6.3 Characteristics and skills of sales people.
6.4 Forecasting, quotas, and budgets.
6.6 Sales mistakes when selling something new.
“Statistically, that’s not a lot of data points, but in my experience,
if you listen to 40 smart customers, you learn more
than you would from any consultant’s report.”
Founder and chairman of Boston Beer Company.
Sales is an integral part of marketing, or at least it should be. Many marketing textbooks just briefly review sales, often as a single paragraph in a larger chapter on promotion strategies; selling is one way of communicating with a customer. Larger companies set up marketing departments alongside sales departments as a means to specialize tasks. Most SMEs on the other hand will be less in a position to create a separate sales function (or even marketing function) and will integrate both roles into one, and this role will most presumably be fulfilled by the business-owner or entrepreneur.
The definition of what marketing is that is used in this book is more explicit towards the role of selling when we talk about marketing. In chapter one marketing, more precisely entrepreneurial marketing, is defined as: “selling more products or services, to more customers, more often, for more money, and at the same time being more efficient in order to create more profit.” So selling is the purpose of (entrepreneurial) marketing and can therefor never be seen as a separate function within the an organization. This chapter will focus on people engaged in selling, the selling process, the difficulties of selling, and the changing role of sales as a company grows.
Selling does not always imply a monetary transaction. Former salesman at Apple (when it was still small!) Guy Kawaski uses the term evangelist instead of salesman to emphasize that selling should focus on a vision or dream and not on a product or service:
“Selling a dream means transforming a vision – that is, an insight that is not yet perceptible to most people – into a cause and getting people to share that cause. Thus, evangelism is the purest form of selling because it involves sharing ideas, insights, and hope in contrast to exchanging goods or services for money” (Kawasaki, 1991: 4)
6.2 The sales process
Any sales process consists of eight stages that overlap and influence each other (Orr, 2012: 23). These elements are shown in figure 6.1.
Figure 6.1 – the sales process (Arr, 2012: 23)
The first stage is to search for new customers and then qualifying these so-called leads. In order for a lead to qualify as a prospect, a customer who would actually fit the business offerings must:
- have a need for the business offering;
- be in a position to buy the offering (be authorized to sign a contract);
- have enough resources to buy and use the offering;
- have the eligibility to buy the offering;
- be accessible by the salesperson;
- be profitable.
The second stage focuses on researching and planning for each and every other stage in the sales process. In order to gather the relevant information to facilitate the selling of an offering, a salesperson needs to know in advance what they want and what the customer to do after the relevant stage.
The next stage concerns the approach of a prospect to get an appointment. This sounds easier than it is due to time constraints on both sides: finding a time that both buyer and seller can meet but also realizing the time spent with a salesperson cannot be spent on other operational or strategic activities. The doctors in the opening case cannot speak to a salesperson and a patient at the same time.
The fourth stage is all about asking questions, probing, in order to discover the needs of the customer. These questions can be subdivided into SPIN questions:
- Situation Questions – data-gathering questions about the facts and background of the problem the prospect has;
- Problem Questions – exploring the problems, difficulties, and dissatisfactions in areas where the seller’s offering can help the prospect;
- Implication Questions – taking the prospect’s problem and exploring its effects, helping the prospect understand a problem’s seriousness;
- Need-payoff Questions – getting the prospect to talk about the benefits that the seller’s solution could offer.
After discovering the needs of the buyer, the salesperson should demonstrate how the business offering can fulfil those needs. In chapter two these needs have been described using Maslow’s needs hierarchy. For business buyers the needs are also related to the buying process itself and a buyer is searching for ways to decrease uncertainty in it. Either the buyer wants to decrease the uncertainty about who to buy a solution to the business problem from, uncertainty about the problem actually being a problem, and uncertainty if the amount of money spent on solving the problem is well spent (Wittreich, 1966: 129).
Box 6.1 – Getting to yes, PLEASE!
After the presentation a customer will normally posit several concerns. “No” is the most often mentioned (or thought) word in any sales process. A salesperson’s job is to handle these objections and to get prospects to say “Yes, PLEASE…” The acronym PLEASE emphasizes the five activities necessary to reach the sixth: End by closing the sale.
P stands for probing to find out more: don’t take no for an answer and probe to discover more about the problem a prospect has with the offering.
L means listen to the problem and take it seriously.
E stands for envisioning a future situation based on the prospect’s problems. This future could be bright (“So you are looking for something in order to offer your patients a more healthy life?”) or dim (“And you are worried about the life expectancy of your patients and the large number of them dying young?”)
A stands for ask some more. A prospect is rarely convinced the first time round for a salesperson is asking someone to change the way their company works or thinks.
S means solve the problem: the salesperson’s offering must link to the problem and solve it.
E is the final goal of the sales visit: end by closing the sale. After all the probing, listening, asking and solving a sales person must end the visit by closing the sale (“sign the dotted line”) or by advancing to the next stage (or person) in the sales process.
The seventh stage has been mentioned Box 6.1 as the final stage in the PLEASE acronym: establishing commitment or ending by closing the sale. Finally, the business must realize that the first sale to a prospect, now a customer, is the beginning of a relationship. Sales people must now spend (non-selling) time with a customer. Due to the trend to create closer supply chain relationships with fewer suppliers and with longer term contracts, sales people need to keep talking with customers to maintain their position as a preferred supplier. This is all part of final stage, the so-called follow-up stage.
6.3 Characteristics and skills of sales people
In his 1961 Harvard Business Review article McMurry mentions six reasons why the job of a salesperson is difficult. First, selling is a never-ending story. As soon as one sales call is finished the next one is waiting. Also, sales people, even if they are part of a team, tend to work without someone to fall back on, i.e. the actual presence of colleagues or a boss. Sales people make long and irregular hours with lots of travelling in between sales calls and tiring demonstrations and sales visits. Next, sales people also face the fact that prospects can look upon them as inferior and treat them with little respect. Sales people can even look at themselves as intruders of prospects time and space. Lastly, sales people have to be used to a large numbers of rejections before they get to a yes (McMurry, 1961: 114). Looking at these reasons, my guess is that not much has changed in all these years…
Who becomes a salesman then, if selling is so difficult? What characteristics and skills do sales people have in common? According to several researches described by Engle & Schmidt (2011: 4-8) sales people share the following characteristics:
- A sales person is more conscientious; this means being organized, hard-working, business-like, self-reliant, ambitious and persevering.
- A sales person is more open to experience and thus more innovative than other professionals; a sales person is curious, imaginative, excitable, artistic, unconventional, have a wide range of interests and willing to make use of this experience.
- A sales person is more extravert; extravert people are energetic, forceful, adventurous, enthusiastic, outgoing, and sociable.
- A sales person is more emotionally intelligent; emotionally intelligent people tend to know and express their own feelings as well as interpret other’s feelings. They can regulate and use their emotions to their advantage. Another thing is that emotionally intelligent people tend to be better able in leading themselves and therefor perform better at selling.
- A sales person is more willing to take risks that other people on average would do. Due to the fact that they never know what the outcome of any given sales call will be, their job involves much more risk than other jobs.
- A sales person is better able to generalize from observations and experiences. This is called conceptual ability and is needed to be able to solve problems and judge social situations.
Except personality traits and characteristics, sales people are in need of specific skills. These skills can be derived for the selling process mentioned earlier:
- communication skills
- listening skills
- human resources skills
- problem solving skills
- organizing skills
- self-motivation skills
- persuasion skills
- customer service skills
- integrity (Deeter-Schmeltz et al., 2008).
Both the personality traits and characteristics and skills have also been attributed to entrepreneurs. This should come as no surprise because in the smaller SMEs with no specific sales or even marketing department the business owner or entrepreneur will do most selling her/himself.
6.4 Forecasting, quotas, and budgets
In the previous paragraph six reasons why selling is difficult are mentioned. Next to the person-centred difficulties some task-related difficulties arise. Most difficult, in small, medium, and large firms, is the process of forecasting sales. Also setting up quotas and budgets are important, yet difficult, tasks.
Making mistakes in forecasts leads to wasting resources if the sales forecast was too high or losing customers and revenue if the forecast was too low. Forecasts are made using more qualitative or more quantitative techniques. Qualitative techniques include naïve forecasting (sales in the next period equal the sales of the previous period), jury of executive opinion (asking key managers), Delphi technique (like previous technique but done in multiple rounds using a feedback mechanism), the sales composite method (aggregate of salespeople input), and a survey of buyer intentions (Orr: 96 – 98). Quantitative techniques are for instance the use of moving averages, exponential smoothing, time series, and regression analysis (Orr: 99 – 101). Each method has its own merits and restrictions but it does not fit the scope of this book to explain these in depth.
After having set an overall sales goal the firm has to determine the individual quota per salesperson. Based on tenure, assigned job, sales skills, market potential, competition, and geographical coverage a sales person’s quota is higher or lower than a simple average sales volume or average profit margin per sales person (Orr: 106).
The flipside to setting individual quotas is how to motivate the sales force. Depending on the type of salesperson based on performance the business owner has to realize that each type is motivated in a different way. High performers (“star performers”) are motivated most if no cap is put on their commissions and overachieving also leads to extra compensation. The average performer (“core performers”) are motivated by multi-tier targets, i.e. multiple targets with each target being higher than the other, and prizes. The poor performers (“laggards”) are motivated most through peer-pressure and a pace-setting bonus, meaning a shorter term target to finally reach year targets (Steenburgh & Ahearne, 2012: 71 – 73).
The final difficulty after forecasting and setting individual quotas is budgeting: translating the forecast and the company’s strategic plan into “measurable quantities that express the expected resources required and anticipated returns over a certain period of time” (Orr: 107).
6.5 Changing a winning team?
Orr et al. mention that a “universally equipped salesperson does not exist.” This means that there are many types of salespeople. Selling has been described as simple (the salesperson as an order taker) or more complex (selling as a creative process with no standard answers or sales pitches). To be able to sell in each situation a salesperson needs different capabilities and skills (Fogol et al., 2012: 96). Better yet, each of these situations requires a different type of salesperson.
Companies and the business environment change too. Companies in the start-up stage of the product life cycle need a different type of salesperson than companies in the decline stage. According to Zolthers et al. a business in the start-up stage needs for their sales force to “create awareness and generate a quick product uptake”. In the growth stage the sales force needs to find ways to “penetrate deeper into existing segments and develop new ones”. When a business enters the maturity stage, the sales force should “focus on efficiently serving and retaining existing customers” and in the final stage, the decline stage, the sales force needs to “emphasize efficiency, protect critical customers and exit unprofitable segments”. Each stage needs a changing role of the sales force, possibly a different sales force size, a changing degree of specialization, and allocation of sales force resources (Zoltner et al., 2006: 83).
6.6 Sales mistakes when selling something new
When starting a new company many entrepreneurs make the same mistakes regarding selling (Onyemah et al., 2013: 76 – 77). To start with, on average a start-up develops the offering first and only then does he/she get feedback from the customer. Most of the time this is too late to change things and a lot of resources have been wasted on a business that will not be able to sell.
A second mistake often made by a start-up entrepreneur is failing to listen and instead try to convince the other party. Thirdly, start-up entrepreneurs try to sell through offering discounts. These discounts set unprofitable price precedents that will make the company unsustainable in the long run.
A fourth mistake often mentioned is selling to friends and family (probably the same that invested in the company to start off with). The question, after they bought the offering, remains why they bought from the entrepreneur. More often than not it is the case that they buy because of the entrepreneur not because of the offering itself.
Finally, start-up entrepreneurs make the mistake not to connect with strategic buyers, the buyers who can be helpful as the initial reference customer. The solution to this, and all other problems mentioned, is to connect with real customers as soon as the idea is born.
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