In business-to-business sales, customers view salespeople either as vendors or consultants.
Vendors speak price and performance, while consultants speak value and profits. Vendors may win sales, but they rarely win their customers’ trust or loyalty. Salespeople who want to become trusted assets to their customers must be able to answer the question: “How much profit will you add?”
Be a profit center
When you can demonstrate a positive impact on profits, you can always find an interested buyer.
To establish yourself in this role, think of a sale as a “Profit Improvement Proposal” that delivers one or more of the following:
- It helps customers add more profits than they could otherwise.
- It helps them add profits sooner.
- It helps them add profits with greater certainty.
In other words, your goal is offer your customer a high-yield, quick-return, low-risk investment opportunity.
You can help customers pursue higher profits in just two ways: by reducing costs or by increasing sales.
Cost reduction is the obvious path for most salespeople, because your customers already know what their costs are. If you can show a way to reduce warranty claims by 10%, for example, it’s easy for your customer to do the math.
Here’s what’s so powerful about translating cost reductions into the language of profits: the multiplier effect. In most organizations, it takes a lot of effort to achieve a little bit of profit. Let’s say your customer is operating at a healthy 20% profit margin.At that rate, it takes $5 in sales to generate $1 in profits. So if you can contribute $1 to the bottom line through cost reductions, that’s equivalent to $5 in new sales.
Even so, customers care a lot more about growth than they do about cost savings. No business exists to control costs. They exist to make money, and the only way to make money is through sales.
Potential sales growth is tricky to measure, because it involves more uncertainty. But that’s not an insurmountable obstacle; growth plans always involve some uncertainty. What’s most important is to make a plausible case for how you’re going to contribute to your customer’s growth. Consider, for example, basing your projections on past experience with other customers and/or industry benchmarks.
Here are some of the areas where you might be able to help your customers improve, and thus contribute to their sales growth:
- product design
- manufacturing quality
- time to market
- customer satisfaction
- new product development time
- forecasting/inventory management
- sales coverage
- billing and collections
- customer targeting
The language of profits
Consider how to frame your proposals in the language of profits. Key terms include:
- Investment: What the customer will spend to obtain your solution.
- Cash flow: How much cash this investment will produce annually.
- Payback: How soon the investment will break even. After payback, cash flow contributes to profits.
- Net Present Value: The sum of all future cash flows, discounted to reflect the cost of capital.
- Internal Rate of Return: Average annual return on the investment. It’s useful to know the company’s “hurdle rate” – the minimum acceptable return.
Adapted from “Consultative Selling,” by Mack Hanan. Published by AMACOM and now in its 7th edition. Info: 212-903-8316.
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