Sales Blog with Sales Tips

If you’re phobic about math, stay with me for one moment while I define a simple statistical term for today’s sales tips post.

Correlation. It’s the statistical relationship between two or more random variables. In short, if one thing changes, how much and in what direction does it affect something else?

See, that wasn’t too bad.

Example
As the collective IQ of the US Congress decreases (a purely anecdotal observation on my part), the American public’s dissatisfaction with their performance increases. Summary: smart is going down while unhappiness is on the rise.

There are many interesting correlations in sales (“interesting correlations in sales” is an oxymoron that you will probably never see or hear again the rest of your life). I’m going to talk about just one in today’s sales tips blog.

Sales Application
The example given above is called a negative correlation. As one number moves in one direction, the other moves in the opposite direction.

Did you know there’s a negative correlation between sales cycle duration and pricing? As sales cycles get longer, our pricing typically declines.

Our customers are very aware of this phenomenon and they can use it as a silent negotiating technique.

Why We Decrease Pricing As Time Increases

• We think any delay is caused by competitive inroads. The customer must really be checking out the competition and is finding pricing significantly below ours.
• Stalling is a form of a customer objection, and we instinctively lower our pricing in response to all objections.
• We’re afraid the customer has lost interest. Maybe a price concession will get them back in the game.
• We don’t know the customer’s budget, but we’re afraid our quote may have exceeded it. Just to play it safe, we’ll reduce our pricing.
• We’re impatient.
• Our sales manager wants us to close business as quickly as possible.

Sales Blog Wrap-Up
Getting out of this habit requires that we understand this is nothing more than a head game. One we play alone.

Its fundamental cause is a fear of losing the deal.

When we discount pricing because the buyer is delaying, we make pricing decisions from a soft position of assumption and conjecture.

There are a million reasons that cause sales cycles to lengthen. Most of the time we don’t know why. More often than not, it has nothing to do with pricing. Instead of discounting, we need to be asking questions.

There is little or no correlation. Resist the temptation.

©2010 Scott R. Sheaffer

Find a New Sales Job

Omniscience is a noun defined as a state of having infinite knowledge and understanding. In short, God.

Sales professionals knowingly or unknowingly slip into the bad habit of believing that customers are omniscient. We think our customers know everything about everything. They don’t.

Negotiation 101
This fear puts us at a disadvantage when negotiating. We all know that we can’t effectively negotiate with customers if they know everything. Actually, if we just think they know all the cards we’re holding, we handicap our ability to negotiate.

5 Sales Tips To Kill The Omniscience Myth
The following represent areas where we frequently assume the customer has unlimited information. These are ranked in order of occurrence with the most frequent listed first.

1. Competitors. Admit it. We all think our customers are a Wikipedia of information about all of our competitors. We compete against our competitors every day and yet we have knowledge gaps about them. Our customers are going to know less than we do.

1. (tie) Commissions, costs and profit margins. I couldn’t decide whether to make this first or second so I’m calling it a tie. Our customers do not know, nor would it be possible for them to know, what our commissions, costs and profit margins are.

Every minute there are thousands of sales professionals around the globe needlessly discounting prices because they believe the customer knows all of our financials.

2. How badly we need this order. A good sales professional knows to never act desperate. It sends out the “I really need this order or I’m going to have to live under a bridge” vibe. This scent is definitely a sales repellent.

The only way customers are going to know we really need an order is if we tell them or if we telegraph it by our actions.

3. Our company’s weaknesses. Obviously, we know most of the dirty laundry about our company. We know about the product that doesn’t work when the humidity level goes above 90 percent. We know our service department had a high employee turnover last year.

We even know about our sales manager’s affair with the president’s assistant (actually, the customer may know about this last one since everyone in North America has figured it out).

We know all the bad and the ugly because we work for our company. The customer doesn’t.

4. Strategic accounts. We want all of our customers to know they are important to us. But we also know that not all customers are created equal. On average, the top 30% of our customers account for 60% of our sales and 90% of our gross profit.

We fear that our large strategic customers will become heavy handed with us because of our dependency on them.

Unless we tell or telegraph this information, there’s really no avenue for them to discover how they are positioned in our account base.

We shouldn’t have to rely on a few customers in the first place, but that’s for another sales tips post.

Wrap Up
Our customers haven’t contracted with the CIA. We are not being wiretapped by them.

They don’t know everything.

©2010 Scott R. Sheaffer

Find a New Sales Job

The most trustworthy phrase in the English language is, “Everything is negotiable.” When our customers push us for better pricing, or some other concession, we can’t condemn them. Horse-trading has been around since Adam and Eve asked God if they could get a “do over.” We all know the answer to that one.

The Customer’s Perspective
When customers are negotiating with us, it’s how we respond to their haggling that can make all the difference. We forget the following when negotiating:

• Most customers have only primitive negotiating skills, at best.
• They’re just throwing stuff “out there” to see if we’ll bite on some of it.
• Their company requires them to ask for certain concessions.
• They intend to buy from us, even if we don’t give them a green light on their last minute requests.

In short, they think, “Why not ask? We have nothing to lose.” And they’re right.

Wrong Way Example
Customer: “Debbie, we’ve been customers of yours for three years now. We’d like to get a 20% price reduction on future purchases.”

Wrong Way Salesperson: “You know I’m already giving you the best price I can.”

This customer is now quite unhappy with this salesperson. Why? Because the customer doesn’t feel heard. They feel “blown off.”

Right Way Example
Customer: “Debbie, we’ve been customers of yours for three years now. We’d like to get a 20% price reduction on future purchases.”

Right Way Salesperson: “You know that I am constantly working to find ways to secure more favorable pricing for you when possible. I think you would agree that our relationship is good and I’ve been a reliable and high quality supplier for you. I don’t know if I can reduce your price by 20%, but I can reduce your costs on all of your purchases if you source more of your fluid power products from me. Can we talk about that possibility?”

Why We Like The Right Way Sales Professional’s Response
“Right Way” has many things going for her. She provides numerous sales tips for us in her response.

• She acknowledges the customer’s attempt at negotiation. The customer feels heard.
• She reminds the customer of the value she brings to the table.
• She agrees to some kind of price reduction, but the customer will have to earn it.
• Finally, she puts the ball back in the customer’s court.

Handling negotiation in this manner does not offend customers. It recognizes the customer’s right to negotiate while simultaneously treating them with respect. If we do it right, we avoid irritating the customer and set ourselves up for additional business.

Sales Blog Epilogue
Our strongest and most powerful tool as a sales professional is our tongue. It is a rudder that steers our relationships right into icebergs or safely around them. How we craft our responses to customer negotiation can either erode a long-term customer relationship or create new opportunities and strengthen partnerships.

©2009 Scott R. Sheaffer