How Does Your Customer Make Money?
Can you answer the question, “How does you customer make money?” By that, I don’t mean at a superficial level, like, “Well, dugghh, Dave, they sell stuff……”
I mean really understanding your customer’s business. It includes things like:
- Who are their customers/markets? What drives success with them? How are those markets growing?
- How does you customer position themselves with those customers, competitors, and in the markets? How do they hold the customer, how do they create value? Are they leaders and innovators, fast followers, middle of the pack, low price alternatives?
- What are their strategies and priorities in their markets? What are their growth goals, how do they measure success?
- How do they generate revenues? What’s their business model?
- What products/services do they provide to generate revenue?
- How do they acquire/retain customers?
- How do they manage quality/customer experience?
- How do they manage costs?
- How do they value their own employees/people?
- What are their key success and performance metrics? What is their track record of performance?
- What causes them to fail?
- and………
The answers to these questions help you understand how your customers make money.
But you are probably wondering, “How do I make money selling our products/services to our customers?”
The answer to this is really simple, it’s answering the question, “How do I help my customers make money?” The answer to this question is the only reason customers will have to want to talk to you.
If you can’t answer that question, then you have no idea how to sell to your customer. But to answer that question, you have to answer the first.
There are only two critical questions that you need answers to, to be successful in selling:
- How do my customers make money?
- How do I help my customers make money?
In military history, there has long been the concept of “Commander’s Intent.” Great leaders recognized they could never anticipate and plan for everything that might happen in battle. Rather than giving orders that might try to dictate what to do in every possible situation, commander’s intent focuses on the outcomes they are trying to achieve in a certain operation.
The goal behind this, and what makes it effective, is that it frees troops at lower levels to adapt and change what/how they execute, responding to the specific situation, but still focused on achieving the desired outcomes.
There are a couple of conditions of success in commander’s intent. The first is constant training, practice, reinforcement, and learning. They constantly conduct exercises, giving their subordinates the opportunity to learn, evaluate alternatives—all to improve their abilities and confidence in figuring things out for themselves, all while remaining focused on the commander’s intent.
The second, related thing, is trust. Leaders must trust that their people understand their intent, have confidence in the training/practice they have given their people to prepare them, and trust them to make the right decisions and do their jobs. Without trust and giving people the freedom to figure out how to achieve the commander’s intent, they will fail.
Commander’s intent had become the core of most modern military doctrine.
The same principles are important in sales and maximizing sales performance. I don’t mean to compare sales to modern warfare, but there are some things that we can learn and apply.
As leaders, we can never anticipate every situation or everything that will happen as our people engage customers. Each customer is different, each situation is different, and they are constantly changing.
If we are to maximize the success of our people, we have to make sure they understand our “intent.” That is, what is our vision and purpose, what are our strategies and priorities; what are we trying to achieve when we work with customers and as outcomes; how do we hold/value the customer; and so forth.
Then we have to train, coach, reinforce these principles every day. Both by the examples we set, in our review processes, and in the programs and support we provide them.
Then we have to trust that we have done everything we can to prepare our people to execute in the manner they should and give them the freedom to do their jobs.
Sadly, too much of what I see happening with sales organizations and pundit advice is going in the opposite direction. Too many managers don’t even understand their own intent–other than hit the numbers. They have no clarity of vision and purpose, strategies focus on react/respond, we don’t have clarity in what we want to stand for with our customers.
Instead of preparing them to think for themselves and figure things out, too many managers want to be completely prescriptive, dictating/scripting everything we do in our engagement process. They fail to recognize that every situation is different and the sales people must be prepared to adapt and respond.
Finally, they don’t trust their people to do the right thing–for the customer or with the customer. They don’t give their people the chance to fail on their own, then learn from that.
For too long, we continue to see declines in overall sales performance. We focus on the numbers, but don’t achieve the numbers. We dictate everything our people should do, but don’t equip them to figure things out. Then we fail to trust them to do their jobs, instead inspecting and micromanaging everything they do.
And it’s not working.
Perhaps, it’s time to look at things differently. Perhaps we can get some clues by better understanding and implementing Commander’s Intent.
Afterword: I’ve just read Secretary Mattis’ Call Sign Chaos: Learning To Lead. It’s has a great discussion of Commander’s Intent and is a fantastic leadership story.
Often, I get into conversations about the sales approach a company deploys. There are questions of, “should we be transactional, product, solutions, consultative focused?”
Often, particularly with XaaS companies, the executives leap to the conclusion, “We have to be transactional, “SaaS” focused. We want to drive predictable revenue through a high volume/velocity transactional approach.” That’s often because, “that’s what every other SaaS company does.”
Others have a biased view based on what they perceive as the complexity and impact of their offerings, “We want to be a high value add partner and want a solutions based approach to selling.”
Sadly, most focus on pitching their products, trying to find receptive customers, because that’s they way they’ve always done it.
Or there are those that change their approaches, chasing the latest shiny new methodology. For example, “we’ve got to do Challenger/Insight based selling…” As much a fan I am of this approach for very complex buying environments, it’s often the wrong choice for many buying environments.
In developing these models, we are creating an “inside-out” view, focusing on what is most efficient and cost effective for us, but perhaps not effective for how the customer buys.
The reality, is these are false choices. We can’t choose to be transactional, product, solutions, or consultative focused—at least if we want to be successful in successfully engaging our customers.
It’s our customers and their approaches to opportunity/porlbme solving and the associated buying processes that determine our most impactful sales engagement model. We don’t choose how we sell, rather we must choose how we effectively and efficiently respond to the way our customers buy.
For example, transactional selling approaches are very efficient, very predictable, and easily scalable. But if our customers purchase of our solutions involve a complex buying process, our engagement model will be completely disconnected with how the customers buy. They will perceive our approach to be shallow, unresponsive to the multiple buyers, unresponsive to the dynamic shifting process, unresponsive to the risks, and so forth.
Likewise, if we adopt a solution/consultative selling approach to customers that have a simple, transactional buying process, (for example they are experience knowledgeable buyers, few people are involved, the risks are known and easily managed), we would frustrate them by over complicating the process.
In each situation, choosing a sales engagement approach that is disconnected with how the customer solves problems (of the type we solve), and how they buy will not achieve the results we and our customers want.
Customer buying processes might be characterized as simple/transactional, complicated, or complex. To effectively engage customers we have to align our sales process to how they buy and engage them in ways that create value to that process.
This is the outward-in process.
And this is the mistake too many organizations make in designing their sales engagement models. They believe they are in control of their sales engagement model, where the reality is the customer buying process enables us to define the most effective customer engagement model.
What we do control is the definition of our target markets and our ideal customer profiles. We establish this by understanding what problems we are the best in the world at solving, then identifying the characteristics of those customers who have those problems. This becomes our ICP. Once we have defined our ICP, we understand how they solve these types of problems or address the opportunities. We look at their problem solving and buying approach understanding and characterizing that for the ICP.
We can then design the sales engagement process that complements the buying processes of customers who make up the ICP, And we can design the engagement model that is most effective and efficient in responding to that particular type of buying process.
What we learn in the outside-in approach are a number of things:
- The most effective sales engagement model to support the customer’s buying process.
- We may have multiple ICPs, with different buying processes, we have to optimized the engagement model for each buying process. As a result, we can simultaneously approach certain categories of customers with a complex/consultative model, and other categories of customer with a transactional model (The sales evolution of SFDC is a fantastic case study of this).
- How customers buy changes over time. What may have been a very complex buying process, may over time become very simple. For example, in the early 90’s, I was EVP of sales for a company. We decided to equip our sales people with laptops (well at the time, they were more luggables). At the time, it was a very complex buying process, with people from my team, IT, finance, operations, and support involved in the selection process. All the vendors used solutions based approaches in working with us. Over time, as all of us have become more knowledgeable about buying these tools the buying process has become much more simplified and the right sales engagement model is either highly transactional, or even self-serve.
We really don’t choose our “optimized sales approach.” Rather it is driven by our target markets/customers and optimized around how they buy.
Anything else misses the target and will not produce the results you want or need.
Afterword: For more detail on aligning your selling approach with the customer’s buying process, look at my posts on sensemaking and Cynefin.
Apples And Oranges
Let’s imagine that for some reason you want to evaluate the performance of apples. You might develop criteria and compare apples to those criteria. You might do a comparison, for example looking and apples and oranges.
You’d immediately observe apples are relatively thin skinned fruit, at least relative to oranges. Possibly, every pound of oranges produces more juice than a pound of apples. When you bite into an apple you get that resounding crunch, biting into an orange you just get a squish. You’d observe it’s difficult to use oranges in making a pie. You could come up with a number of other observations about apples and oranges. Apples and oranges have many similarities–they are fruit, edible and have other similar characteristics, but they have many differences.
But in understanding apples and their performance versus oranges, you’d quickly realize that the comparison is like……..well, comparing apples and oranges.
Recently, I read an article, “What’s Wrong With Solution Selling.” It was the result of deep research into the performance of organizations with solution selling approaches and those with transactional selling approaches.
There were some interesting aspects of the research. It assessed roughly 12 commercial capabilities of organizations, going beyond the sales function, looking at things like innovation capability, product management, talent management. It also identified differences in performance between the top performing organizations and the rest, finding that in each area, top performing organizations were roughly 10% better than the average in each category. Interesting, but not surprising.
They also looked at differences in roughly 8 sales execution capabilities. Comparing the performance of those engaged in solutions and transaction selling approaches.
But then the article went further, it started making comparisons in performance between organizations that had solutions focused engagement models and those having transaction focused engagement models.
In virtually every category, transactionally focused organizations were more effective than solutions focused organizations.
There were some “insights,” like: “Value propositions in solutions focused organizations are difficult to tailor or quantify.” Or, “In solutions selling, channel partners may struggle to understand their role in contributing to your value proposition and solutions.”
Well, duugghhhh…..
Isn’t it obvious? Solutions selling is deployed where customers have very complex buying processes–the space of unknown knowns or unknown unknowns*. Transactional selling is deployed in simple buying processes–the space of known knowns*. So these differences are not at all surprising and and the analysis provides little insight into performance.
It’s really a false comparison, it’s, I hesitate to say, like comparing apples and oranges.
Of course there are things that solutions seller can learn from transactional sellers, adapting and applying to their engagement strategies. Likewise, the reverse is also true. But comparing performance between the two different approaches is relatively meaningless because each approach is tailored to respond to very different buying processes and contexts (and of course the article focused exclusively on selling, ignoring the customer buying process–more in another post).
The article concludes, that many organizations try to move to solution selling, but few get it right…
Well, yes and no. But the same could be said of transaction selling, consultative selling, insight driven selling. There are huge gaps in performance in each area. The study, itself, identifies the gaps. But this is not a surprise, there is endless data about declines in sales performance. We see customers voting, daily, in choosing alternatives to dealing with sales people.
But if we are to understand and improve commercial as well as selling performance, perhaps the best starting point is our customers, understanding how they buy and how we create the greatest value in whatever their buying process is.
Working backwards from how our customers buy always gives us greater insight into how we effectively and efficiently acquire, serve, retain, grow, and create value for them. Sadly, the research didn’t not assess this.
* Refer to my articles exploring Cynefin and Sensemaking.
