8 ways to win over IT buyers in a downturn

The economic downturn has resulted in IT budgets being slashed and many key projects being delayed, postponed, or even scrapped.

As a consequence how organisations are buying and implementing IT has changed, with 8 important implications for the way organisations are selling.

1. An immediate payback - most customers are delaying making decisions on any project that cannot demonstrate an immediate pay-back. They want to see results fast, or solve an immediate problem and they won't just take the vendor's word for it. They need evidence, or more to the point justification that is both quantified and verified.

2. Cutting the cost - there is widespread re-negotiation of contracts, with customers seeking to cut back on rates, project days, etc. With fewer new projects starting and increased vendor competition, suppliers have no choice but to adhere to customer requests for cost reductions.

3. Sharing the risk - vendors are having to consider risk - reward based pricing in order to revive stalled projects. But how do you reduce uncertainty about the level of risk, or the likelihood of reward - you need ask yourself this question.

4. There is Zero tolerance for project over-runs, or delays. Tighter control of spending and more disciplined project management of initiatives ranging from migration to virtualisation. This has given renewed emphasis to agile methodologies of project delivery, including regular iterations, or releases.

5. Phased implementations - increasingly cash strapped and risk-averse customers are looking to break down major initiatives into bite-size chunks that are both easier to manage and easier to fund.

6. New licensing models - in this era of IT cost cutting anything goes. Vendors are 'going back to the drawing board' with software/hardware investment , service rates and the timing/staging of licensing renewals under review.

7. Point solutions - in this present climate few IT managers and directors are out to change the world, or even their major systems. The focus has turned to point solutions, that will solve an immediate pain. Of course, these solutions must easily integrate with existing and future technologies.

8. An end to the Big Vendor bias? 'We only buy HP, or IBM' is something that vendors are hearing less these days. The trend towards consolidating all technologies with a single vendor is dead. Even if this had proven successful, the budgets are not there for it at present.

Ray Collis - sales actvity and sales effectiveness

Who is needed on your selling team? - 8 key roles

Sales as we know it has changed forever, gone are the days that 2 people can sell high value deals without help from domain, technology and delivery experts. This fact has implications for the sales and relationship competencies across your organisation.

We all know that buying teams are getting larger and decision making is more complex. But what about your selling team - has it changed accordingly?  Is your company adopting a team-based approach to sales?

What type of sales team is needed to close a €500,000 plus deal?

I was chatting with two successfull entrepreneurs yesterday about selling complex solutions into major organisations and we began to talk about the type of sales team needed to close big ticket deals. 

Based on our collective experience of over 50 years in business we identified a number of key roles critical to moving opportunities from leads to meetings to sales cycles to orders.

1. A sales person - who adopts an expert led and consultative selling approach 

2. A pre-sales support person who knows the domain

3. A product/market expert who can talk knowledgeably about the industry

4. A Product director -  who owns the technology vision and road map 

5.  A Senior developer who can be paired off with senior tech staff from the client/buying team

6. An account manager who can be introduced towards the end of the sales cycle who has delivered similar projects previously

7. An implementation/customer services driver to manage delivery, customer service and steering group reviews

8. The MD & maybe even chairman - to build confidence and add gravitas

The most successful organisations sales is everybody's job.  The organisations who are closing business are holding workshops and team meetings with their key staff to remind them of this. 

 

Even in a downturn there are opportunities - one company's story

Market conditions are tough, but some companies are finding it tougher than others.  That is because while everybody is facing the same downturn, not all are reacting to it the same way. Here is an encouraging example.

A large services firm that has hit their revenue target month on month for the first quarter of the year this against a backdrop of:

• Tighter budgets in the sectors they are selling to
• Their local competition closing offices and cutting headcount

In Sept 08 the situation was as follows:

• This firm didn't have to sell proactively in years
• They had very few new local projects to work on
• They faced stiff competition for international projects
• Making contact with past clients, prospective clients was at an all time low

Over a three month period this firm took a number of key steps to address the situation:

• Firstly they asked people at the grass roots to help with business development
• Secondly they held workshops with all customer facing staff to remind people about staying in contact with clients
• Thirdly they reviewed all their old contacts, centralised them and began to make proactive contact
• Finally they started to note conversations they were having with clients at all levels and got senior staff to come along to meetings to share their insights and expertise with contacts

All quite simple you might say. Well the results have been interesting to see.

• Activity levels have increased without hiring a single sales person
• Over a six week period four of their project team handled 20 proposals and won 7
• In-house experts without any background in sales are spending a few hours a week on business development
• Their sales target hit 3 months in a row
• A new pipeline of real work that will bring delivery headaches

I highlight this story because it shows that new projects can be secured despite all the doom and gloom we hear on a daily basis and as this company proved everyone can and should contribute to business development.

What buyers look for in a sales person

We were hosting a sales workshop recently with some senior account managers and project managers and they seemed surprised at the characteristics buyers look for from their partners and suppliers.

As a result I asked a director of IT who holds a size-able budget what characteristics he looked for in the vendors/service providers. His answer

• Expertise
• Listening skills
• Someone who isn't too pushy
• Someone who is willing to say they don't know the answer buts knows someone who doea
• People who follow up professionally

The message: people want to meet experts not know it alls, people who are confident in their ability and people who know what they don't know.

How to access 1000s of new trusted contacts using Linked-In

You have often heard it said that what matters ‘is not what you know, but who you know’. Yet, few people consider themselves to be good at networking. But, social networking once the reserve of teenagers, has reached the business world providing business networking with a real shot-in-the-arm.

Everybody has heard of the 6 degrees of separation – the notion that there are only 6 people between you and anybody that you could want to contact. Now Linked-In, the professional equivalent of Facebook and Beebo, shows business people that they are better connected than they think.

Linked-In is essential for every professional – whether they want to find new customers, build their professional profile, find out about a company, recruit staff, or look for a new job. Moreover it is by-in-large free. Today it has 38 million members and growing, in over 200 countries around the world.

It enables most people to effortlessly double, triple and quadruple the number of contacts to which they have access. In fact it will quickly provide access to 1000s of new trusted contacts. I use the word 'trusted' because unlike cold calling, these people are linked to you by somebody they have worked with, studied with, or done business with in the past.

Thereby it really accelerates business development, moreover because it involves leveraging established past and present; friends, colleagues, clients, etc. it is much easier and more effective than cold calling.

Getting Started with Linked-In

Here is how it works:

1. Sign-up for free and enter your career and educational history – it is a little like preparing your CV, only that you are guided step by step online.

2. As you build your profile you will be presented with other members who have worked in the same companies and studied in the same institutions (at the same time). You can choose to link yourself to them. When you do they will receive an email asking them to accept a link from their profile to yours.

3. You can import your contact list from Outlook (or another source) to Linked-In and that will result in an even longer list of people to whom you might also be linked. Again you can select any of the automatically generated contacts and they will then receive an email requesting the link to you.

4. There are two things that determine the strength of your profile on Linked-In; how many connections (or links) you have to others, as well as how many recommendations you have received. The latter is a direct result of how many others you give recommendations to, and how many your revive in return. This aspect is pretty well controlled, before a recommendation from another appears on your profile you will get to view and approve it.

5. As seen below you will very quickly have access to thousands of new contacts via your network. Here is an example of the statistics you will be able to view, including where people in your network are located and what sectors they belong to.

6. If you want to sell to a new company, for example Company XYZ, then you can search for the company and see if there is somebody in that company that either you know directly, or that you know through somebody else. You can then view their profile and contact them by email. You can also contact a certain number of people directly even if you don’t have any links (that is part of the paid service). When you contact the person they will receive an email notification to their email inbox and can also pick up the details next time they log into Linked-In.

7. You will have both a personal and a private profile on Linked-in – that way you get to decide who can see what. For example, if somebody searches for you in Google there is a good likelihood your public profile will appear. But, some aspects of your profile can be kept private to only those that are linked to you can see.

8. You can join groups on topics that are of interest (e.g. ERP software) whereby you can share thoughts and opinions with other members. You may be interested in groups in particular that your potential customers might be interested in.

9. Put Linked-In in your internet favorites (if you use Firefox you can download an extension that integrates it with your browser’s menu) and make visiting the site a habit. It is useful to know that you can set notifications of new contacts, emails and recommendations you have received to get them all just once a week (as opposed to receiving them by email as they arrive). You can add a link back to your Linked-In profile to your email signature, your personal bio anywhere it appears on the web.

Pricing is a blend of art and science

Many managers struggle with the issue of price.  That means they are leaving money on the table.  The ability to justify, negotiate and command high margins and prices is the supreme test of salesmanship, as well as the most meaningful measure of quality.

1. Why Managers Struggle To Get The Price Right

Pricing is a blend of art and science.  For economists it is a relatively straight-forward equation – that point where demand and supply meet.  But in the real world how prices are set is much more complex.  That is why it cases problems for managers.

 Price is only one half of the price-value equation, albeit the half that tends to get most attention.  A product, or solution that is 50% more expensive, but delivers a 20% saving year on year over and above others solutions is still the best solution to buy.  Hence, the increasing focus on pay-back, or return on investment.

Even for rational buyers and economic buying decisions price involves the notion of psychology and perception.  Products and services that may be relatively similar in terms of form and function can have vast differences in price depending on brand name, styling and other quite subjective factors.  Indeed, a whole array of difficult to weight factors, from the reputation of the company to the relationship with the salesperson, can outweigh price. 

Part of the reason for the difficulty in setting price, is the fact that there are few absolute rules ot follow and several paradoxes, for example:

      ·         For some products raising the price perversely increases demand, or at least desirability. 

      ·         Price is relative and increasing it can be effectively achieved by reducing the volume of the product, the length of service, etc.

2. Pricing: Key Questions to Address  

Here are some of the key questions Managers should address in setting, or revising price:

1.       (a) What is the cost?  That is what do you need to charge to cover the cost of producing and delivering the product/service, as well as the cost of its development and marketing? 

Tips:

·         To avoid under-estimating the cost of marketing, take the cost of development and multiply it by 3.

·         Calculate the total cost of development and taking your product, or service to market, adding up all direct and indirect costs.  Spread this over different estimates of volumes to be sold.

·         Of course, to that needs to be added a profit margin representing the return on investment and reward for risk to the promoters.

2.       (b) What is the customer willing to pay?  The answer to this question is based on an understanding of the value and the payback of you solution.

(i)    Understanding the value

What are the factors that determine the perceived value of the solution?  Break your product/solution into components (e.g. scoping, pilot, installation, integration, commissioning, ongoing support, etc.) and, where possible, isolate the benefits/value associated with each.  Re-arranging these components can impact on the value.  

In terms of market research report they may put little value on the research process and reporting, but great value on the conclusions and recommendations.  So it would make sense to increase one and perhaps reduce the other.  Can you separate out different elements and charge for them separately (e.g. service)?

Tips:

·         Keep in mind that price sensitivity, perceived need (or urgency) and value for money of your solution will vary greatly from segment to segment. 

·         It can also vary according to how you position your solution and the promises, benefits, or features that you highlight.

 (ii)   Understanding the payback

How significant is the problem that the solution solves?  What is the payback, or return on investment for the customer?  What saving, or additional revenues will ultimately result from the solution?   What is the customers total cost of ownership?  What proportion of that total cost does the price account for?

Tips:

·         Create a spreadsheet to calculate the implication of your products, or services on the customer’s business.

·         Involve the customer in modeling the business case / return on investment for your solution.
It is generally best to be modest, or realistic in your assumptions.

·         Track how customers apply and benefit from your solutions.  Undertake a before and after analysis of the impact.

 

3.       (c) What are competitors charging?  What do the alternatives cost?  

 

Tips:

·         Keep the list of alternatives as broad as possible, including the cost of alternative technologies, or solutions and even the cost of doing nothing.

Questions:

·         Do you start with a low price to penetrate the market and then increase?

·         Do you have a higher list price, but be prepared to negotiate?

·         Do you offer a number of product variations/service alternatives with different prices attached to each?

·         Do you charge for your solution in terms of a large upfront payment, or alternatively in smaller increments?  Do you charge once-off or per usage / ongoing license / retainer fee? 

Value Based Selling

Points to consider in value based selling:

1.       A lack of understanding of the real requirements, a failure to diagnose the real reason the client requires a solution. Diagnoses of the real requirements is done with the customer in the room not back in the office with a team of internal people. It should not be rushed. It will take a number of meetings especially in high value sales. Developing value word equations the customer understands and can apply to his or her own business can be effective

 

2.       When selling solutions to complex buying units, people need to understand companies get results and people look for personal wins. The vendor needs to understand the personal win that is going to motivate each member of the buying unit as well as the corporate results. These personal wins can unlock added value that people will pay for

 

3.        Value is about giving an incentive to change, once the incentive is there the customers focus then switches to assuring that the solution being considered can be delivered as promised – they will associate value in the delivery process, project people and tools to deliver – a point often underestimated

 

4.       Value needs to be win win – if it isn’t then delivery and the valued repeat sale will not happen

 

5.       Walking away can be the right thing to do – two of our clients walked away from deals in 2007, the deals were awarded to their competition. The projects were put on hold in 2008 ad our clients were asked to rescue the projects.

 

6.       Value is built across the sales cycle not a the end of it

 

7.       It is very difficult to position your value when responding to RFI’s and RFP’s

What do you do when your client wants to renegotiate on price?

Most buyers are passing on the pain of budget cuts to their suppliers, they don’t have a choice.

However, some suppliers are better insulated against cuts than others, specifically those with whom relationships are strongest, satisfaction is highest and, most important of all; those who are able to quantify their impact on key business drivers.

The next group that is faring better with respect of cuts, is those suppliers adopting a proactive approach – dealing with it before receiving the purchasing departments email or phone call.

1. Ask the Hard Questions First

- Is the contract worth it? Will your company die without this contract? What is the balance of power? Is the customer a good payer? How profitable is the work?

- What is the buyer’s motivations? What are the underlying business drivers for the customer? Is it cutting costs, driving efficiencies, minding the cash, targeting non-essential costs, delaying capital projects, or maximizing revenue/value capture? Which of these is involved can have a subtle, but important impact on how to renegotiate price.

- How valuable is the relationship? How successful the renegotiation is, depends on the relationship in question. How far you are prepared to go to meet the customer’s needs depends on how important the customer is to your business. But it also depends on your assessment of how secure the customer is - what is the real financial position in the client company? Will they survive?

- What is the bottom-line impact? Go back to your project budget, your cash flow and your P&L. What impact will price cuts have? What is the impact on margins and profits of different strategies to achieve cuts of 5%, 10% and 15%? Some aspects of projects are less profitable than others, some may even be sub-contracted and deliver only small margins - target these areas for the greatest cuts.

- What is the market outlook? What are competitors charging? What is the cost of switching?

2. Strategies to Use in Renegotiation

- Prepare for the negotiation – practice lots of scenarios – ensure you have competitor pricing, use information from project reviews, come with suggestions, play good cop and bad cop, don’t decide there and then allow time to consider.

- Revisit your contract. What does your contract stipulate in terms of re-negotiation? Although you may adhere to requests for renegotiation even if not technically required under contract, timing and related issues are very important. ‘All deals are renegotiable’, but that largely depends on the bargaining power of the parties involved.

- Use the Right Parties to Renegotiate. The choice of who sits in on the re-negotiation is very important. Don’t just leave it to the person who is dealing with the account on a day to day basis. Ensure any re-negotiation is submitted for approval to the most senior level.

- Decide in advance your final negotiating position and how you are going to try to improve on it. Consider the milestones in the neogitation from your buyers perspective.

- What is the quid pro quo? With a win-win in mind what can the buyer offer in return for a price cut? For example, if you’re unhappy with the price we’ve agreed and want it cheaper then I might renegotiate for a higher volume of orders from you.

3. Key Principles To Follow:

- Adopt a win-win approach – handle it well - put yourself in the buyer’s shoes - it is not personal, its business. Once the issue of a renegotiation is raised deal with it proactively, put a process and timeline in place to address the issue.

- Pass on your savings immediately, and if you don’t have any to pass on start cutting your costs and renegotiating with your own suppliers.

- Reframe the issues in terms of value, or the impact of your solution/services on the customer’s business. Have the anticipated benefits been achieved? Have unanticipated benefits arisen? Now you know the client, the environment, etc. much better than you did when the project began, or when you crafted the proposal you can bring that learning to bear on the project and cost benefit analysis review with the purchasing/procurement officer.

- Focus on efficiencies and driving additional benefits / value. Quantify the impact your solution is having in the customer’s business and identify ways in which this can be maximized. It may seem like you are revisiting some of the earlier stages of the sales process, but re-affirming needs and payback for the customer is very important.

- Examine the total cost of the solution – your cost may only be a small proportion of the total cost to the customer. For example a software client’s price was 1.5 million, however the customer organization had allocated 50 IT staff for 12 months to the implementation project which more than doubled the budget. Targeting this area could identify a wide range of savings.

4. Find innovative ways to cut the cost, including:

· Price differentiation – identify changes in the product / service that can have a significant impact on perceived value, that may include adjusting; support levels, feature set, scalability, etc. Some of these areas may cost very little, but greatly impact on level of perceived value.

· Simplifying the product - sometimes you have to stop adding value, as it is adding too much to your product cost.

· Re-package and re-bundle. Break down into components of value and cost.
· Target reductions in support costs, for example, improved self-service help functionality, or remote monitoring. These can all greatly reduce ongoing support costs.

· More flexible pricing (e.g. Software As A Service) or delivery models (e.g. phased implementations).
· Provide the customer with the option of self-provisioning / internal fulfillment of parts of the solution. E.g. the customer provides 2 manpower resources to reduce the implementation budget.

You Can't Recover From A Failed Pilot

Pilots play an increasingly important role in the sales process. It is not the fastest way to secure a sale, but sometimes it is the only way. In a high-risk business climate they provide an ideal vehicle to tangibilise product benefits and thereby secure buyer commitment.

The reality however is that while pilots reduce the risk for the buyer, they can have the opposite effect for the seller. Indeed, the experiences of our clients suggest that only one third of pilots agreed will lead to a purchase, with many pilots agreed never even getting 'off-the-ground'.

Pilots can be expensive, they can elongate the sales cycle and, if problematic, they can be very difficult to recover from. These are just some of the reason why pilots require careful management.

For early stage companies this is all the more important, where successful pilots are important in providing 3^rd party product validation and customer reference sites for future marketing.

Top 5 reasons why pilots fail

So, why do many pilots fail? Here are the top five reasons:

1. The pilot is entered into too readily, by the buyer or the salesperson. This in particular can happen with complex pilots that require a significant commitment of time and resources on either part.

2. The Pilot showcases the technology, but fails to prove the business case. While IT managers for example are delighted with the technology, that enthusiasm does not translate into a valid business case at C Level.

3. Clear and realistic success criteria not agreed, resulting in a mismatch of expectations, and the lack of a process for moving the buying decision forward post-trial. In too many cases customer criteria for evaluating pilot success are not written down and reviewed against results. For the selling organization there is often limited contact with end users and consequently the lack of a real feedback from the ‘coal face’.

4. Poor implementation on either side:

o Poor client side implementation- often stemming from a ‘not invented here’ mentality on the part of whoever has been delegated to manage the pilot. Show me who is managing the pilot client-side and I will tell you how successful your pilot is going to be.

o Failure by the selling organization to manage the pilot and in particular how the solution is used and surprises, or problems, that arise during implementation. An important factor here is a hands-off approach to supporting the pilot, poor users training and a lack of effective co-ordination between the sales and technical.

5. Priorities in the company change, or perhaps people, or politics change – the longer the pilot the greater the risk here.

A lesson from Google: keep your product simple

Products, or services don’t have to be perfect before you release them. In fact, holding out on getting to the market, until the product is finally ready could be a major business blunder.

This is surely a lesson that leading software developers like Google and others have learned. For example, I clicked to add an attachment in my Gmail account recently, to be greeted with the notice below:

Clearly, Gmail continues to launch new features not just in beta, but s part of a continuous stream of product iterations and new releases. Next quarters features will be richer than today’s, but the focus is on getting today’s products immediately into use among customer.

It used to be said that ‘good is the enemy of great’, however too many great products never reach the market. Limiting what a product, or service does, so that it can be sold next quarter, as opposed to next year is key to success. Besides, the one big launch at the end of a waterfall, has been replaced with a product roadmap dotted with regular iterations and releases.

There is another trend that we have noticed from buyers. The bells and whistles approach to new product development would appear to be at an end, with budget restrictions and cut backs focusing buyer attention on core benefits and features and how they impact on their business. With payback at the top of the agenda, the ‘nice to have’ features are suddenly less important.

Another trend is the focus on ‘point solutions’, as opposed to complete systems overhauls, or technology revolutions. Buyers want a problem solved and want the most practical and cost effective way of doing so. When it comes to ripping out the back end, adopting a new platform or implementing a new technology, many buyers prefer to wait until the present economic uncertainty reduces. So, it is fix a problem today mindset and change the company tomorrow. This mindset demands a point solution.