Why There is No Value When You Provide Value Via Special Pricing

Posted by Dave Kurlan on Mon, Sep 29, 2014 @ 09:09 AM

negotiation Image Copyright: violin / 123RF Stock Photo

I was discussing the OMG Partnership opportunity with a gentlemen from Hong Kong, who objected to our reasonable licensing fees, refusing to pay any fees to a US company.  This is when the conversation began to resemble a sales call.  He did what a lot of buyers do to salespeople and began to boast about how well-positioned his company is to market OMG in Hong Kong and what a huge opportunity this would be for OMG.  He expected me to waive the fees in exchange for the great opportunity he described.

Most salespeople - 74% to be exact - not wishing to jeopardize a great opportunity, start negotiating or worse, agreeing, to the unrealistic requests.  There are ripple effects to this, for example:

  • It creates precedent, making it difficult to uphold terms with new and even existing customers
  • It makes whatever deal they sign very short term.  It is only a matter of time before someone else offers a better price and the business goes away before it has a chance to generate enough volume to make up for the discounted pricing. 
  • It threatens the profitability from the account.  If you reduce or waive fees and/or prices once, the customer expects to negotiate and win every time, making it more difficult to achieve profitability.
  • In OMG's case, the potential partner would have no skin in the game - removing the urgency for them to generate business, and further eroding the potential for a profitable partnership

Weak salespeople mistakenly see the compromise or discount as the value when, in fact, selling at a premium actually establishes the value.  This is so difficult for most salespeople to comprehend.  They think they are doing everyone a favor when they acquiesce, but in reality, they are setting everyone up for failure.  

Most executives think that this is a training issue, but they would be wrong.  While training can provide a number of strategies and tactics for dealing with prospects and buyers who behave this way, it doesn't change the misguided salesperson at all.  At best, these salespeople have new words, but still execute with the old beliefs.

The root cause appears in the way that salespeople make major purchases for themselves. If they have always shopped for the best price, that behavior becomes the norm.  When a prospect wishes to do the same, the salesperson views that as acceptable - appropriate even - and finds a way to accommodate.

This particular issue is one of the many hidden weaknesses that OMG identifies when we evaluate sales forces and assess candidates.  It can explain why margins are poor, why salespeople are unable to sell value, and why business is lost because of price.   Listen carefully to this entire audio clip, taken from a sales training webinar, where a salesperson ambushed himself as a result of this very weakness.

How many of your salespeople have this hidden weakness?  How many candidates have you considered that have this hidden weakness?  How would your business change if none of your salespeople had this issue?  What did you learn from the audio clip?


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Topics: Dave Kurlan, sales training, sales weaknesses, sales assessment tools, value selling,

How Four Variations Influence Sales and the Way People Make Decisions

Posted by Dave Kurlan on Wed, Jan 26, 2011 @ 08:01 AM

Over the past week or so there has been a terrific discussion on the Sales Management Executives Group on LinkedIn that drew an unusually spirited discussion on the use of sales assessment tools.  As of this writing, there were more than 7science0 comments, enough participation that I can easily break the comments into four types.

  • Opinions
  • Experiences
  • Gut instinct
  • Science

My regular readers know that I fall on the side of science, but the other three types of commenters feel so strongly about their positions that you would think they were talking science too.  It's great when many people chime in with their comments.  That's the beauty of a discussion forum or Blog - everyone gets to participate and weigh in.  But in the case of a question where its author expects an answer based on science, it becomes more difficult to separate opinions from experiences, gut instincts and facts.  Regardless of the type of comment offered, they all believe their comments to be factual.

Science shows that Objective Management Group's Sales Candidate Assessments are highly predictive - 95%.  But a very small group of clients may have experience that is inconsistent with that science, especially if they used it as a stand alone(without the process it was intended to be part of) tool, had a poor quality pool of candidates to use it on, if they failed to closely manage the people they did hire, if they ignored the warnings we provide on recommended candidates, or if there were non-performance issues (nut cases). Others could have an experience with assessments that aren't at all predictive of sales performance (personality and behavioral styles assessments) but used them with such a small sample size that luck led them to believe that those assessments were predictive.  OMG's sample size is 500,000 salespeople! 

Opinions about assessments, such as "they don't work", lumping dozens of brands, types, and results into a single category, is akin to making sweeping statements like, "cars aren't made very well",  "cell phones can only be used for talking", or "X-Rays aren't dangerous".  Opinions are often lacking in science and experience.  On the other hand, Gut Instinct is great -- when it's right -- and sometimes it is right!  But sometimes it's wrong and you can't make important business decisions on something as unreliable as gut, especially when you are more likely to try and force that kind of decision to be the right decision (in hindsight) by waiting too long to correct a mistake.

If you understand these four types of comments as they relate to a discussion on assessments, what happens if I suggest that prospects judge salespeople in the same four ways?  They subconciously sort whether they are being fed science, experience, opinion, somebody's gut, or some combination, as well as how it all impacts the way they make their decisions.  For simplicity, let's use the 4 traditional social styles - Amiable, Expressive, Analytic and Driver - as context. Analytics will only respond to science.  If they believe they are getting anything other than facts they won't buy.  Amiables need to trust the person they are buying from so when a relationship and trust have been established, Amiables could buy from someone who has strong opinions and good references and might even ignore the science-based salesperson who may not be a good relationship builder.  Expressives have many ideas to share so they may not want to learn that they are wrong from someone who is basing his solution on science.  Drivers want results - quickly - and may use all four - your science and the experience of others, and their own gut to form an opinion to quickly make a decision.

How much of today's article is science?

How much is opinion?

How much is gut?

How much is experience?

I always have an opinion and it's usually influenced by my considerable experience working with companies in more than 200 industries during the past 25 years.  I try extremely hard to make sure that my opinions can be backed by science and while I use gut instinct, I only use it to choose which subject to write about on any given day - I never use gut to make decisions about who to hire, recommend, or how to hire them!

 

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Topics: Dave Kurlan, sales hiring, sales management, sales candidates, sales assessment tools, linkedin, personality assessments

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Best-Selling Author, Keynote Speaker and Sales Thought Leader.  Dave Kurlan's Understanding the Sales Force Blog earned a medal for the Top Sales & Marketing Blog award for six consecutive years. This article earned a Bronze Medal for Top Sales Blog post in 2016 and this one for 2017. Read more about Dave.

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