Tomicide Solutions, December 2010
By Tom "Bald Dog" Varjan
Podcast version: MP3 Version
Legend has it that Oscar Wilde's last words were...
"My wallpaper and I are fighting a duel to the death. One or other of us has got to go."
And although he had fought bravely, the wallpaper eventually won. And good ol' Oscar unceremoniously kicked the bucket.
Today, the same duel is taking place in many IT companies. History is forcing new sales and marketing practices on them, but they are bravely fighting for keeping the old practices.
They are still doggedly chasing after buyers with authorised and signed purchase orders in hot pursuit of the quick buck.
And one by one, those salespeople get their noses smashed by the brick walls buyers erect to keep salespeople out of their lives.
This proverbial wall is the purchasing department whose single most important task is to find reasonable IT service providers and beat them up on price.
And, as a result, IT companies are falling like flies. Here today, gone tomorrow.
But...
If you do "respected authority" type marketing and join your prospects' buying cycles early enough, then what you find is that some 97% are not ready to buy when you make first contact with them.
This is why replaceable vendors are busy chasing after the 3% of prospects that are ready to buy right away. They pay the astronomical price of their chasing games.
But let's talk about the 97% right now.
They are already in their buying cycles per se, but at the moment they're researching for information and educating themselves how to dig themselves out of their business predicaments. They are not ready to engage outsiders to solve their problems. They still believe that with a little research they can find enough free information to patch together their own solutions.
If you start pestering them with your cutting edge technology and technical solutions at this point, then there is one thing you achieve for sure: Buyers pigeonhole your company as a replaceable vendor, and when the time is right, they send you and RFP.
And now you're in a bidding war and there is a good chance that you will bleed to death. You may win the contract if you sufficiently underbid the other poor bastards who participate and respond to the RFP, but just because you win the battle (FRP) you may lose the war (Profitability to your firm.)
And do you know what also happens to vendors on a daily basis?
They get milked for information and samples, and buyers often decide to use to seek out the lowest bidder to implement the stolen ideas.
Einstein was right when he said...
"Only two things are infinite, the universe and human stupidity, and I'm not sure about the former."
Thousands of IT companies out there pay over $100,000 for each of their salespeople for activities that automated systems could do in a more consistent and predictable fashion.
What do most of these salespeople do when not meeting qualified buyers?
They follow up on their contacts.
And do you know what that so-called follow-up is? Any idea?
Putting it bluntly in plain English, they spend most of their time harassing prospects and try to push and shove them further down in their sales funnels.
And how do buyers respond to this harassment?
They do their level best to block salespeople out of their lives.
Prospects don't return voicemails and go hiding when salespeople show up at their doorsteps.
But then look at the sales side of the equation. Listen to most sales trainers and they talk about "Don't take no for an answer", "Keep on keeping on", "You stop follow-up only when either you or your prospect is dead."
Then in August 2006 editorial of the Harvard Business Review published a frustrated summary...
"Customers' buying processes have evolved in our world of ubiquitous, instant, global communication... but companies' selling processes have for the most part stayed the same."
Most IT companies still don't get it, and when investors pressure them for higher performance, they just hire more salespeople.
Why?
Because for some pervert reason, most IT companies are obsessed with gross revenue, often at the expense of net profit.
Once I've heard someone say...
"Revenue is vanity, profit is sanity and cash is reality."
And the way I see it, real cash is profit per employee. When you look at total profits, you can say that your company has grown by 100% but what if your company's headcount has grown by 300% then that will push up your cost of doing business, won't it?
So, total profit is not 100% realistic, is it?
Every decent pirate captain knows that the real booty is what each pirate receives because this takes the size of the crew into account.
Maybe one day Jack Sparrow or some other pirate captains will teach financial management at Harvard, and then even business leaders may learn this basic piece of knowledge.
So, let's wait and hope.
Let's look a closer look at Toyota. Only 3% of Toyota's gross revenue comes from Lexus. But, what also comes from Lexus is 61% of Toyota's net profit.
Anyway...
So, these IT companies hire more salespeople. Great!
But what kind of salespeople?
Just read some of the job postings for salespeople.
The kind of salespeople who like working with people, are motivated by money, can handle endless amounts of rejections and objections, can deal with abuse from shithead prospects, are good at pounding pavements, knocking on doors and dialling for dollars and are aggressive closers.
And, of course, most IT companies don't want to train their new salespeople. They hope to find "ready-made" kick-arse calibre salespeople who are willing to join the company on straight commission.
And this also snugly first the description of salespeople in vendorville. Replaceable vendors employ street peddlers and bazaar hucksters to use their tricks to drum up business.
And what kind of salespeople will apply for these low-brow positions?
Well, losers from the bottom of the sales scum barrel. Who else?
Losers most of whom the competition has already tried and either fired or rejected in the first place.
And while fungible vendors clog up the streets with their roaming salespeople, respected authority-calibre companies are figuring out how to grow to the next level of success without hiring more salespeople but using their existing resources more effectively and creating greater leverage using technology not headcount. That is...
So, what's the difference here?
Doing more of the same is about increment. It's about efficiency. Doing what we've always done, but doing it harder and longer. Keeping the same process, but throwing more time and effort at it. Increase the intensity levels of activities. It's about being obsessed with tactics and methodologies, often at the expense of strategy.
Improvement, on the other hand, is about effectiveness. It's about doing less of something different. It's about tweaking the process to get more output from the same or even less input. The focus is on the end result.
What this also means is that you don't need to "throw" live salespeople at prospects who are still in the "mildly interested" stage of their buying cycles.
You can offer human contact only when prospects click into the "wildly committed" stage. You don't have to "waste" manpower on prospects until and unless they demonstrate their intention to do business with you if you can fulfil their buying criteria.
And at that stage what you need is not traditional hucksters but technology professionals who are skilled in consultative selling.
And if you run a low-volume high-margin premium-calibre business and work with the premium segment of your market, you don't need legions of salespeople. You need only a few. A very few.
But now there is another dilemma. Do you need...
While you can find a few salespeople with basic technical skills, most buyers, often with advanced degrees in technology, never treat them as peers but as subordinates. And that creates price- and other objections.
Can you imagine a buyer with a Ph.D. in computer science discussing the possible purchase of a 6-figure server system with a high-school dropout salesman?
The buyer is likely to have questions, most of which the salesperson can't even comprehend let alone to answer.
Also, most technical people look down on sales and marketing, and resent the people who practise these dark and dubious disciplines.
But wait a second.
What technical people actually hate is traditional "peddler-type" selling. But because of their special education and expertise, they are excellent at key consultative skills, like analysis, diagnosis, synthesis and project management.
It means they are perfect for consultative selling.
And here we have to stop for a second and take a closer look at selling as a business function...
Many years ago, Prussian military strategist, Carl von Klausevitz defined war as...
"an act of violence intended to compel our opponent to fulfil our will."
Paraphrasing good ol' Carl, "Sales is defined as an act of manipulation intended to compel our prospects to fulfil our will." Buyers frequently experience buyer's remorse and leave transactions with a feeling of "I never come back here".
In the words of sales trainer and sales strategist, Frank Rumbauskas...
"Selling is about attempting to convince others that they want or need your products/services regardless of whether they do or do not really want or need them."
And this is exactly why tech professionals hate anything and everything related to client acquisition or business development. Because at most IT companies client acquisition boils down to the lowest common denominator: Plain old hucksterism.
But let's put a twist on client acquisition, and say, again, as defined by Frank...
"Buying is the act of willingly purchasing something that one wants or needs. The buyer leaves the transaction feeling satisfied and fulfilled."
So, now the question is this...
Do premium-grade IT companies need salespeople with technical skills or technical people with sales skills? And I don't mean traditional sales skills like building rapport, handling objections and closing skills. Those are great skills in vendorville, but in premiumland, those skills only repel buyers and scare them away once and for all.
So, let's forget about traditional sales skill, so tech people can breathe a sigh of relief.
First, what they don't need is traditional sales skills with thousands of masterful closes and objection handling techniques.
We have to understand that buyers want to interact with technical people because they're the experts, and buyers need help with their decision-making. Salespeople with bare minimum tech- and business savvy are not experts, thus unreliable, so buyers, who have already educated themselves on what they want to buy using the web, don't need to meet them.
But they want to talk to experts to find answers to their still unanswered questions.
Above and beyond being technical professionals, high-level decisions-makers are businesspeople, and they want to interact with technical people with business savvy.
They want to interact with technical professionals with...
Technology skills are obvious, so let's skip them.
Business savvy is general business knowledge with emphasis on the target market's industry. It's the ability to view your target market's business model from a "boardroom perspective". You have to be able to speak both server room- and boardroom English.
Communications skills are general communications skills with huge emphasis on questioning skills.
In traditional sales training, the experts talk about listening skills. And they are important. But in consultative selling, questioning skills are even more important.
Especially the kind of questions that allow your prospects to see their predicaments from new perspectives, so they get inspired to do something about it.
So, you have to decide what's more important to you: Impressive revenue figures or impressive profit figures.
Mark Twain once said...
"Thunder is good, thunder is impressive; but it is lightning that does the work."
Similarly, revenue is impressive, but it's your profit that keeps you in business.
So, let's focus on profits a little bit.
McKinsey's study of the Global 1200 found a 1% price increase, assuming demand remained constant, cause operating profits to increase on average by 11.1%.
By contrast, increasing sales volume, as most IT companies try to grow, every 1% revenue increase adds only 3.3% to profits.
So, it's pretty clear that what you need is not more sales volume, that is more clients or more sales leads, but fewer and better clients with better projects, sold at premium fees and prices.
And for that what you need is better positioning of your company in the marketplace. Positioning so good that the demand for your company far outweighs the work your company can supply.
In every market only the top 2-5% is what we can call cream of the crop. About 70% of the market is average. And about 25% is what we can legitimately call the sludge of the industry.
And positioning is about attracting that magic top 2-5% while avoiding the rest with outstanding dexterity.
In his book, The Ordeal of Change, Eric Hoffer wrote in 2006...
"In times of change, learners will inherit the earth, and the learned will find themselves beautifully equipped to deal with a world that no longer exists. The illiterate of the 21st century will not be those who can't read and write, but those who cannot learn, unlearn and re-learn."
With the widespread use of the Internet our whole lives have changed. And that includes the process of buying and selling complex, high-ticket and hard-to-explain IT products and services in the B2B world.
And either we roll with the changes or get buried by them. Using behemoth sales forces to harass prospects may have worked in the past but that era is over.
IT companies have to realise that buyers have the advantage. They buy whenever they are ready to buy, and they don' tolerate salespeople who push them around for quick purchases.
The bad news is that this change has stretched out sales cycles, but the good news is that a bigger part of the process can be automated, so you can make more profits employing fewer but higher calibre people.
And the key is that these higher calibre people are IT subject matter experts with strong peripheral skills in business and communications. Employing these people can help you to position your company as a respected authority that can magnetically attract the top 2-5% of the marketplace.
Come and let's discuss this newsletter issue on my blog...
Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.