicimportance

ofproduct/service

high

low high

ShopShop

LeverageLeverage

Manage

Risk

Manage

Risk

PartnerPartner


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Define valueDefine value

Station Break . . .


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What is value?

Value = Benefits Cost

Practical test:

Value is something the customeris prepared to pay for.

Practical test:

Value is something the customeris prepared to pay for.


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What things do we do for our

customers during the salesprocess that are so valuable

that customers would be

prepared to pay for them?

What things do we do for our

customers during the salesprocess that are so valuable

that customers would be

prepared to pay for them?

Station Break . . .


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Customer value survey

We asked 1,100 buyers from UScompanies:

Has anyone ever made a salescall on you that was so valuable

you would willingly have pulledout a check book and written them

a check for the call?

B i i V l i F t F S l


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Bringing Value in Face-to-Face Sales

Talking brochures add no value.

Information on customer relevant trendsand issues adds minor value.

Acting as the customers advocatecreates value.

Problem solving and customizingsolutions add high value.

Helping customers change strategicdirection adds most value.


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Where customers perceive value

Talking brochures: negative value add

Time-stamped info on industry/competition

Customer advocate

Problem solving & customized solutions

Change of strategic direction

-2004 Neil Rackham, J ohn DeVincentis


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The value map

VALUE

DISADVANTAGE

VALUEVALUE

DISADVANTAGEDISADVANTAGE

VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

High cost

offering (Y)can compete

with low cost

offering (X)if it has

more benefits. XX

YYCost

Benefits


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but . . .

VALUE

DISADVANTAGE

VALUEVALUE


VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

Y cantcompeteat higher

cost withoutadditional

benefits. XX

YYYYCost

Benefits


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Value map in selling

VALUE

DISADVANTAGE

VALUEVALUE


VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

YYSALESCOST

VALUE CREATED IN SELLING PROCESS


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Value selling strategy

VALUE

DISADVANTAGE

VALUEVALUE


VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

OPTION 1:Create more value

in selling process11

OPTION 3:Hybrid of

options 1 & 2

33

OPTION 2:

Slash sales costs

22

YYSALESCOST



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Which optionhas the highest

success rate?

Which optionhas the highest

success rate?

Station Break . . .

VALUE

DISADVANTAGE

VALUEVALUEDISADVANTAGEDISADVANTAGE

VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

11

33

22

YY


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The toughest strategy to execute

VALUE

DISADVANTAGE

VALUEVALUE


VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

11

33

22

YY

Most people believehybrid should be

easiest

Very, very difficultwith many failures

Th 3 t l t


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The 3 customer value types

a bigger, better tasting pie

ExtrinsicExtrinsic

valuevalue

buyersbuyers

VALUE COSTBENEFITS=

IntrinsicIntrinsic

valuevalue

buyersbuyers

a cheaper, no-hassle pie-

EnterpriseEnterprise

AssetsAssets

StrategicStrategic

valuevalue

buyersbuyers

a balanced diet

+

I t i i l t


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Intrinsic value customers

Understand the product Perceive product/service

as readily substitutable Focus on the cost Resent time/cost

associated with salespeople

E t i si l st s


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Extrinsic value customers

Focus on how productis used

Interested in solutionsand applications Value advice and help

Willing to invest time andmoney with sales peopleto create solutions

Strategic value customers


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Strategic value customers

Focus on leveraging supplierscore competencies

Prepared to radically changecurrent process to get bestfrom suppliers

Connection between supplierand customer so closeindividual roles are blurred

Selling models for value creation


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Selling models for value creation

COST OF SALE

IntrinsicConvenience

CostAvailability

ExtrinsicProblem solving

Customization

StrategicBusiness process changes

Leveraging total enterpriseresources

VALUE

CREATION

POTENTIAL

Enterprise

model

Transactional

model

Consultative

model

The 3 selling models


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The 3 selling models

TransactionalTransactional

Value created through cost reduction

and ease of acquisition

Value created through cost reduction

and ease of acquisition

" I know

what I need;

I don't want

to wastetime/effort"

ConsultativeConsultative

Value created through advice,

problem identification, problem

analysis, and customized solut ions

Value created through advice,

problem identification, problem

analysis, and customized solut ions

" I don't

know theanswer; I

need help/

expertise"

EnterpriseEnterprise

Value created through leveraging

enterprise capabilit ies beyond

products

Value created through leveraging

enterprise capabil ities beyond

products

" I need a

partner; I'm

willing to

change myorganization"

Consultative and transactional sales on the value map


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VALUEDISADVANTAGEVALUEVALUEDISADVANTAGEDISADVANTAGE

VALUE

ADVANTAGE

VALUEVALUE

ADVANTAGEADVANTAGE

11

33

22

YY

Consultative and transactional sales on the value map

Transactional

Sale

Transactional

Sale

Consultative

Sale

Consultative

Sale

Enterprise

Sale

Enterprise

Sale

SALES

COST



Positioning the sales effort the change


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Positioning the sales effort - the changeTransactional

Customers


CustomersCustomersConsultativeConsultative

CustomersCustomers

sweet spot

captures most customers

sweet spot

captures most customers 1999 Neil Rackham, John DeVincentis

Positioning the sales effort - the change


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clients


clientsclientsConsultativeConsultative

clientsclients

Transactional clientsTransactional clientsbecome even more

transactional due to:

segmentation strategies internetperceived commoditization


Positioning the sales effort - the change


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Customers


CustomersCustomersConsultativeConsultative

CustomersCustomers

Consultative clientsConsultative clients

up the bar:

up-front investmentincreases

client expectation is higherwinners over-invest in

attractive opportunit ies


The sweet spot vanishes


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e sweet spot va s es

Transactional

clients


clientsclientsConsultativeConsultative

clientsclients

A sales force positioned here will failA sales force positioned here will failunable to compete transactionally too li ttle and too late for winning the consultative

business

sweet

spot


Optimizing the selling investment 1


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Investment

by Supplier

Investmentby Customer

BALANCEBALANCE


WASTEWASTE

RISKRISK



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Investment

by Supplier


TRANSACTIONALTRANSACTIONAL

CONSULTATIVECONSULTATIVE

ENTERPRISEENTERPRISE

strip coststrip cost

create newvalue

create newvalue

create

extraordinary

value

create

extraordinaryvalue




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Investmentby Supplier


TRANSACTIONALTRANSACTIONAL

CONSULTATIVECONSULTATIVE

ENTERPRISEENTERPRISE

Most sales forces are here

too expensive to succeedtransactionally

under-resourced andunderskil led to succeed

consultatively


X


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Is this for real? Are thesethings happening to our

industry?

If so, what should we doabout it?

Is this for real? Are thesethings happening to our

industry?

If so, what should we doabout it?

Station Break . . .

Using sales resources


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Using sales resources

We can no longer afford to put the mostresources to the biggest customers: this is the

era of lean selling, especially in transactional

sales.

We must put our sales resources where we can

create most customer value.

The winners shift transactional business to

cheaper channels.

They put more resources into the opportunitieswhere they can create most value.

S i


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Can the same salespeoplesell both Consultative and

Transactional business andbe successful?

Can the same salespeoplesell both Consultative and

Transactional business andbe successful?

Station Break . . .

Mixing Transactional and Consultative


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Mixing Transactional and Consultative

Rackhams Law

No sales force can be effective if the same

salespeople are selling both Transactionaland Consultative products.

Why?

Why Transactional and Consultative


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dont mix

Economic reason

Any salesperson who is talented enough to

make Consultative sales is too expensive touse in Transactional accounts where

customers dont want, dont need and wont

pay for high level sales talent.



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dont mix

Psychological reason

When salespeople have both Transactional

and Consultative opportunities, they alwayspay too much attention to the low-margin

transactional business at the expense of

higher margin [but longer sales cycle]

Consultative opportunities.

. . . So what do I do about it?


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. . . So what do I do about it?

Talking brochures cant survive. So dontbe caught in the vanishing middle; up the

bar and aim for bigger consultative sales.

Talking brochures cant survive. So dontbe caught in the vanishing middle; up the

bar and aim for bigger consultative sales.

1

2

3

Ask yourself, would the customer write a

check for this call? -- thats how you know

if youre a value creator not just a value

communicator.

Ask yourself, would the customer write a

check for this call? -- thats how you know

if youre a value creator not just a value

communicator.

Create more value through understanding

customers more deeply than ever before,by problem solving and by customizing

solutions. See products & services as

tools, not ends in themselves.

Create more value through understanding

customers more deeply than ever before,by problem solving and by customizing

solutions. See products & services as

tools, not ends in themselves.

St ti B k


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Lets spend a few minutes

thinking of questions we have

about selling

[Before I answer a question Ill get a

vote on how many people areinterested in it. The more votes, themore detailed the answer.]

Lets spend a few minutes

thinking of questions we have

about selling

[Before I answer a question Ill get a

vote on how many people areinterested in it. The more votes, themore detailed the answer.]

Station Break . . .


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