Category Archives: Sales & Marketing

Can you Justify Differential Pricing for the Same Services? Three Approaches

Situation:  The Company struggles with differential pricing. They want to be fair to clients but feel that a one-price policy limits growth. What tiered pricing models work, and how are they rationalized?

Advice from the CEOs:

  • Differential pricing by client demand.
    • For high value services, you must have a compelling value proposition.
      • Research comparative premium pricing for similar value propositions and set prices accordingly.
    • For price sensitive clients, offer two alternatives:
      • Senior staff services at one price or associate services under supervision for a lower price. Let the client choose between price and quality.
  • Differential pricing by market risk.
    • Early stage clients want high service but may not be able to pay bills. This justifies a premium price, as you are not assured of collecting for services. The differential is a risk premium that covers non-payment risk.
    • Well-established clients are less risky, and support lower pricing due to a lower risk of non-payment and are assigned a lower risk premium.
  • Differential pricing for bundled vs. non- bundled services.
    • If a client purchases individual services, then there is a set cost for each service.
    • However, if a client wants to purchase a bundle of services, then it is reasonable to discount the bundle. You are not necessarily charging less for the bundle, because you have now received additional business at a lower acquisition cost. Your “discount” reflects the savings that you have enjoyed in reduced marketing and sales cost.

Key Words: Pricing, Pricing Models, Fairness, Value Proposition, Service Pricing, Market Risk, Bundled Services, Risk Premium  [like]

Opening a Branch Office – Five Preparatory Analyses

Situation: The Company plans to open their first branch office. There are considering several possible locations. What are the most important considerations as they prepare?

Advice from the CEOs:

  • Perform an ROI analysis for the planned office. How is the ROI for the branch office different from your primary office? Look for potential economies of scale in your business model. This may prompt a rethinking of how you generate your products or services.
  • Simultaneously, look at your potential costs per location and the level of business required to (1) break even and (2) to match/exceed home office return in the new location. As you consider different geographical locations, compare costs and potential contribution of each against the others.
  • Decide whether you need to build full operations in your branch offices, or whether you can use a distributed services model, working from a central hub that performs some operations that need not be replicated in the branch offices.
  • Once you have completed these three analyses, perform a make/buy analysis to determine whether you get a better return from setting up your own office or purchasing a local company, if one exists.
  • Lower risk by starting with a relatively low cost operation – essentially a satellite office with minimal staff. As the new office develops initial business, they can be supported by your home office operations. They will serve as local feet on the street to evaluate the true potential and local barriers to entry within the new market.

Key Words: Branch Office, Location, ROI, Economies of Scale, Make/Buy, Barriers to Entry       [like]

Working with an Off-Shore Business Partner – Six Recommendations

Situation:  The Company has an off-shore business partner. Primary concerns involve team performance, process documentation and anticipating sales/marketing problems before they become issues. What have you found effective to monitor these areas?

Advice from the CEOs:

  • At the executive level, keep things simple – identifying the major goals and pieces of projects that are the make-break points.
  • Simplify the high level summary and make sure that all of the supporting activity is aligned with and supports key project or company goals. Some members manage projects with weekly or bi-weekly meetings.
  • The benefit of keeping it simple in your own mind is that you can always return to this simplicity when dealing with detail level queries from the partner. It keeps you grounded and on track.
  • One company uses project timelines that clearly show each of the teams where they fit into the project and how important it is for them to complete their portion of the project on time and to spec. Keep everything simple and direct.
  • Sales tracking and management is different from development projects. Drive monitoring off forecasts, pipeline, and achievement of metrics that track with the forecasts.
  • In working with your off-shore partner, organize your presentations so that the key points of emphasis are readily visible. Have back-up slides to show detail aspects of particular projects or initiatives, and be prepared to cover the details if needed. This will help to build confidence between you and your business partner.

Key Words: International, Partner, Performance, Process Documentation, Sales, Marketing, Alignment, Project Management, Communications                 [like]

How do we Get our Doer/Sellers to Sell? Four Recommendations

Situation: The Company has a geographical sales and service organization. Much of the sales effort comes from the consulting reputation of the managing director of each geographical unit, but he directors’ core values usually favor consulting over meeting sales plans. How do we get these directors to meet sales goals?

Advice from the CEOs:

  • Experience turning around a consulting organization with no sales culture:
    • Ours was a 5-year process. It starts with a leader who sells successfully and teaches by example.
    • As we made the transition, we selected new hires for sales skills to compliment their consulting skills. This facilitated our transition to a strong sales culture.
  • You need to commit to build a sales culture.
    • Moving to an account manager team versus an engineering/professional team was a big shift. It takes time and patience.
    • Hire effective sales people to jump-start the process. Most of the successful seller/doers will be new hires.
    • Revise your reward and recognition structure around your objectives.
    • Make rainmakers your best paid people. This will bring others out of the woodwork.
  • Bias sales compensation for doer/sellers toward variable compensation. Allow successful individuals to make over $200K per year.
    • Consider a 3-year phase-in by not increasing base pay through raises. More than make up the difference in available variable pay. Directors will now have more incentive to hit their sales numbers.
  • This is a difficult change in both sales leadership and culture. You may have to make significant leadership changes.

Key Words: Sales, Compensation, Core Values, Consulting, Goals, Reward, Incentive, Transition, Hiring, Culture  [like]

Where Can I Find a Good Salesperson? Five Suggestions

Situation: The Company wants to expand its sales force by adding “diamonds in the rough” – hungry individuals motivated by a high commission/low salary opportunity with high total compensation potential. How can they find these individuals?

Advice from the CEOs:

  • Hire “out of school” and use a good sales assessment tool to evaluate which candidates have the right attitude and skill set to succeed. Create a career path through a lower paid inside sales position to eventual higher paid outside sales position while the individual gets up to speed understanding your technology and as they develop sales skills. This helps to generate revenue to cover costs while developing new sales candidates.
  • Accept that you will likely experience turnover hiring candidates out of school. High commission sales forces in other industries deal with 85% turnover over 3 years to find “keepers.” This may be a significantly higher level of turn-over than you are used to in other positions.
  • Look to sales job fairs and Craig’s List for candidates.
  • Give your current sales people a bonus for referring friends or acquaintances who will stay with you for 6 or 12 months. Pay out theses bonuses over times.
  • Find a good sales recruiter to find experienced high-producers in industries with a similar product sale.
    • The appeal to these individuals is a high earnings opportunity combined with the chance to sell a sexy product.
    • Because these people will already be high earners, you may have to create a draw system so that they do not have to make too great an earnings sacrifice by switching to your Company.

Key Words: Sales, Hiring, Training, Commissions, Referrals, Bonuses  [like]

We Want to be Different – Not a Commodity! Five Important Steps

Situation:  The Company has had success with a few large clients but wants to expand their customer base for long-term growth. How do they differentiate their products in what is perceived as a commodity market?

Advice of the CEOs:

  • One company created differentiation by getting to know everyone in the business – building long term relationships, based on reputation and trust.
    • They spent time up front understanding the needs of customers that they wanted to develop.
    • As opportunities arose, they built relationships and asked questions to clearly define client needs.
    • While it takes time and patience, the objective is to be able to say “We know your business” – with credibility.
  • The steps:
    • Study the business, sector, and customers that you wish to serve.
    • Leverage the success that you have had with large customers. Talk about how you helped subunits within your large customers. This makes a big customer seem more like a collection of small customers similar to your prospects and makes your experience relevant.
    • Let prospective customers know, when appropriate to the situation, that you are hungry and will go the extra mile for their business. Simply out-serve your competition.
    • Learn who currently serves your prospective clientele. Study these competitors, their strengths and weaknesses. Talk to their customers – learn what they love about competitors’ service, and what they would like to see changed. Find the holes in what they provide and fill these holes with a better offer.
    • Look for and encourage repeat business and references to new business.

Key Words: Commodity, Differentiation, Sales, Marketing, Business Development, Customer Needs, Competition [like]

How do You Pay Sales Reps? Two Examples

Situation: The Company is considering two options to pay sales people – base/draw plus commission, or no base/draw and larger commission. What do other CEOs find most successful?

Advice from the CEOs:

  • Align your sales incentive plans to your company objectives. Two examples, one of an aligned system and one of a dysfunctional system:
    • Aligned System
      • Sales reps are 100% commission (including expenses) with no caps on income. They are measured by two sets of metrics.
      • To keep their jobs, they have to achieve a minimum of 85% of their revenue goal. Fall below this and out the door.
      • However, commissions are calculated on the gross profit achieved on sales, and reps are provided with software to calculate GP and commission.
      • This company is the most successful in its market.
    • Dysfunctional System
      • Sales reps are paid a base plus quarterly commissions calculated on achievement of revenue goals.
      • The net result was that reps had no incentive to preserve gross margins.
      • The result was constant conflict between sales and finance; the situation only started to improve as reps’ commissions were converted to a combination of revenue and margin.
  • Issue: what is the role of the rep within the sale?
    • Is the rep a door opener or a closer?
    • What percentage of the close is attributable to the rep?
    • In a complex or staged sale, allocate commissions based on contribution to the close. Reps who can’t close are not as valuable as those who can.

Key Words: Sales, Commissions, Commission Plans, Objectives, Alignment  [like]

Positive Marketing Messages vs. FUD (Fear, Uncertainty and Doubt) – Five Suggestions

Situation: IBM and others established the value of preaching FUD (Fear, Uncertainty and Doubt) within their marketing campaigns – “choose IBM, the brand that you can depend on, because who knows what others will actually deliver.” Is it still worthwhile to use FUD, or are we better off emphasizing the positive benefits of our services and keeping our image positive?

Advice from the CEOs:

  • When considering whether it is better to sell the time that your system or product is “up” or the time that it is “not down,” you need to understand your customer’s perspective.
    • If they are cautious and skeptical, then FUD may work. If they are positive and upbeat, then they will more likely respond to a positive, upbeat message.
    • Match your marketing message to the attitude of the key decision makers within your customer companies. Learn their hot buttons during ambassadorial visits.
  • Companies sometimes use FUD when they sell “the future.”
    • Being “in”: if you haven’t got our product/service you won’t be with it!
    • Insurance companies sell protection from the unknown.
  • Mix the message. Sell the positives, with an appreciation of the cost of the negatives to reinforce the positives.
  • Be the “Mr. Goodwrench” of your marketplace. Educate and reinforce.
  • Consider positive health care analogies in your marketing:
    • Rapid Response – mimic messages from urgent care.
    • The value of maintenance programs – mimic messages from wellness programs.
    • Develop metrics to substantiate what your customers are hearing from your message.

Key Words: Marketing, Messaging, Brand, Image, Research, Validation  [like]

Working On vs. In the Business – Six Thoughts for your Staff

Situation:  The Company created five customer-centered divisions headed by Business Development Managers (BDMs) who oversee project management as well as business development in their markets. A year after implementation, the BDMs are more focused on managing their teams than on developing new business. How can we enhance focus on business development?

Advice from the CEOs:

  • Your BDMs are technicians; business development (BD) isn’t their strength.
    • People gravitate toward important/urgent activities in their comfort zone.
  • Supplement your staff with people who have a proven talent for business development.
    • You may not need 5 people – 2 or 3 may be sufficient to support the BDMs.
  • What if our customers demand technical expertise in business development personnel?
    • Make category expertise a requirement when hiring, in addition to experience in BD.
    • There are specific traits that characterize successful BD personnel. Specify these traits in your hiring process and verify these abilities in candidates both by testing for these traits and through reference checks. The Sandler Organization has good tests for BD talent.
  • The BDMs are responsible for coordinating bidding and pricing. Should this responsibility be handed over to the new BD personnel?
    • Not completely. You have two options.
  • Require BD personnel to coordinate with the BDMs when it comes to pricing and project delivery, and/or
  • If you determine that the BD personnel need to be able to negotiate pricing on their own, tie their commission compensation 100% to margin on projects bid.

Key Words: Sales, Business Development, Customer-Centered Organization, Hiring Requirements, Hiring Selection, Collaborative Sales, Compensation  [like]

WOW – Great Press! Now what do we do? Five Follow-ups

Situation: We just issued a press release that generated great media coverage. This resulted in increased call traffic and “hits” to our web site. How can we to leverage this response into sales?

Advice from the CEOs:

  • Everything starts with a Marketing Plan. Without a plan, there may be little that you can do right now. The most important benefit is that you’ve established a presence in your market that may make it easier to gain coverage from future press releases.
    • What can you do short-term? Try to use reverse DNS to look up the email addresses of those who recently viewed your site. These will enable you to send email materials to capitalize on interest once you have a plan.
  • Develop a holistic marketing plan, including incentives for prospective customers to respond to your product or service offering.
    • When your marketing plan is in place, send out a series of timed press releases to develop and maintain interest in your technology.
    • Feature your offering and incentives both on your web site and in non-web collateral for prospects and leads.
    • When interested customers respond by visiting your web site or calling, use the incentives to convert this interest into sales.
    • Put different response codes on web, snail mail and other collateral so that you can track the source of leads. This will tell you which channels generate the most and highest quality leads and will improve future planning, budgeting and allocation of resources.

Key Words: Press Release, Lead Management, Lead Conversion, Lead Tracking, Marketing Plan  [like]