Category: Sales

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Look for the cause

Whatever business you are in, it is worth considering cause and effect whenever something good or bad happens.

It’s a bit like a doctor diagnosing the illness that is causing the fever, not just treating the fever, but far too often we focus on preventing the bad stuff, not repeating the good stuff.

The same principle applies to quality systems. There are procedures and processes like root cause analysis and the 5 whys principles that help you determine the real cause. Once you have done that you can prevent the root cause, which prevents the effect.

I am at least as interested in what went well as I am in what went badly. Eliminating errors and preventing problems is great, but doesn’t move the business forward.

A few months ago I had a meeting with a prospect who was initially quite hostile, so much so that I struggled to get him to agree to a meeting at all. I’d been introduced by a colleague, so he had expressed an interest in getting his business ready for sale, but even so he was difficult.

The meeting went OK. It was not the most positive experience, and I think if you’d asked me to rate my chances of securing work immediately after the meeting I would have said perhaps 30%.

Two days later, I had a phone conversation with this same person. He was really enthusiastic, telling me that he was just off on a business trip but that he would be in touch and we would be working together.

I like the effect – having a prospect tell me that he will be engaging with me is good news, but without knowing the cause I could not repeat it.

When you have a sales meeting that fails or a marketing campaign that didn’t work, I suspect you have a review process to determine why. Do you have the same process when you win?

(By the way, I think my prospect became my fan as a result of reading my book, Deal Finance)

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What are the best ways to keep your customers?

It’s much easier to sell to an existing customer than it is to a new one, but many businesses don’t have a formal program to retain their customers.

When you measure all the effort that goes into winning a new customer, all the money and management time you spend acquiring those new customers, compare that to the amount of time, money and effort you devote to keeping your existing customers.

If there is no formal program or incentive, or if you are not measuring your customer retention, the chances are that no one is focused on it. What’s measured is managed.

If you compare that to the pay TV industry, businesses like Sky have separate departments devoted to customer retention. They don’t call them that – it would be a bit too obvious – but if you want to negotiate your contract and reduce your fees, tell Sky you are thinking of leaving and you will probably end up talking to the disconnection team. They have the authority to offer you special deals to keep your business!

Giving an existing customer a special deal is a great way of hanging on to them, but the special deal doesn’t have to be money!

You might offer early access to a new product or service (that’s a great way of testing something new as well, by the way) or perhaps you’ll invite them to join your dedicated knowledge area, where they can learn more about your business.

If you can foster a sense of community among your customers, that will help. People love to belong to a club.

Probably the most important part of keeping customers is communication. If you don’t keep your customer informed, you are saying that you don’t care about them. If all you do is transact with them, they will never be a fan or an advocate for your business.

Whatever else you do, communicate!

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Pick the right moment

A great challenge in business is to do things at the right time whereas doing the right thing at the wrong time can easily lead to failure.

This is clearly apparent in sales, where asking for the business at the wrong moment can damage the emergent relationship. You are seen as pushy and / or desperate!

It is less obvious but no less true in other areas. Perhaps there is a project that will add to the short-term workload of a department. Launching the project in the department’s busy period may not be the best idea! The blowback from such a decision might include the conclusion that you don’t know what is going on and are out of touch – or worse, that you knew and didn’t care.

Timing plays a big part in negotiation when you are busying as well as selling. If you can pick the right moment to ask for the extras, you will find the vendor more receptive. The chances are that if you wait until the day before you are due to take delivery you will get short shrift.

The best time to buy a new car is when the dealer hasn’t quite reached their target and is running out of time – at the end of the month, quarter or year.

The best time to ask for a testimonial is when the buyer is ecstatic with you and your service. Capture it on video, in the heat of the moment, for maximum effectiveness.

So the things that are on your urgent to-do list may have to wait for the appropriate moment, but don’t let that become an opportunity for procrastination.

There are two relevant sayings

“one who hesitates is lost”

adapted from Joseph Addison’s 1712 play Cato

and

“fools rush in where angels fear to tread”

Alexander Pope “An Essay on Criticism”

Somewhere between the two is the sweet spot. Think about your timing and be patient!

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Building trust

 

There’s a saying that people only buy from trusted sources, and if you combine that with the one “people do business with people” you begin to recognise just how important it is that your prospects and customers can trust you / your organisation / your people.

Establishing trust is difficult and can take a long time. Destroying it can take seconds. I know I have quoted this before, but it bears repetition:

Trust arrives on foot and departs in a Ferrari – Mark Carney, Governor of the Bank of England.

The rules for maintaining trust are actually very simple.

Be consistent. Trust requires certainty and inconsistency is the enemy of certainty.
Be very clear. Nothing destroys trust faster than disappointed expectations, and they often result from a lack of clarity. Who is going to do what by when?

Keep your promises

If you are going to fail to meet a promise, tell your customer early!
Be responsive. If you don’t answer questions or provide information when requested, your customer will think you have something to hide.

Building trust takes longer and is a little more complex.

Be visible. Your prospect has to know you first. If you know who your prospects are, and where they are, make sure you are visible there. That might be a trade magazine, a particular website or an exhibition. If your prospects are there, you should be too.

Be helpful / of value Your prospect has to like you. If you provide something for nothing or for very little (an email address) you are helping your prospect. We like people who help. What can you give away?

Make it easy. Your prospect will still be nervous and hesitant. What can you do to make the decision an easier one? Is there a trial version or a low cost “light” program they can experience?

Give guarantees. You are confident that you deliver value, so guarantee it to your prospect.

That’s it from a customer / prospect perspective, but what about building trust within your teams?

Similar principles apply – do what you said you would do, when you said you would do it. That will take you a very long way.

 

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People do business with people

 

I was at a funding event recently where one speaker talked about how investors decide to invest – or not to invest.

It has very little to do with the financial forecasts, or the potential return.

It has everything to do with the people. Investors will not invest in businesses if they don’t like the people involved.

Many years ago I worked with a venture capitalist who told me they would rather invest in a great team than a great product. The great team will fix the poor product and the poor team will break the good product.

When I am advising clients who are entering into corporate transactions – buying or selling businesses – I always stress the personal aspects. You won’t sell your business to someone you don’t like, or at least get along with. You certainly won’t buy a business unless you like the people involved.

When a customer buys from you they are making an investment. That’s partly financial – they exchange money for your goods and services – but more importantly it is an investment of trust. They trust you to provide goods / services that meet their needs.

That’s part of the reason why it is so much easier to sell to a past customer than it is to sell to a new prospect. The past customer, at some point, trusted you. With a prospect you have to establish that trust. With the past customer you have only to re-kindle the relationship.

Do you have a sales and marketing mix that helps create the trust that prospects need to move forward? Do you have the testimonials from people like them? Do you have relevant case studies?

Does your sales team focus on creating the relationship?

 

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What are the best ways to keep your customers?

It’s much easier to sell to an existing customer than it is to a new one, but many businesses don’t have a formal program to retain their customers.

When you measure all the effort that goes into winning a new customer, all the money and management time you spend acquiring those new customers, compare that to the amount of time, money and effort you devote to keeping your existing customers.

If there is no formal program or incentive, or if you are not measuring your customer retention, the chances are that no one is focused on it. What’s measured is managed.

If you compare that to the pay TV industry, businesses like Sky have separate departments devoted to customer retention. They don’t call them that – it would be a bit too obvious – but if you want to negotiate your contract and reduce your fees, tell Sky you are thinking of leaving and you will probably end up talking to the disconnection team. They have the authority to offer you special deals to keep your business!

Giving an existing customer a special deal is a great way of hanging on to them, but the special deal doesn’t have to be money!

You might offer early access to a new product or service (that’s a great way of testing something new as well, by the way) or perhaps you’ll invite them to join your dedicated knowledge area, where they can learn more about your business.

If you can foster a sense of community among your customers, that will help. People love to belong to a club.

Probably the most important part of keeping customers is communication. If you don’t keep your customer informed, you are saying that you don’t care about them. If all you do is transact with them, they will never be a fan or an advocate for your business.

Whatever else you do, communicate!

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Perception and reality

Most businesses think they provide good service to their customers and they are probably right, if they are still customers.

Some time ago, I was managing a large distribution business. Every year we commissioned a “Customer Satisfaction Survey” from a third party. It was a report that we debated at some length, to see if there were opportunities to improve our services.

The problem with that report (and I am sure many similar exercises) was that the answers didn’t change very much from year to year. We were asking the people who were using our services, and the very fact that they kept coming back to buy again told us we were providing adequate service – and the report reinforced that view.

What we really needed to do was to ask the people who didn’t buy from us, or even better the customers who no longer bought from us but instead had found an alternative supplier. What made them change?

You and your customers may think you provide good services. What do the people who tried you and went elsewhere think?

Marketing & Sales people will tell you that you can much more easily reactivate a past customer than find a new one; you can do much more to improve your services by asking a dissatisfied customer what you did wrong – and in the process perhaps that dissatisfied customer will give you another chance.

What have you got to lose by asking?

 

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Are you listening?

 

A colleague told me a story about an engineering business having trouble with the reliability and frequent failure of its products.

A fellow speaker described what they do as helping people to listen.

A different colleague told us how he had created a multi-million dollar business using a simple sales technique.

The engineering business resolved the quality issues when they started listening to the mechanics using the equipment, and took note of the modifications these enthusiasts were making to their own machines.

My speaker colleague is a specialist in mediation and problem resolution. Most problems occur because people are not really listening to each other, or even worse just sending emails.

The sales technique is to (at its simplest) listen to what your potential customers want, and then provide a solution.

“We have two ears and one mouth so that we can listen twice as much as we speak” is a quote attributed to Epictetus the Greek philosopher.

If you are listening to the people on the front line – those who have to deal with the customer, or fix the problems – you can see patterns and take steps to minimize those problems before they occur.

If you are listening to your team, you can recognise when morale is not what you would like it to be. Poor morale in your team will lead to poorer customer service and to poorer business performance.

In negotiation, if you are really listening to the other parties you will be much more successful.

In sales, if you drown out the customer by telling them what you can do, you may miss the opportunity where they tell you what they really need. Supply what your customer really needs and you will keep a customer forever.

Try listening more – you don’t know what you might hear!

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What shape is your revenue?

When I ask a business leader

“What was your revenue last year?”

I’ll get a number as the answer. That tells me a little about the business, but from a business value perspective I want to know a lot more.

The next question is

“How many active customers do you have?”

This often leads to a debate about the definition of an active customer, but usually gets an answer fairly quickly. I think an active customer bought from you within the last 12 months.

There are two more elements that go to make up the revenue profile, how often does your customer buy (f) and what is the average order value (AOV)

The formula looks like this

rev shape

Where T is your turnover and n is your number of customers.

From the business buyers perspective, once n has reached a minimum level what matters next is the frequency with which the customer buys.

It is important not to become too reliant upon one customer and prospective acquirers will be worried if one customer exceeds more than 20% of your revenues.

A customer who buys from you once a year is typically worth less to an acquirer than one who buys 3 or 4 times a year.

There are exceptions. It might be that the once a year purchase is from a “Marquee” customer; someone you are proud to do business with and usually someone who commands instant name recognition.  If you are able to state “We supply John Lewis” that will count as a marquee customer, but other examples might be government business or the NHS.

The most valuable customers are those who are on long term contracts, where you are providing goods or more likely services.  These are very common as support services, for example in IT or building maintenance.

Within these contracts there are a few things to look out for to ensure you maximise the value.

A real “Red flag” for the buyer is if the contract contains a “change of control” clause, allowing your customer to break the contract if the ownership of your business changes.

It’s good to have contracts set up as “evergreen” where the contract automatically renews unless one party (or the other) gives notice, but within these there will need to be some form of pricing mechanism.  You don’t want to be trapped in a contract where your costs have dramatically increased, but you are unable to adjust your sale price.

If your business doesn’t lend itself to long term contracts, aim to move as far down that road as you can. Become an approved supplier or a preferred supplier or enter into some form of framework agreement – anything you can do to evidence a strong relationship with your customer.

If you want the best value for your business, you need to show that your revenues (and your profits) are growing, year on year.

That does not necessarily mean that you should keep adding new customers. If you can increase the frequency with which your customers buy, your revenues will grow. If you can increase the average order value, your revenues will grow.

 

 

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Is it Christmas yet?

Every year all the children get excited because Christmas is coming, but all the retailers get stressed because Christmas is their busiest time of the year.

In the US their busy period is from Black Friday (the day after Thanksgiving) through to Christmas.

Wikipedia tells me the name comes from the appearance of the crowds that thronged the streets of Philadelphia but the popular myth is that it is when the retail chains move into the black (into profit) for the first time since January. Don’t tell anyone, but the smart retailers make money all year round, not just in the last few weeks of the year. The dumber ones go broke in January & February when the rent bill falls due.

Is your business seasonal? Is there a distinct pattern to your sales, so that you know that some part of the year will be quieter than another? Do you look for the pattern?

Seasonality is common in many business sectors, with summer holidays and the Christmas break affecting many, but if your business is seasonal you have three choices:

A.      Match your resources and investment to the pattern of your sales. Some businesses do this through the use of temporary staff (Retailers at Christmas is a classic example of this)

B.      Use the quiet period to do jobs that have been put off from the busy period (common in the agricultural sector, and in some parts of the building trade)

C.      Find something else to fill in the gaps

One of my clients is a florist, and their seasonality is weekly, or rather at the weekends. Everyone wants to get married at the weekend!
We’ve made a deliberate decision to target other markets, moving away from weekend work to jobs that can be done between Monday and Friday, balancing out the workload across the week. It will never be perfect, but where doubling the size of the wedding floristry would require a doubling of the team, we can double the size of the business during the week just by utilising the existing team & giving them a few more hours.

Big swings in sales lead to big swings in cash flow, big swings in cash flow stress the business (and the owner) sometimes to breaking point. If your business is very seasonal, that’s not a good place to be. Remember that more businesses fail from cash flow problems than anything else.

Find another market, or another product to sell to smooth out that seasonality.

A colleague helped a client whose business was entirely winter seasonal; they bought a business that equally seasonal, but in the summer.

The same is true of orders and projects. If all you do is very large projects, sooner or later one will go wrong or be delayed & deferred. Lots of little project to fill in the gaps are a really good idea.

The best sales graph is one that has a smooth upward curve – how can you smooth out your sales?