2009 Neil Rackham Some Difficult Issues in Selling Today Milano
June 22nd, 2011 2011 Neil Rackham Neil Rackham Slide 2 2011 Neil
Rackham Seven Nasty Issues The end of the better mousetrap model
The death of f-t-f transactional selling The unsustainable hybrid
sales force The ever-extending sales cycle The decline of RFP
selling Skyrocketing costs of chasing an opportunity The need for
new selling models Slide 3 Whats Happening in the USA 2009 Neil
Rackham Unique Products/Services Substitutable Products/Services 3
years ago 10987654321 987654321 Today 10987654321 In 3 years 6.4
4.5 3.7 SSI Data: 47 corporations 773 sales executives Slide 4 2011
Neil Rackham Horrid rumors The average company has more than twice
as many competitors as it had five years ago. Customers today can
access more than 20 times as much data on competition than they
could five years ago. Slide 5 Station Break 2011 Neil Rackham What
does decreasing differentiation mean for the way we sell? Slide 6
2009 Neil Rackham The Better Mousetrap Business Model Create a
mousetrap that is unique or highly differentiated The value lies in
the mousetrap The role of sales is to communicate the value of our
mousetrap So sales is value communication Slide 7 Sales becomes
value creation, not value communication So the role of sales is to
add value to our mousetrap Theres not enough value in the mousetrap
to differentiate us from competition Our mousetrap is one of many
ways to kill mice 2009 Neil Rackham The Alternative Business Model
Slide 8 2011 Neil Rackham Seven Nasty Issues The end of the better
mousetrap model The death of f-t-f transactional selling The
unsustainable hybrid sales force The ever-extending sales cycle The
decline of RFP selling Skyrocketing costs of chasing an opportunity
The need for new selling models Slide 9 Two Customer Value Types
2010 Neil Rackham Value = Benefits Cost Consultative
customersTransactional customers Know what they want Treat you as a
commodity Buy on price and convenience Have a problem Value your
time Buy on expertise and trust Slide 10 2010 Neil Rackham Three to
Five Years Ago TRANSACTIONALCONSULTATIVE Advice focus Expertise
decision Want meetings 10% were transactional $ 10% were
consultative Most customers would pay a little extra for some
advice Cost focus Convenience decision Dont want to meet Slide 11
2010 Neil Rackham Customers Today TRANSACTIONALCONSULTATIVE Advice
focus Expertise decision Want meetings More clients buy
transactionally $ $ $ The middle is going away. Cost focus
Convenience Decision Dont want to meet More want deeper
consultative relationships Slide 12 2009 Neil Rackham The
Transactional Problem A face-to-face transactional sales force
costs too much in a market that, by definition, buys on cost.
Transactional customers dont want and dont need face-to-face
salespeople. The talking brochure is cumbersome, costly and
inconvenient. More than one third of the average sales force are
talking brochures. Slide 13 2011 Neil Rackham Seven Nasty Issues
The end of the better mousetrap model The death of f-t-f
transactional selling The unsustainable hybrid sales force The
ever-extending sales cycle The decline of RFP selling Skyrocketing
costs of chasing an opportunity The need for new selling models
Slide 14 Station Break 2010 Neil Rackham Most sales forces have
hybrid salespeople who pursue both transactional and consultative
business. Does it work? Slide 15 Mixing Transactional and
Consultative: 2010 Neil Rackham A Great Truth No sales force can be
effective if the same salespeople are chasing a mixture of
Transactional and Consultative opportunities. Slide 16 Why
Transactional and Consultative Dont Mix: 2010 Neil Rackham Any
salesperson who is talented enough to make Consultative sales is
too expensive to use for Transactional opportunities where
customers dont want, dont need and wont pay for high-level sales
talent. Economic Reason Slide 17 Why Transactional and Consultative
Dont Mix: Psychological Reasons 2010 Neil Rackham When salespeople
have both Transactional and Consultative opportunities, they always
pay too much attention to the low-margin transactional business at
the expense of higher margin [but longer sales cycle] Consultative
opportunities. Slide 18 A Case to Show it Works 2010 Neil Rackham
Oracles sales force sold database products [transactional] and
applications [consultative]. Predictably, sales of database
products were good; sales of applications were failing. Despite
initial sales force opposition, Oracle took database sales away
from the sales force and sold them through Oracle store, telesales
and internet. Sales of applications rose dramatically, database
sales remained at the same level with lower cost of sales. Slide 19
2011 Neil Rackham Seven Nasty Issues The end of the better
mousetrap model The death of f-t-f transactional selling The
unsustainable hybrid sales force The ever-extending sales cycle The
decline of RFP selling Skyrocketing costs of chasing an opportunity
The need for new selling models Slide 20 Station Break 2010 Neil
Rackham Why are selling cycles getting longer? Slide 21 2009 Neil
Rackham Why Cycles are Getting Longer More complex product /
service offerings. More customers involved in the decision. The
need to invest earlier in the cycle [the end of RFP selling]
Customers expect much more from the sales process. Customized
solutions. Slide 22 The Customer Decision Process 2010 Neil Rackham
Recognition Of Needs Recognition Of Needs Evaluation Of Options
Resolution Of Concerns Negotiation Of Terms DECISION RFP Earlier
entry is essential for success By the time the RFP is issued: your
value creation opportunity is limited 80% of the decision has
already been made Slide 23 2009 Neil Rackham Another Changing
Business Model Understanding & scoping the problem PRE-CONTRACT
Delivering the solution POST-CONTRACT The OLD Model... Developing
the solution Slide 24 2010 Neil Rackham Another Changing Business
Model Understanding & scoping the problem PRE-CONTRACT
Delivering the solution POST-CONTRACT Developing the solution...
the NEW Model Slide 25 Station Break 2010 Neil Rackham With selling
cycles starting earlier, extending longer and involving more
people, how much does it cost to pursue a typical complex sales
opportunity today? Slide 26 2011 Neil Rackham Seven Nasty Issues
The end of the better mousetrap model The death of f-t-f
transactional selling The unsustainable hybrid sales force The
ever-extending sales cycle The decline of RFP selling Skyrocketing
costs of chasing an opportunity The need for new selling models
Slide 27 2009 Neil Rackham Sales Costs: some facts It costs IBM
Global Services an average of $480,000 to pursue each opportunity.
The Big 4 accountants spend upwards of a million to try to get an
audit. Very few companies know what it costs them to chase an
opportunity. Slide 28 Station Break 2010 Neil Rackham So what can
organizations do to control these skyrocketing costs? Slide 29 Five
practical suggestions Over-resource the best opportunities Take
opportunity selection out of the hands of salespeople Involve
marketing and marketing tools in opportunity selection Push
transactional opportunities to cheaper channels Upgrade the
consultative selling effort Slide 30 2009 Neil Rackham More nasty
thoughts What if we dont create the kind of value the customer
wants? Or worse, what if we create expensive value and once weve
solved the problem the customer goes to a cheaper competitor? Slide
31 What is Value? 2009 Neil Rackham Value is something the customer
is prepared to pay for Value = Benefits Cost Slide 32 Customer
Value Survey We asked 1,100 buyers from US Companies: 2009 Neil
Rackham H as anyone ever made a sales call on you that was so
valuable you would willingly have pulled out a check book and
written them a check for the call? Slide 33 Where Clients See Value
2009 Neil Rackham 98765432101 Change of strategic direction Problem
solving & customized solutions Client advocate Time-stamped
info on industry/competition Talking brochure: negative value added
Slide 34 Station Break 2009 Neil Rackham This was a general study
of business-to-business buyers. Do professional services clients
see advisors value in the same way? Slide 35 2009 Neil Rackham How
do Advisors Create Value?* Objective/challenging point of view 4.8
Useful frameworks to see problems clearly 4.6 Play trusted
advisor/counselor role 4.5 Bring new ideas 4.3 Solve problems were
not equipped to deal with 4.1 Help spot trends 4.0 Bring approaches
from other industries/companies 3.9 Prevent re-inventing the wheel
3.9 Dedicated resources without run the business pressure 3.5 *
Adapted from John DeVincentis BAH study Slide 36 Station Break 2009
Neil Rackham How much of the value we create happens before the
contract is signed? Slide 37 2009 Neil Rackham Before? During?
After?... All 3? Objective/challenging point of view Useful
frameworks to see problems clearly Play trusted advisor/counselor
role Bring new ideas Solve problems were not equipped to deal with
Help spot trends Bring approaches from other industries/companies
Prevent re-inventing the wheel Dedicated resources without run the
business pressure Slide 38 2009 Neil Rackham Where We Create Client
Value BEFORE DURING A significant amount of the value we create
occurs before the contract is signed Its unpaid and clients
increasingly expect it Its costly [IBM Global Services spends
$480,000 on each opportunity] Its risky when low cost competitors
can undercut us on solutions and approaches weve created during the
sales process AFTER Slide 39 Station Break 2009 Neil Rackham How do
we avoid the value trap of aiding competitors by creating expensive
value for clients who then dont contract with us? Slide 40 2009
Neil Rackham Three Ways to Avoid the Value Trap Better opportunity
selection Up-front and frank value discussion Trust-based
relationships Slide 41 Station Break 2009 Neil Rackham How
effective are most companies at selecting which sales opportunities
to invest in? How could they do better? Slide 42 2011 Neil Rackham
Seven Nasty Issues The end of the better mousetrap model The death
of f-t-f transactional selling The unsustainable hybrid sales force
The ever-extending sales cycle The decline of RFP selling
Skyrocketing costs of chasing an opportunity The need for new
selling models Slide 43 2011 Neil Rackham Three Sales Model
Milestones Circa 1890 The Producer / Collector split July 1925 E K
Strongs Psychology of Selling 1975 - 1985 Consultative Selling
Models Slide 44 2011 Neil Rackham Whats New in 35 Years? So what
kind of research do we need to reach the next milestone? Slide 45
Five Profiles for Sales Performance* 2011 Neil Rackham *Source:
Integrated Sales Executive Council 2009 Challenger Lone Wolf
Problem Solver Relationship Builder Hard Worker Slide 46 2009 Neil
Rackham Comparing High Performers with Core Performers* Different
view of world Business understanding Love debate Push clients
Challenger *Source: Integrated Sales Executive Council 2009 Core
performersHigh performers 23% 39% Relationship Builders Build
strong client advocates Help others Give time freely Get along with
all 26% 7% Slide 47 4% 54% Relationship BuildersChallengers HIGH
Complexity 2009 Neil Rackham Performance and Complexity of Sale*
Percentage of High Performers *Source: Integrated Sales Executive
Council 2009 11% 20% Relationship BuildersChallengers Low
Complexity Slide 48 2011 Neil Rackham Most Important Challenger
Skills* Offers unique perspective Two-way communication skills
Prepared to push/pressure client Knows client value drivers Can
identify economic driversComfortable discussing fees *Source:
Integrated Sales Executive Council 2009 Slide 49 2011 Neil Rackham
Why Challenge Matters Without challenge, we slide lower down the
customer organization and become less important to the client
agenda. Without challenge, the customers perception of us narrows,
so our capabilities are seen as increasingly limited. Without
challenge, we are consulted later in the clients decision process,
when ideas have already been defined by competitors. Slide 50 2009
Neil Rackham The Big Four of Challenge Challenge starts with ideas
that are: BIG more comprehensive and further reaching than ordinary
ideas. RISKY both ourselves and our client are taking a bigger
risk. INNOVATIVE pushing the envelope with new, often untested and
unique approaches. DIFFICULT hard to implement because of scale,
uncertainty or politics. Slide 51 The BIG 4: 1 SIZE 2011 Neil
Rackham 12345678910 S mall B ig Bite-sized Large-scale Contained
Short-term Organization wide Extended timeframes Slide 52 The BIG
4: 2 RISK 2011 Neil Rackham 12345678910 A chievable O utperforming
Familiar Unknown Modest Low-risk Ambitious High-risk Slide 53 The
BIG 4: 3 INNOVATIVENESS 2011 Neil Rackham 12345678910 F ollowing L
eading-edge Responsive Proactive Tested methods Me-too New/untested
methods Unique Slide 54 ED Difficulty asyifficult The BIG 4: 4
DIFFICULTY 2011 Neil Rackham 12345678910 In your sleepSignificant
stretch Assured outcomeUncertain outcome Confident
team/clientApprehensive team/client Slide 55 S E F A B L D O O D L
B S E F A Difficultyasy ifficult ollowingInnovativeness eading-
edge Riskchievable ut performing Scalemall ig SAFE or BOLD? 2011
Neil Rackham 12345678910 123456789 123456789 123456789
