Manufacturing strategy and the relative costs of action vs. inaction
Most B2B sales today is based on an artificial construct — a single variable equation that EITHER seeks to raise the cost of inaction or discount the cost of action with lower price.
You’ve heard it ad nauseam — some version of “uncover pain” is the “value selling” mantra of today’s “quality” sales people. And there’s still a large population of average sales people that compete on price.
Neither approach is adequately suited to today’s complex environment which requires a multi-variable approach that simultaneously lowers cost of action, substantiates cost of inaction and factors outside variables such as disincentives in real investment and relative return.
Last year’s BCG look at robots redefining competitiveness provides an interesting case study of the factors involved as cost of action (often under estimated) falls while cost of inaction fluctuates.
Sophomoric “Return on Investment” calculations
Let’s start with the all too common “ROI” calculated by a B2B sales rep. “Buy my machine” their argument goes “and you’ll save 1/2 person of labor @ a loaded rate of $30,000/year. You’ll pay it back in 14.5 months.”
Putting aside the folly of such simplistic assumptions as the ability to immediately monetize 1/2 person’s labor, this overlooks many factors. A simple sampling includes: availability of capital, relative return of competing capital projects, strategic prioritization of markets/products/production lines, and cost of funds.
As noted in the BCG article, they typically also naively gloss over related costs including for example: disruption to production, rigging, wiring, overtime, training, reduced capacity during ramp-up and problems confidently scheduling production.
Accounting for general conditions
Sales reps are exhorted to lean in to periods of economic weakness and to grow during slow downs. I loathe excuses and applaud metrics that hold reps accountable. But it’s also realistic to recognize that secular and cyclical factors impact orders.
For instance, if your product or service is intended for the oil and gas industry, it hasn’t mattered what sort of a hot shot you are…sales are down in 2016.
And with one aberration, durable goods orders have been stagnant since 2013.
Why? Many contend that the “misallocation” of savings, driven by returns influenced more by monetary policy than markets, has reduced real investment in the private sector. That in turn probably accounts for stagnation in productivity growth and profitability.
Lacy Hunt and Van Hoisington recently described it as follows.
This line of reasoning is complicated, but the linkage can be explained as follows…The saving rate is, therefore, lower. Since saving from income must equal real investment, the latter drops. With real investment weaker, productivity, profitability and economic growth follow suit.
If your prospects are investing in share buybacks instead of capital assets, that’s not something your reps are going to fix….but it also doesn’t relieve them of the responsibility of project creation and sales, albeit among a smaller pool of prospects who will measure projects skeptically.
Cost of inaction
I don’t want to diminish the consultative role of B2B sales people who should understand the prospects’ businesses quite well.
While carefully honoring any NDAs they still have great insight into general industry trends and practices. They see what works, what doesn’t, and what order of magnitude results are realized.
They should be able to recognize other implications of inaction, and further help prospects quantify real associated costs.
In a real sense “uncovering and quantifying” the pain is a consulting service — but it can’t be simplistic or purely self-serving.
And companies that have great content marketing actually do much of this through nurturing workflows and content as prospects guide themselves closer to decisions.
Cost of action
This set of variables is where I observe sales reps failing to maximize opportunities.
Every product / service has a price. Assuming that’s been set in a way that balances profit and market opportunity, it’s appropriate for companies to be hesitant to discount. (Of course there are other considerations here as well. Companies measured by growth in subscribers, and contracted future purchases at favorable pricing are examples.)
Why is price the only lever to pull? Sure, lead-time, payment terms and contract duration are common factors that are negotiated in conjunction with price. But what about product / service models that are developing as the sharing economy takes hold? And financing programs that are easily funded with cheap money and may allow buyers to manage around covenants and other restrictions? What about private activity bonds that could finance building expansion leaving fungible financing available for capital equipment? Would your reps even understand? Know what to ask? Be comfortable having those conversations?
There are an almost limitless range of ways that sellers can creatively drive down the real cost of action for buyers — and an entire parallel universe of ways that they can reduce the misperceptions of high cost of action. Virtual reality, for instance, can mitigate concerns (which are really adjustments to perceived cost of action) of buyers considering new solutions.
Sales people must be business people
The problem is that most sales people are trained for that — to sell. Their training includes some familiarity with circumstances, but they don’t understand a balance sheet, depreciation, cash flow, relative rate of return or the fungibility of financing.
Therefore it’s impractical to expect them to be able to sell with the depth that’s really required to help buyers satisfy their best interests. Training can help them distinguish between objections and excuses, as Seth Godin recently wrote, but it can’t make them business people — at least not easily.
Unrecognized power of marketing automation
So how can organizations structure sales teams that really are consultants in a practical sense to buyers? I believe that really sophisticated marketing automation is an unrecognized tool to do so. Delivering contextually appropriate information and insights — to the sales people at the right time, with micro coaching, holds the key.
Then training can focus on delivery and great qualitative research and business savvy can create the tools & programs to illustrate cost of inaction and reduce cost of action.
But that’s more than most sales teams will do.
Will yours?
