Selling in the_internet_age

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Selling in the_internet_age

  1. 1. Based on 20 Years of World Class Sales Research Across 80,000 B-B Customers and 7,300 Sales Forces By Howard Stevens and Geoffrey James Selling in the Internet Age How the Web is Transforming the Buyer/Seller Relationship
  2. 2. 3 Introduction Over the past 15 years, the business world has been adapting to the sudden appearance of the Internet in its midst. During that time, we’ve seen the Internet move from dial-up medium of email and brochure-ware into a broadband and wireless medium capable of displaying two-way video. At the same time, we’ve seen a massive migration of all sorts of information onto the Web, along with the introduction of entirely new business models for selling, such as e-commerce. At first, it was difficult to see exactly how the Internet would change the ways that businesses buy and sell. That’s be- cause the process by which business culture absorbs new technology can be broken into two distinct phases. During the first phase, the technology is compared to whatever technology is already familiar. The telephone, for instance, was originally seen as a more convenient form of telegraphy, with a clerk at Business A calling a clerk at Business B in order to dictate a message from one corporate executive to another. It was only after the novelty of the telephone had worn off that executives realized that it would be more useful to use the tele- phone to have a direct one-on-one conversation. The second phase happens after the technology be- comes more commonplace and people begin experi- menting with the tool in new ways. In the case of the telephone, it took several decades for businesses to figure out how to use it in new and different ways. The result was the use of the telephone for negotiating, tele- sales, closing verbal contracts, and all the other elements of 20th century business telecommunications. Today, we take the telephone for granted; it’s become largely invis- ible. It was at that point, when the telephone slipped into invisibility that the “telephone era” was over in the business world. A similar transformation took place with the personal computer. When first introduced, the PC was widely viewed as a cheaper version of a word-processor. While it was capable of calculations (via spreadsheets), many executives considered it more a device intended for a secretary than for an executive. Even today there are CEOs inside highly traditional companies who believe that a PC on the desk demeans the status of a top executive. However, with the exception of these few holdouts, the PC is now seen as a generalized tool that belongs on every desk. Today, everyone in the business world knows what a PC can do as a standalone personal productivity tool, so we’re now in the post-PC era. Until quite recently, the Internet was still in the first phase of technological introduction, with perception of the technologies viewed almost entirely through the lens of those previous. For example, even today many corporate websites are simple “brochure-ware” – collections of data that previously would have been presented in hard-copy format. Even most e-commerce sites are little more than online versions of mail-order catalogs, with the same pre- sentation and same methods of ordering. At the same time, people are learning to use the Internet in ways that are quite different than their pre-Internet counterparts. We are now in an era when those changes are becoming clear, and they are truly enormous. Every aspect of the sale has been altered in a variety of small and large ways, a process that is accelerating as further technological advances inject even more innovation into an already rapidly evolving environment. This white paper provides an overview of how the Internet is wreaking massive changes in the culture of the business buyer, changes in the way that they buy products, and changes in how they expect sales profes- sionals to provide products and services. It then provides an overview of how the Internet-based technology has changed the sales process, and how the cumulative re- sult in all these changes is forcing companies to change the way they do sales training and define sales roles.
  3. 3. 4 brochures and elaborate product pitches are meaning- less because the customer already knows what to buy and can locate multiple places to buy it. As a result, the importance of the sales rep to the customer as a deliv- erer of information has waned, almost to the point of non-existence. Similarly, the information on the Internet has vastly increased the ability of customers to negotiate their own price. In the past, the simple mechanics of gathering data on competitive products (and comparing relative prices) was a formidable job, requiring many man-hours on the part of the customer. Such work was productive only when the customer was comparing products that were nearly identical, and where the difference in price was large enough to justify the effort required to un- cover that difference. For example, a company purchasing a complicated com- puter system could easily justify writing an RFP, reading multiple vendor proposals, and finally selecting the right vendor because the difference in price (or, more precise- ly, total cost of ownership) between the two competing systems was likely to be far greater than the expense of the complex buying process. However, in cases where the variation between the prices of two competing products was relatively small, customers were naturally reluctant to go through such an expensive process. Instead, they’d depend upon local sales reps to provide basic product information and trust them to provide the best price. Often these relationships were “locked down” with the purchasing department, thereby guaranteeing that certain amount of buying behavior would take place going forward. The net effect of such relationship was to leave the power of setting prices to the selling firm and (by exten- sion) the sales rep who represented the firm. As long as the price was not egregiously higher than what else was available, the customer would continue to buy from the “approved vendor” at the price set by that vendor. How the Internet Is Changing the Business Buyer Historically, customers relied on sales reps to provide information and expertise about the products that the customer needed to purchase. As such, sales reps in a certain sense, were in the information delivery busi- ness. The typical sales rep spent much of his or her time carrying product information from the company to the customer. Sales calls involved showing the latest bro- chure, delivering a product presentation, and explaining the benefits to the customer. This behavior was of value to the customer because the sales rep was presenting information that the customer needed in order to make a buying decision. Over time, two factors led to a demand for a new class of salespeople – ones who worked for independent companies who produced no products themselves, but specialized in selling other companies products. These became an alternative channel that vendors or suppliers could use to further penetrate their markets. These independent sales companies provided either: 1. A less expensive way to reach a specific geographic market or a market dedicated to a specific class of products. They created this “distribution” business by serving the products of multiple vendors (usually non- competitive) at a greatly reduced cost to each service supplier or manufacturer. 2. Specialized technical sales “experts” who could include a supplier’s products in a more sophisticated solution that required multiple products (or services) in a specially designed application for a specific customer. They became known as value added resellers or VARs. The Internet, however, has now made the historical sales methodology obsolete and put both substantial ad- ditional pressure and opportunity on both distributors and VARs. Using the Internet, customers can get product information at the same time as the sales rep, not just about the sales rep’s offerings, but the offerings of all of the rep’s competitors. In this environment, product
  4. 4. 5 Today, however, customers can instantaneously compare products online, both in terms of functionality and price. Suddenly, it’s become relatively inexpensive for custom- ers to search for the lowest prices for many goods and services that they might require. This ability to easily and quickly find alternatives tends to drive prices downward because, all other things being equal, the customer can now purchase the lower-priced product without carrying a heavy financial burden of researching alternatives. Customers, and the processes they use to buy, have changed in other ways as well. Opportunities that were once within the purview of one, or perhaps two, decision-makers may now involve an entire commit- tee. Complex sales that previously could have moved forward on the basis of general consensus among the buyer’s management team are today often subjected to increased levels of scrutiny and formal approval. There are two sources to these changes in buying behav- ior. The first source is the economy. Many companies have reacted to the current recession by tightening financial controls and adding additional roadblocks, in order to limit purchasing to essential products and services. The second source of the change in buying behavior is the flood of technology into the infrastructure of most corporations. Because organizations are better con- nected, they’re more inter-dependent, which means that large purchases – and the operational changes that they might involve – tend to ripple through a corporation, like a sharp tug on one strand of a gigantic web. Today, it is not unusual for sales professionals to confront opportunities where the customer’s senior manage- ment, procurement group, legal group, financial group, engineering group, and even human resources depart- ment possess the right to review and approve major purchases. As a result, it is no longer enough for a sales professional to cultivate one or two key contacts inside an account. Instead, it’s now necessary to sell to all these constituen- cies, each of which is likely to have a different agenda and a different reason for being interested in the offer- ing and its impact on the entire customer organization. In addition, each element of this multitude of stakehold- ers has the potential to delay or block the purchase, which can create a truly Byzantine sales cycle. Large op- portunities now take much longer to develop and close, and thus require sales reps to manage the process with both patience and precision. This would be burdensome enough if it were merely timidity and risk avoidance on the part of the customer. In fact, the slower decision-making that results from greater levels of financial control often reflect the poten- tial for very real disasters from the viewpoint of a selling firm and the people who represent it in a sales capacity. For example, while large companies usually have little difficulty getting credit to make business purchases while still covering operating expenses, smaller firms are often at the mercy of a banking sector that’s reluctant to lend to any but the most stable corporations. As a result, it’s not always clear whether a customer who wishes to purchase, and intends to purchase, will actually have the money to purchase when it finally comes to paying the selling firm. Because of this, sales professionals are now expected to constantly re-qualify the financial viability of potential and existing customers. At the same time, they’ve needed to get far more creative in terms of crafting purchasing terms that may need to accommodate problems with cash- flow. All of this takes time and effort, all of which must be layered atop whatever efforts the sales professional is already taking to develop and close the opportunity. To summarize, today’s business buyers: • Often know more about a product category than the sales rep • Can more easily make product and price comparisons • Are therefore better able to demand price concessions • Have increasingly complicated buying processes • Experience frequent changes in management • Are experiencing more extensive financial controls • Require sales professionals to work harder for the sale
  5. 5. 6 How the Internet Is Changing the Buying Process Not too long ago, pundits were arguing over whether selling, as a profession, could survive at all. According to many experts, the Internet would make sales reps obso- lete because customers would be able to make deci- sions, order products, check delivery status, and so forth, entirely without the assistance of a sales rep. Under this theory, most (if not all) products and services would be purchased across the Internet, with the cus- tomer driving the process. Because of this, the only way that a company could differentiate itself would be by offering a lower price for a similar product, or a compa- rable price for a better product, either in terms of func- tionality, quality, or the services surrounding it. In other words, the Internet was supposed to create a “value-driven” marketplace where a salesperson was largely irrelevant. And indeed, that has happened to a certain degree, as the Internet has gradually replaced so many of the traditional sales functions, such as the deliv- ery of simple product information and the controlling of price lists and the ordering process. The airline industry, for example, has become almost entirely driven by price, with consumers and business people alike able to choose the lowest cost flight on a variety of websites. In order to preserve margins in the face of an Internet-driven price war, airlines have resort- ed to charging a wide variety of fees which were, until recently, hidden from the purchaser. There is an irony here since traditionally sellers would have preferred to avoid listing line items that often became targets for buyers to individually challenge for a lower price. This relentless pressure on pricing has made the airline industry peculiarly brittle, subject to bankruptcies, merg- ers, and other difficult-to-manage events. More impor- tantly (from the perspective of sales professional), the movement of airline ticket purchasing on the Internet almost eliminated an entire class of sales professionals, the domestic travel agent. However, while travel agents are no longer responsible for selling the millions of domestic airline tickets, the profession of the travel agent still exists, albeit in a more rarified form. Their continued existence hinged on their ability to switch from being “just distributors” which the Internet easily replaced for many buyers, to values added resellers, who could provide specialized exper- tise. As the U.S. Bureau of Labor Statistics explained in the Occupational Outlook Handbook, 2010-11 Edition: Employment of travel agents is expected to decline by [only] 1 percent over the 2008 – 18 periods. The ease of Internet use and the ready availability of travel and airline Web sites that allow people to research and plan their own trips, make their own reservations, and purchase their own tickets will result in less demand for travel agents for routine travel arrangements. However, as more travelers take exotic and customized trips, the demand for some of the specialized services offered by travel agents will grow. Additionally, the increasing number of international visitors to the United States represents a growing market for travel agents who organize and sell tours to these international visitors. The Internet, therefore, has not rendered the service of travel agents obsolete, but instead forced them to pro- vide more complex types of services to a more complex type of customers. This has grown to such a level of complexity and sophistication that today, in many if not most markets, no one salesperson is capable of learn- ing, staying up-to-date or managing all options. This has forced (as in all other professions) the need to specialize into multiple sales roles. Any doctor is better than a non- professional for less important medical needs, but no one would depend on a pediatrician to do brain surgery, or a chemical engineer to build a bridge, nor a patent lawyer to defend a criminal case. So to, the Internet has replaced the less specialized sales functions, such as the delivery of product information. In brief, a new market for a new type of complex product emerged because the Internet drove prices of the basic product down. And that new, more complex product requires a sales professional to create and package the product to meet the need of travelers, who now want to buy more complex products that are (in a sense) layered upon the inexpensive products that no longer require a sales professional. In this instance
  6. 6. 7 the Internet has not only created a new sales demand, it has allowed these newly specialized salespeople to com- petitively advantage themselves against competitors. All products and services evolve through a life cycle. Most basic marketing courses will define and elaborate the characteristics of the different stages of the product market life cycle. What is less well known is that the sales process also evolves through a similar product sales cycle where the skills, competence and therefore the “specialty” of the salesperson must also change as the market and its customers mature. In the initial stage of the product sales cycle, the product comes in only one shape and size, there are no com- petitors, and there is little or no history, not to mention empirical proof, of the real advantages of the product to demonstrate to a prospect. The sale depends on the skill of the salesperson to create an intuitively compelling “vision” of potential success. And while the decision is ultimately a simple one (because there are essentially no variables to consider and weigh), that presentation can only be made to the ultimate financial decision maker… as lower-ranking “buyers” seldom have the authority to make such a “risky decision.” This type of salesperson is a special breed of new business developer (or “hunter”) that we frequently call “a Closer.” The Internet replaces many of the old requirements of the Closer who no lon- ger has to generate his or her own leads because email and other market promotions not only generate leads, but to a large extent, even qualify them. If the product proves to be a success, it will move on to the second phase of the sales life cycle. We now see the emergence of additional features and options, additional applications and the beginnings of a real product history in the form of case studies, thought leadership articles, and, of course, additional providers who create a new competitive market. However, the product is still new to the customer, a salesperson must essentially become a “consultant” who must now provide a full basket of additional personal competencies, not only in introduc- ing the solution to the customer, but also demonstrating the potential, identifying and designing a specific (and usually “pilot”) application, but also teaching the cus- tomer how to manage the new application at least until they develop the expertise themselves. This sales phase may sometimes be so complex that it requires a team of sales specialists to fully cover all of the requirements. There may be an operationally oriented team member, a technical salesperson, a relationship manager and other Consultative Stage State-of-the-art high technology product / service systems Relationship Management Stage Accepted and widely used product /service subsystems or Assemblies Initial Stage “Exciting”New or Unique Product / Service Often Fads / Trends Commodity Stage Parts or supplies What Customers Are Buying Added Values Customers Want Purchase Complexity Customer Experience With Product / Service low High lowHigh Hi-Tech Product / Service System • Flexibility • Custom Design • Improve Existing Systems • Expandable • Installation and Training • Professional Relationship Management Stage • Feature / Option Flexibility • Match Existing Quality Specifications • Deliverable to specific Schedules • Cost (not price) Savings • Repeatability • UnderstandableTechnology New Unique Product / Service • Simplicity • Ease of Installation and Use • Ego Enhancement • Margin Increase Tied to Uniqueness • Competitive Edge Commodity Stage • Standardized to Fit Existing Usage • Easily Replaceable • Lowered Costs • Easily Available • Just-in-Time Delivery Purchase Complexity Customer Experience With Product / Service low High lowHigh •
  7. 7. 8 positions to complete the team. These team members are often called consultative salespeople. The leader of the team may be the “partner” in a professional business segment or the “rainmaker” in a consulting firm. The Internet provides sellers a market presence, and through thought leadership campaigns, establishes the cred- ibility of the consulting organization. The lack of “online presence” greatly restricts the seller’s opportunities. In the third phase of the sales cycle, customers have developed sufficient internal expertise that they need little consulting in the typical sense but are dependent on a salesperson who will be a fully responsible resource to manage the relationship between buyer and supplier, and assure that all customer requirements are managed effectively. We typically call this type of salesperson an “account executive.” The Internet provides these ac- count managers additional forms of communication, greatly enhanced speed of response, and even increased networking opportunities to more thoroughly penetrate and strengthen their position within the customer’s total organization. As the product reaches the final stage it has become a commodity until it is replaced with a new technology. Except at the largest contractual relationships, the role of a live salesperson is minimal, and may be entirely replaced by the Internet.* The computer industry is another example of this metamorphosis It was once believed that the Internet would mitigate the need for a sales force to sell computer technology. It was assumed that since a wide variety of computer hardware, software and services were available across the Internet, companies would easily be able to find whatever com- puter products they wanted for the lowest price pos- sible. This, in turn, was supposed to result in technology companies that no longer depended on a sales force to arrange the purchase of their products. As with the airline example, the expected impact of the Internet was partially true. Relatively simply products, like personal computers, became commodities, forcing the companies selling them to move away from direct sales, with sales reps calling on customers in person or customers coming into retail stores, which was how busi- nesses purchased computers until about the late 1980s. Companies like Dell, CDW, and Insight began experi- menting with telephone ordering and eventual “out- bound telesales” and, later, direct orders across the Internet. The rest of the industry followed suit, greatly reducing the number of sales that took place from direct sales (to large enterprises) and retail sales (to consum- ers and small businesses). While these new buying methods proved to be less expensive than the previous alternative, they were unable to prevent the continuing commoditization of the product, and the consequent decrease in sales margins. However, even as Internet-driven commoditization elimi- nated the need for direct sales and retail sales, it para- doxically began to create a demand for a higher-level of sales activity. Because basic computer’s power became so cheap, companies discovered they could use that power in ever-more-complex and interesting ways. Doing so, however, often required expertise that the company itself did not currently have, or lacked the ability (or interest) to go out and obtain. Because of this, computer firms like IBM began to focus on selling and providing services to help companies harness all the cheap computing power that they could now obtain without the intervention of sales professional. IBM also discovered, somewhat painfully, the innate limits imposed by the reality of the product sales cycle in the 1970s when they attempted to develop a retail store chain to compete in the commodity market as had Radio Shack. They, at first, believed they could reach success at all four stages of the product sales cycle. They planned to be the major introducers of new products, provide consulting expertise to major “enterprise applications,” Telesales Performance 2006 Telesales Study 2010 Telesales Study Companies with an Average Telesales Quota > $1M 15% 25% Average Deal Size > $25K 6% 29%
  8. 8. 9 field a salesforce of account executives, and build a retail chain. Ultimately, after two separate attempts at retail, they learned they could not convince consumers that they could be the high tech developer of increas- ingly more complicated main frames and still be the low cost, low end provider, any more than the market could believe that Radio Shack could be a high end, high tech corporate supplier (although Radio Shack did try a short- lived marketing campaign to that end.) Today IBM deliberately focuses on both Consulting (in phase two of the product sales cycle) computers and peripherals through VARs and distributors. They are also careful to exit markets that have become absolute com- modities, spinning of printers and related machines to Lexmark and later the PC to a Chinese partner. Today, there are hundreds of thousands of sales profes- sionals in the computer industry. However, rather than selling the basic product, they are essentially managing complex projects that often combine multiple hard- ware and software technologies, bringing together the capabilities of multiple companies to satisfy customer requirements, and so forth. Another reason that the Internet hasn’t eliminated the need for large numbers of salespeople is that customers are not nearly as enchanted at the prospect of control- ling the buying process as one might think they’d be. For example, while it’s true that customers have the ability to research competitive alternatives in multiple product categories, they often elect not to do so. The problem, from the perspective of the customer, lies what social psychologists call the “tyranny of choice.” In the 2004 book The Paradox of Choice - Why More Is Less author Barry Schwartz argues that too many choices can create buyer anxiety and actually make a purchase less likely. “Though modern Americans have more choice than any group of people ever has before, and thus, pre- sumably, more freedom and autonomy, we don’t seem to be benefiting from it psychologically,” he writes. Seeing a wealth of choices for every single purchase that a company makes can easily be seen as a liability when once considers the other changes that have taken place, particularly in the pace at which business takes place. It’s easy to imagine that, after a while, harried decision-mak- ers would begin to feel that they’re wasting their time trolling around on Internet sites to look for a bargain, when they could simply call an expert (i.e., a sales profes- sional) and just have him or her “take care of it all.” To summarize, the Internet has made the following changes to the buying process: • Produced a price war among competitive products • Made it more difficult for sellers to differentiate • Created a constant lowering of profit margins • Forced sales of low-end products into inexpensive sales channels • Created the possibility of higher-order solutions based on sophisticated combinations low-cost offerings • Resulted in a tyranny of choice as customers tried to create such solutions • Generated a demand for high-end “solution selling” Even though the airline industry and the computer industry could not be more different, there are striking similarities between what happened in terms of how their products and services are sold. The sales effort, which originally consisted of direct sales of all classes of products, bifurcated into two very different sales mod- els. On the low end, selling becomes transactional, with the Internet providing the capability for customers to pur- chase directly, with the presence of inside sales person- nel (i.e., sales support) to handle cases where customers are unable to transact business purely online. By contrast, on the high end, selling becomes solution- oriented, where the sales professional takes the basic elements sold at the low end (e.g., tickets or PCs) and combines them into something that uniquely addresses the buyer’s individual needs.
  9. 9. 10 How The Internet is Changing Buyer Expectations In addition to changing the way the customers buy, the Internet has profoundly altered their expectations from the individuals and firms that sell to them. The most important alteration is a basic change in business model that makes the sales relationship even more important than it was formerly. In the past, companies tended to organize vertically as far as was practical. A good example of this model is the IBM of the 1960s through the early 1980s. During those years, IBM created virtually everything that was required to de- liver computer power to its customers -- from the research that went into the electronic components in the chips, all the way to support and maintenance of end user applications. Today, by contrast, IBM participates in many segments of the computer industry, but it no longer attempts to integrate all those parts into a single vertical supply chain. As mentioned earlier, IBM-branded PCs (for instance) and the chips that go into them, are manufactured by a company in China. Other firms have been even more assiduous in shedding parts of their business that can be more profitably and easily handled elsewhere. Today’s most successful companies tend to focus on a particular aspect of an industry that they, and they alone, can do better than other companies. This is not to say that the elements that are outsourced are in any way unimportant; in many cases, the outsourced elements are entirely crucial. It’s just that it’s most cost- effective to have a company that specializes in that element be responsible for that part of the supply chain. This type of dispersed supply chain is only possible because the Internet creates an infrastructure where compo- nents, products, raw materials, and services can be easily tracked and transferred. As a result, it’s not unusual for an electronics firm (for instance) to have a supply chain that encompasses several hundred different companies, all com- municating with each other across the Internet in order to ensure the orderly transfer of goods and services.
  10. 10. 11 The massive shift away from the vertical organizational structure and toward a dispersed outsourcing model radically increases the importance of the sales profes- sional. Businesses have become dependent on the sales professionals who represent the outsourced functions and supply chain partners. Businesses now look to their vendors (and the sales professionals they employ) to “own” the aspects of their customers’ business that those customers would prefer not to own themselves. The sales professional, in essence, acts as the “manager” of that key function within the buying firm’s business model, ensuring that the vendor delivers what’s prom- ised on time and on budget. In performing this function, the sales professional is aided by both internal (e.g., tech- nical specialists, finance, legal, administrative and others) as well as customer-facing organizations, like customer service, within his or her firm. However, the burden of responsibility, for design and solution and ensuring that it not only works well in the customer environment, but actually impacts the customer’s business, now falls on the shoulders of the sales professional. While this is a positive development in the sense that it increases the strategic importance of the sales profes- sional, it also comes at a price. Treating the sales profes- sional as an outsource manager puts that professional in the same supercharged (and often political) environ- ment where a firm’s internal managers must operate. And that environment can be demanding. Paradoxically, while the pace of decision making has slowed and be- come more complete, the pace at which business is ex- pected to be conducted, completed, and delivered has increased. What exists today is a supercharged business environment where managers (internal and external, i.e., sales reps) are being driven to constantly do more with less and produce predictable results that reduce the risk of corporate failure. Such environments can be both exhilarating and ex- hausting. Despite the fact that staffs are leaner than ever, projects that in a previous decade would be been slated for completion in six months are now expected to be finished in a single quarter, or even in a single month. Corporate environments are often highly unstable, with new decision-makers arriving (and old ones departing) far more frequently than in the past. Sales managers, for example, often have an average tenure of less than 18 months, according to Gerhard Gschwandtner, publisher of SellingPower magazine. In this highly fluid environment, priorities are constantly changing in ways that are often surprising, even to the people who exist inside that environment. This state of flux has an enormous impact on sales professionals, who are alternatively asked to wait for long periods of time (while highly controlled consensus-driven buying process- es grind slowly forward) and then take immediate actions on those occasions when the proverbial “iron” is hot. Unfortunately, the sales professional is asked to accom- plish this while still remaining something of an outsider in the customer’s corporate environment. Lacking any official authority, the sales professional is forced to cre- ate leverage and influence in other ways. Clearly, this kind of subtle leadership is worlds away from the original notion of the sales rep as a simple information provider. To summarize, the Internet has made the following changes to buyer expectations: • Most companies eschew vertical integration • Companies tend to organize into complex supply chains, or join associations that integrate them • Companies need vendors to provide key elements of their business • The role of the sales professional is consequently more important • Sales professionals now act as outsourced managers • Sales professionals have limited authority at the customer site • Sales professionals are, nonetheless, expected to be leaders
  11. 11. 12 How the Internet is Changing the Selling Process In addition to changing the culture of business buyers and the way that they buy, the Internet has also massive- ly changed the way that organizations attempt to sell to those buyers. The Internet has given birth to a wealth of sales-oriented tools, many of which change the way that sales teams locate, develop, and close opportunities. Throwing technology at the sales team, of course, is nothing new. The product category known as Sales Force Automation (SFA) is at least two decades old. The basic concept behind SFA (and its successor, Customer Relationship Management or CRM now frequently called Sales 2.0) was to apply the principles of factory automa- tion to the sales environment. The emphasis was on making the sales processes repeatable and standardized, with reps following a standard set of behaviors at each stage of the process, and then monitoring those steps, much like a factory automation system monitors the steps in a manufacturing line. This approach did very little to help sales teams to sell. Quite the contrary, because the early applications needed data from the sales force to produce meaningful reports, sales reps were often forced to do a lot of keystroking, on top of their normal duties. Not surprisingly, many sales reps (especially those trying to pursue a higher level of professionalism) resented the seemingly insatiable demand for data entry. As a result, the failure rate of CRM implementations was as high as 50 percent, according to figures from the market research firm Gartner. In addition, the “factory” model of sales automation tended to ignore the rather obvious fact that customers might have a very different idea of how they would like the buying processes to proceed. The “factory” model assumed that selling was the simple, repeatable process that it had been under the “information delivery” selling model. It was difficult to adapt that model to a “con- sultative selling” situation where the sales professional works in partnership with a customer, working on a joint agenda. CRM systems are increasingly seen not as a mechanism for monitoring and controlling the sales process, but instead as a way of documenting what happened in or- der to replicate successful sales situations and diagnose those that failed. For example, many companies now use analytics programs to search through their CRM data- base to identify the profile of prospects that were easy to develop into opportunities, and then use that profile to generate better incoming leads. CRM has also changed the way that sales groups are managed. For example, in a traditional sales organiza- tion, forecasting typically involved a sales manager meeting with the sales reps on a weekly basis and asking what deals were likely to close. Then, the manager would make his or her best judgment about what would really happen based upon gut instinct and a sense of which reps could be trusted to actually make their number. By contrast, with a CRM system, a sales manager can look at historical data, pinpoint progress in the current sales pipeline, and determine what’s likely to happen in the future, thereby creating a more accurate sales forecast. Sales professionals have also incorporated additional In- ternet-based technologies. Blogs, web conferencing, and social network sites (e.g., Facebook, Twitter) have been harnessed as relationship-building tools. At the same time, marketing groups have begun mining both the CRM data and the wealth of data available on the Internet, and using tools like email and websites to develop qualified sales leads that are more likely to buy. For example, a website can now track when and where potential custom- ers visit, thereby providing the sales rep with additional insight into the customer’s potential interest areas. The areas where sales technology firms have been particularly active in recent years include: Lead Generation Today, many tools exist to help sales teams create a more robust pipeline. The challenge here is to have some way to differentiate between leads that have high potential and leads that don’t. Lead generation tools like InsideView, Hoovers, and Dow Jones provide in-depth background and current news about prospects’ financial status and corporate strategies. Armed with that knowledge, a sales team can better qualify prospects, thereby building a pipeline that’s full of high-quality opportunities.
  12. 12. 13 Sales Cycle Acceleration A great deal of technology now exists to help sales teams develop the deals in their pipeline so that they are quicker and easier to close. For example, sales research tools like Jigsaw, SalesGenie, and LinkedIn provide in-depth information on hundreds of thousands of decision-makers. Having that “inside information” helps the sales team build additional contacts in the pros- pect’s firm and build stronger relationships with those contacts. Similarly, sales analytics tools such as Cloud9 and Birst allow you to compare past opportunities with current ones, so that sales managers can better assign resources to opportunities likely to reach fruition. Compensation Management In the past, compensation and commissions were often handled haphazardly, which limited the ability of sales managers to drive strategic and tactical sales behavior. Today, sales compensation tools like Xactly and Makana allow sales managers to fine tune commissions and quickly inform the team of the changes. As a result, sales professionals are now better informed and presumably better targeted at pursuing the deals that sales manage- ment would like them to pursue. Sales and Marketing Integration Sales and marketing groups are traditionally at logger- heads, arguing over spending, lead quality, sales execu- tion and so forth. The resulting turf wars and stovepipes consume “energy” that could otherwise be channeled into tactical execution of a sales and marketing strategy. Sometimes top executives have become so frustrated with these distractions they create a new position that both sales and marketing must report to such as Chief Revenue Officer. More frequently, companies are using sales-oriented technology to measure the effectiveness of both sales and marketing. As a result, verifiable facts and figures begin to replace the opinions and subjective perceptions that lie at the core of these interdepartmen- tal squabbles. Sales Management Many of the tools discussed above provide sales man- agement with deeper visibility into both the sales process and individual performance within that process. This helps sales managers identify the areas (and people) that need improvement, and that can prove invaluable when a company is positioning itself for future growth while trying to hold expenses down. However, even with this massive influx in new technol- ogy, many companies are struggling to keep up. The research firm CSO Insights recently conducted a survey of more than two thousand sales and marketing profes- sionals revealed that 85 percent of marketers felt they were doing a good job generating quality sales leads. By contrast, only 50 percent of the sales professionals -- in those same organizations -- were satisfied with those leads. Another CSO Insights survey, this one of 600 sales and marketing groups, revealed that marketers think they produce 38 percent of the leads that convert, while the sales pros think that number only 23 percent. However, even if the marketers are correct, sales groups (or cus- tomer referral) on average are still generating nearly two thirds of the leads that actually turn into customers. The simple truth is that, despite a vast influx of new tech- nology, most sales organizations are floundering. Ac- cording to CSO Insight’s 2010 survey of 2,800 companies worldwide, “the percentage of reps making individual quotas dropped significantly, and the percentage of the overall company revenue target achieved dropped, as well.” Ironically, 85% of the firms surveyed reported that they raised quotas for the subsequent year! To summarize, the Internet has made the following changes to the selling process: • Created a vast influx of new technology • Impacted nearly every aspect of sales activity • Promised to vastly increase productivity • Has, in many cases, failed to do so • Has apparently made quotas MORE difficult to achieve
  13. 13. 14 How the Internet is Changing Sales Training In the past, sales reps were masters of the “art of selling” the softer or more interpersonal skills, often rooted in social psychology such as rapport building, closing techniques, etc.) and procedural knowledge (how to configure a deal and write an order, etc.) Today, the best salespeople possess business acumen and the in-depth industry experience required to take responsibility for key functions inside a customer’s account. The salesperson who can not only read a P&L statement but also understand it, is capable of speaking the language of business. If not, they cannot present a financial benefit to justify a high-level investment that will be required to make the largest sales. In short, they won’t be able to sell to the “C” suite. To succeed with technical buyers, the heads of functional departments, the new sales professionals must also be more technologically savvy than their old-time counterparts. Where they once rejected applications like CRM as intrusive nuisances, they embrace new technology and even pioneer its use, not because they’ve suddenly become technology wonks, but because they view that technology a way to augment their ability to sell. This is not to say that the old sales skills will be entirely useless. After all, selling is the very core of business, and, as such, possessing these skills must remain eternal. For example, the ability to building a strong customer relationship will always be valuable. However, these soft skills will increasingly be used in inside sales situations that involve a higher level of human interaction, where only the most “professional” of sales professionals will be able to thrive. In the PBS special, New Selling of America, author Walter A. Friedman* explains how the role of the sales professional has changed and evolved since the 19th century. That evolution process has accelerated over the past decade, be- cause the growth of “consultative selling” demands that sales professionals become, well, more professional.
  14. 14. 15 Traditionally, sales jobs have been filled with individuals who lacked a college degree or (best case) had a degree in a non-business field. To bring such individuals up to speed, companies typically provided a week or so of training on product features, followed by a few days on basic selling skills, like cold calling and closing. Similarly, business schools tended to treat selling as a craft rather than an academic discipline. Most universities and even business colleges, not to mention MBA programs, all but ignored Sales, focusing instead upon Marketing, which seemed more strategic and professional. That’s no longer true under the “consultative selling” model. Vendors can hardly expect customers to wel- come sales reps into their business as consultants and trusted advisors if all those reps bring to the table is company-specific information and some rudimentary selling skills. As a result, companies in an increasing number of indus- tries are hiring sales reps who have technical degrees or equivalent experience specific to the industry in which they’ll be selling. For example, it is not at all unusual for electronics firms to hire sales candidates who have a BS in Electrical Engineering and then train them to sell, which is seen as easier than providing technical train- ing to employees with a sales background. At Samsung, for example, sales reps work alongside their customers’ engineering staff during the early phases of a project, To summarize, the Internet has made the following changes to sales training: • Motivational sales training is no longer effective • Consultative selling requires business acumen • Some companies now provide college-level business classes • Academia is finally taking Sales more seriously • Companies are investing heavily in sales training helping to devise ways to build custom circuitry into future products, according to Joe Virginia, former vice president of Samsung Semiconductor’s LCD business. In other cases, companies are providing extensive industry-specific training to bring sales reps up to speed. For example, Genzyme Biosurgery, a maker of products for cartilage repair and severe burn treatment, puts new sales reps through an eight week training program that includes basic anatomy, surgical vernacular and protocol, and how to interpret and explain clinical data related to what the product performs, according to Devin Hughes, the company’s Director of Sales. Even business schools are starting to take Sales more seriously. As of February of 2011, more than 50 colleges now offer some kind of certificate or degree in Sales, according to the Sales Education Foundation, an orga- nization that tracks college-level programs. Virtually no business schools offered programs of this sort twenty years ago. Another indication of the growth of sales professional- ism is the sales training business which has grown from a relatively small industry comprising a few firms into a $4 billion business in 2008 in the United States alone, according to the Sales Training Vendor Guide, published by the ES Research Group, a firm that studies the sales training market.
  15. 15. 16 How the Internet Is Changing the Role of the Sales Professional In the traditional “information delivery” model of selling, the sales rep delivers a “sales pitch” that provides informa- tion (features, benefits, etc.) that’s intended to convince the customer to buy. The model also laid great emphasis on “closing” – getting the order – and upon techniques that help manipulate the transaction towards that end. In some companies, aggressive selling behavior was treated with an almost cult-like reverence, as shown in the movies Glengarry Glen Ross, based upon the Pulitzer Prize- and Tony-winning play by David Mamet or Barbarians At The Gate based upon the book by Bryan Burrough and John Helya. Sales teams had a culture where a sale rep would be considered stupid and lazy if he or she weren’t constantly pushing to make a deal. This aggressive style also led to the use of unethical methods which has been a major contributor to the less-than-professional image that has stigmatized sales as a profession in the eyes of a major part of the public including many business execu- tives and university faculty. That selling model assumed that customers understood what they wanted to buy or could be easily convinced and would therefore decide whether to buy from the rep depending upon how well the sales rep could “pitch” the product. However, that approach tends to be aimed at individual consumers for a Business to Consumer product line but is seldom the case when the customer is outsourcing a major function, or setting up a complex supply chain in a more corporate or organizational environment. In these cases, the sales professional asks questions of a customer in order to better define a problem. After the problem is defined, and agreed-upon by both parties, the sales rep determines if his or her firm has a combination of products, services and/or alliances that can solve that problem. That solution is then offered to the customer, not in the form of a canned pitch, but in the form of a proposal or presentation customized specifically to that customer’s needs.
  16. 16. 17 This “consultative selling” model differs from the “infor- mation delivery” model in several respects. Sales profes- sionals using this model typically do not assume that the customer has a complete understanding of the problem; in fact, they assume that the customer may not recog- nize a problem exists. As described in Jeff Thull’s Mastering the Complex Sale, the sales professional asks questions about the customer’s business situation, locates the root problems that are causing that business to run less effectively, and then proposes ways to work together to address the root prob- lems. The sales rep typically proposes a solution that the customer would not have been able to put together and would not have thought to ask for. This form of selling has its roots in classic works on sell- ing like Dale Carnegie’s How to Win Friends and Influence People (1936) and Neil Rackham’s SPIN Selling (1988) and more recently documented in Achieve Sales Excellence (2007) based on research with 80,000 business custom- ers and Building a Winning Sales Force (2009) by Andris Zoltners. There have always been industries that have depended on their suppliers for solutions to complex problems. In such situations, it was normal for the sales professional and the customer to work closely together to come up with a solution to a complex problem. For example, the aerospace and defense industries have long used a complicated contracting and sub-contracting system to create complex systems. And there are numer- ous examples, going back decades, where manufactur- ers design specific labels, sizes, delivery methods for a particular customer. What’s different today is that this sales model, in one form or another, has become nearly universal in business-to-business transactions. Unlike the “information delivery” model, the “consulta- tive selling” model requires a sales professional to have a deep understanding of the customer’s business, the economics in which that business operates, and the abil- ity of the rep’s own offerings to become elements of a solution. And that, in turn, is forcing companies to look for a different kind of sales candidate and to provide significant training in industry-specific and business- specific subject areas. To summarize, the Internet has made the following changes to the role of the sales professional: • Selling is now consultative rather than informational • The aggressive sales tactics of the past are now meaningless • Sales professionals must now diagnose problems • Sales professionals are responsible for providing solutions • Sales professionals need deep understanding of business in general • Sales professionals need deep understanding of specific customer challenges • Sales professionals must develop acute political savvy Beyond that, the sales professional must be extremely as- tute politically (another soft sales skill requirement), in order to create a network of influence and borrowed authority through the entire sales cycle. In other words, selling at the highest level has become an extraordinarily complicated and challenging task that can be far more difficult than in- ternal management or other tasks where authority derives partly from organizational position.
  17. 17. 18 Conclusion SOURCES: * Howard Stevens and Jeff Cox. The Quadrant Solution: A Business Novel That Solves the Mystery of Sales Success. (AMACOM, 1991) * Carnegie, Dale. How to Win Friend and Influence People. (Simon and Schuster, 1936) * Walter A. Friedman. Birth of a Salesman: the Transformation of Selling in America. (Harvard 2005) * David Mamet (screenplay), Glengarry Glen Ross. (Lion’s Gate Studios, 1992) * Neil Rackham, Spin Selling. (McGraw-Hill, 1988) * Linda Richardson, Perfect Selling. (McGraw Hill, 2008) * Anneke Seley and Brent Holloway. Sales 2.0: Improve Business Results Using Innovative Sales Practices and Technol- ogy. (Wiley, 2008) * Douglas A. Smock, Robert A. Rudzki, Steve C. Rogers. On-demand Supply Management: World-class Strat- egies, Practices and Technology. (J. Ross, 2007) * Dave Stein. Sales Training Vendor Guide. (ES Research Group, 2009) * Howard Stevens and Theodore Kinni, Achieve Sales Excellence: The 7 Customer Rules for Becoming the New Sales Professional. (Platinum Press, 2007) * Jeff Thull, Mastering the Complex Sale: How to Compete and Win When the Stakes are High. (Wiley, 2004) * An- dris Zoltners. Building a Winning Sales Force (AMACOM, 2009) * Howard Stevens and Jeff Cox. Selling The Wheel: Choosing The Best Way To Sell For You Your Company Your Customers . (Simon & Schuster, 2001) It’s a truism that a massive change in technology demands a corresponding change in corporate culture. The old archetype of the sales rep as a maverick individual who closes the big deal and collects the big commission is becom- ing increasingly quaint and obsolete. With customers ordering some products and services directly over the Internet and with B2B connectivity linking the entire corporation into the sales process, selling has become a more collabora- tive effort. The Internet has forced sales reps to be less oriented toward paperwork and “stroking the system” and more ori- ented toward working directly with customers to come up with solutions. Sales reps will increasingly be expected to become experts in their fields who can act as consultants, help customers to understand their needs and then come up with a plan to fulfill those needs. Sales professionals (and the firms that employ them) have a choice. Either fight against this overwhelming trend or embrace it. While embracing it will require massive changes at every level of the sales environment, it will ultimately be to the advantage of sales professionals. What will emerge is a new breed of sales professional – smarter and more knowledgeable, and far more professional than ever before.
  18. 18. 19 Howard P. Stevens Howard Stevens is Chairman of Chally Group Worldwide. Mr. Stevens specializes in leadership development, suc- cession planning, customer and market analysis, and sales benchmarking. He is the creator of the original sales product lifecycle classifications and designed the major 5-year longitudinal study of leadership develop- ment for the U.S. Department of Defense and NASA. A licensed clinical psychologist, he is also known for his research and programs to develop a professional sales curriculum at the university level. With diversified inter- ests, he is the author of several books on sales and man- agement (published in multiple languages) including Achieve Sales Excellence, The Quadrant Solution and Selling the Wheel. He has written many articles and is a frequent speaker and radio and television guest. His World Class sales benchmarks program has been presented over 500 times across 30 countries for corporations, trade asso- ciations, government agencies, and universities. He has been a guest on CNN, Bloomberg USA, National Public Radio, Radio Free America, and other business-based programs. Mr. Stevens also taught “World Class Sales” benchmarks at the Columbia University Graduate School of Business and other universities, and serves on the Sales Advisory Board for Ohio University and the Foun- dation Board of Wright State University. About the Authors Geoffrey James Geoffrey James writes the world’s most popular sales- oriented blog, “Sales Source on Inc.com.” Previously named “Sales Machine” and hosted on CBS, Geoffrey’s blog won awards from both the Society of American Business Editors and Writers and the American Society of Business Publication Editors. Unlike other sales blogs, Sales Source on Inc.com is 100% independent. Geoffrey doesn’t do sales training and he doesn’t do sales consulting. That frees him to present his readers with the very best ideas from the very best sales experts and executives. To get updates, sign up for his newsletter or the @Sales_Source Twitter feed. In addition, Geoffrey has published hundreds of articles in dozens of national magazines, including Men’s Health, Wired, Brandweek, Technology Marketing, and Selling Power magazine. About Chally A global leadership and sales potential and performance measurement firm, Chally Group Worldwide utilizes our industry leading research, predictive analytics and advisory services to ensure our clients have the vital information to minimize risk associated with making critical talent management decisions relating to selection, alignment, devel- opment and succession planning. With over 37 years of experience, Chally provides tools in more than 24 languages across 49 countries.
  19. 19. © Copyright Chally Group Worldwide Chally Group Worldwide 3123 Research Blvd Dayton, OH 45420 937.259.1200 800.254.5995 www.chally.com

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