Unlimited Messaging and Other Wrong Pricing Models
As entrepreneurs, it pays to establish sustainable pricing models. Give away the store in the heat of competition and you might find it boarded up in two years, with all of your potential gone. Yes, it’s tempting to try to “hook” people, feeling that you can make adjustments down the road, but that rarely works, for a couple of reasons. First, it’s really difficult to go back to your original customers, who believed in you and helped MAKE your company, and stick them with a new structure. Second (wouldn’t you know it?), more often than not, downward price pressure in popular markets will not allow you to bump anything up significantly.
In our AMG Alerts notification system sales efforts, we have encountered many customers who want a one-price “unlimited messaging” plan. And some of the companies in our business actually try to accommodate this. But how can they, when the cost of telephony and SMS and even email messaging is variable?
It’s easy. If you are in the employee notification system or emergency alert system business, you have a clear choice to make. If somebody is to lose, it can’t be you. So it would need to be the customer. Charge enough so that in any realistic scenario, you’re covered. If the customer might realistically send 50,000 messages per year, make sure they pay for 500,000 just in case.
And of course, the customer is hoping that you will charge them enough to cover 50,000 messages per year, and if they happen to use 500,000, they won’t have to pay extra. The “vendor” will just take the loss. I literally had one of the nation’s largest propane gas suppliers approach us to do customer messaging. It would start at perhaps 10,000 messages in various modes per month. But after a certain number – for which they were willing to pay – they wanted the messaging to be free, even if they sent 10 million per month. Yes, FREE. They eventually did not sign up with us, saying “we don’t like your pricing model.” But alas, the world has tied our hands until many magical things happen. For now, it would be like their buying gas for their trucks from petroleum company XYZ and asking that after the first 100,000 gallons, the gas should be free.
It’s an open economy and everyone is free to do their dance and roll the dice. But we make the point to our sales prospects that our going out of business is not an option. As a supplier of their alert system, they don’t want us to. And even they are willing to take the risk with us, thinking that they will just find another supplier, we owe it to our OTHER customers to stay in business.
So what do we do? We just won’t do “unlimited” pricing. Since we know we would need to offer a price where we would be the guaranteed winners, the customer would usually need to pay anywhere from 5 to 100x more. That just doesn’t make much sense as a LONG RUN pricing strategy.
At the end of the day, it is best to educate your customers on the economics of the business and be fair and establish pricing and policies that reflect the cost of the service. Honesty will cost you business every once in a while, but you will win with increased loyalty on the part of your customers. This is especially true if you are providing a critical service. They may be trained in their consumer lives to look for what appears to be a “deal”, but in a partnership scenario, it gets a little more complicated.
Calling at Your Comfort Level
A risk sales people often make is calling at their comfort level. This means they make sales calls to people they like, people they think like them or people they are not intimidated by. These buyers are often the Relationship Buyers or Coaches in your strategic sale. Because of their personalities, these people are often in middle management and not in decision making capacities. In order to be successful, sales people have to step out of their comfort zone and reach decision makers. The decision makers may not always have personalities the sales person finds easy to relate to.
Chicago is a huge sports town. I see sales people start a call talking about sports all the time. Theyll talk about whatever is in the media today, what team is hot, or what scandal is taking place. We’ll leave the call and the sales person will have the impression thatthey had a really successful call. The truth is they may or may not have built a connection with the prospect. More often than not they have not built a connection at all. If the sales person was not skilled and kept the conversation at sports they will not have learned anything about the buying process, the goals and objectives, the individual buyers personal agenda. All they learned was how that person felt about changing the name of Wrigley field. This information isn’t so helpul when youre trying to sell your product or service.Some ways for sales people to over come this type of call reluctance and to call outside their comfort zone are to read and be aware of whats going on in the world, not just whats interesting to them.
Learn how to hold a conversation on topics theyre interested in. Stretch. Understand how to create a conversation that is interesting to the listerner. Have an agenda before each meeting of what it is youd like to learn. Make sure you leave the meeting with an outline of next steps.Be careful not to get stuck calling at your comfort level.Broaden your comfort level and you’ll be able to call on any buyer at any time.
Pitfalls for Entrepreneurs Part II
“What on earth is he DOING?” is no longer my question, (from the first article) because I have had the opportunity, through one or two subsequent meetings, to figure it out: My friend (were still calling him Kevin) doesnt have a clue about selling.
Now I am not here to make fun of him for that. At the end of the day, it is a skill that is lacking to some degree – sometimes totally – by almost everyone who runs a business. And I’ll raise my hand here too. So whatKevin does is continually expand his product offerings.
I guess I’d liken it to the old days where the soldiers would storm the castle in an attempt to penetrate and overcome the enemy. Imagine 100 troops rushing the castle wall and putting their shoulders into it trying to knock down the wall. A good commander would call them back and say “Boys, that isnt going to work. Bring up the cannons.” Then they would proceed to blow holes into the wall and rush in. Kevin is the kind of commander that says “Boys, keep at it. Im sending another hundred guys to help you push.”
Ever hear the expression If all you have is a hammer, every problem is a nail? Well allKevin has is another hundred guys, and maybe another hundred after them. He doesn’t have a cannon, so he solves his problems using the tool he has. In this case the tool is his big brain and willingness to do hard work. It is easy for him to come up with other ideas and set them out there for people. But he doesnt know how to blow any holes in walls. In fact, he took me through a lengthy presentation he was going to make to what could be a significant new customer – if he could do some selling. He goes on and on about not only the product he is trying to sell, but all ancillary offerings that his company has, almost straining to somehow get that in. In the meantime, I am the customer, saying. “Why do I care about this. Why SHOULD I care? Where are we going with this?”
The presentation should have been heavily customer focused, shortened, and broken up into bitesized chunks that allowed for better focus. (kind of like this blog article) There probably should have been an outline in the front. And before that, some reference to the problem or challenge that the customer has expressed that he has and a direct statement about what he was offering to address that challenge. But let’s stop there because we are getting into sales training and that is a whole other topic.
The bottom line here is that if you are an entrepreneur that has an offering that you KNOW can and should be more successful in the market, think twice before looking to increase sales revenue with another offering and then another. Yes, there are some legitimate reasons for that sometimes, but we all must question whether we should be spending our resources getting ahold of a cannon and breaching the wall in the way that a good commander would.
Pitfalls for Energetic Entrepreneurs
“Focus, Focus, Focus.” This is a mantra common in the world of entrepreneurship and small business startup. I have a friend (let’s say “Kevin”) who runs a multimedia production business. He is a brilliant, personable guy, who is very technical. His business focused initially on development of training programs. He is no salesman nor a sales process guru, and where his new business in the area of multimedia training came from was really a mystery. Like a lot of us, he probably just had some faithful connections. He branched off into some web development because a lot of the talent and tools that he had on hand for multimedia lent themselves to that area. So Kevin threw paint on another wall, and the incremental revenue from web allowed him to keep the doors open. I mean, throw some paint here and there, and a passerby will see it and something might happen.
Fast forward about eight or so years, and Kevin and I get together to see what each other has been up to. He shows me a new CRM product that he has developed – a competitor to SalesInSync – for tracking the sales process (not sure if he used it himself!), and then a complementary offering that does lead generation. Mind you, nothing has changed in his business, fundamentally. He still has the same business size. He still does multimedia training, and a web site or two. But more paint on the walls means he doesn’t need to sell as much multimedia training to maintain his revenue. On top of that, Kevin showed me customer support offering that he also had developed. I am not sure that he has sold any of that as of yet, but that was a major streak of paint on another wall. The we go back into a production area where an employee is working on – you guessed it – a multimedia training program, and he shows me a 3D rendering of a modern office building, with cutaways and wiring diagrams and equipment layouts that just knocked my socks off. I said, “you know Kevin, I’ll bet architectural firms would drool over that.” He got excited and said “Yes! That is something we should go after!” I thought to myself as I left, “Man, what on earth is he DOING!?”
When I got home I noticed a pilots supplies catalog on my coffee table which really only had been used for putting my feet on if I had shoes on and my wife was around, and I took a stack of those mini PostIt notes and marked every page where there was some multimedia training program being sold. The catalog was absolutely thick with them, and I thought that if Kevin could just sell to ONE of those companies, he could increase his business tenfold. So I have lunch planned with him and I am bringing my dogeared catalog.
So what is focus? It isn’t necessarily sticking to one area. I mean, if you have the talent and tools, why not branch out, as long as you can maintain an identity that is not confusing. Paint those walls, but don’t throw it all over the place! Finish one room before going on to the other. Have a plan for success here before moving there. Or at leastbe willing to abandon here and go there with renewed energy. Just about anyone can look at their business and determine quite readily if they have the processes and resources to be successful on many fronts. Most smaller companies cannot. So therein lies the Focus mantra.
Handling the Price Objection
Saying the price is too high, or we cant afford, it is the easiest way to get rid of a novice sales person. If there is value in your product or service, it is priced to reflect the value, and the sales person knows how to communicate the value, theres no reason you have to drop your price – ever.
I bought an email marketing list a year ago. I wanted the list and the price was right. I was just really busy at the time and didn’t have time to make the purchase. A week went by since I received the quote. The salesperson called and dropped the price by 40%. 40%!! I was willing to pay the first price, I thought it was fair. When the price is discounted that much it feels to the consumer like there was a lot of fluff in the pricing and that theyre getting ripped off. Not good for building trust and customer retention.
I recently tried to contact that list company to buy another list. The company is gone. Perhaps they sold services at below cost. This is never a good idea no matter what marketing gurus or analysts will tell you. If you use your common sense, its clear. Never sell at below cost, ever.The salesperson has to understand the value before they can sell it. Do they understand the competitors? Do they understand their strengths and weaknesses? Don’t kid yourself, your competitors have weaknesses. Do they understand your own company’s strengths and weaknesses? A key point – do they really –LISTEN– to the prospect?
If my list salesperson listened to me he wouldve presented ways to make the sale easier for me, managing my time constraints. Instead, as so many sales people do, he gave the product away.I love to help organizations teach their people how to overcome the Price Ojbection. If you listen to the prospect, its the easiest one to overcome.
Doing it Right
Earlier this month I talked about “earning the right” in a sales process. Recently, I was at an event where I met a salesman who did exactly that. A person with solid sales skills just warms my new business development heart, so I had to share the story with you.
I joined a sailing club. Since I’m a small business owner I spend a good amount of time working. When I’m working I’m totally devoted and committed to what I’m doing. 100% of my time and attention is focused on my goal. My time off is my time off. I was really looking forward to sailing. When I’m out socially I am very vague about my business. I’m not there to sell. I’m there to connect with people and have a good time. I’m in my figurative fuzzy slippers. The captain of the sail boat and the organizer of the event is a broker for marketing services. Hmmm we made the connection pretty quickly that there were business synergies. We did NOT however talk about it on the boat. We talked about sailing, connections, the food we’d have later, the trips he’d been on in the past, the great people that were in the group and enjoyed Chicago’s exquisite skyline in the spring. Our crew consisted of an IT professional, marketing pro, a helicopter pilot, and a high level manager at American Airlines. No one was exchanging business cards. What a relief.
A week or so later, I received a Linked in Connection from the marketing services broker. “yes, I thought.this guy gets it”. We’ve since connected and formally established our mutual synergies. I look forward to doing business with this man for a long, long time.
What’s With These High Sales Targets?
I have heard salespeople lately express their concern over what they consider to be high sales targets in view of our current economic situation. “Whats my boss thinking? Nobody is spending any money right now!” “This is just a terrible time to (start a business/keep the business/stay in business/sell anything)”
While I would concede that unrealisitic sales targets are sometimes improperly used by sales managers in a clumsy attempt to motivate their people, I am not ready to admit that this is a terrible time to attempt to do business. And even though at the time of this writing, the numbers have not gotten much better, for a salesperson, now might be a pretty good time and it will only get better. Let’s start with this unscientific, and possibly annoying truism: Somebody is going to sell something. So it might as well be you.
Now that that is out of the way, lets dig deeper and look at why you shouldnt just chuck it in and go looking for a new career:
- Not all industries are experiencing a slump. Have a handle on the dynamics of YOUR marketplace and don’t get distracted by all the attention that our recession is getting. If you have to stop watching the news or reading the newspaper, go for it.
- Your sales prospects are more likely to be looking for new suppliers NOW than in more comfortable economic environments, often owning to their desire to reduce costs. Doors that were previously locked are going to start to swing open. This means a whole new world of opportunity. Your focus should be on exploiting that.
- Are all of your competitors still in business? Good. That should be a signal that there is still opportunity. Are some of your competitors out of business? GREAT! Now you are there to fulfill some unmet market needs. A market shakeup can provide great opportunities for everyone from dominant powerhouses to pipsqueaks that previously had no chance.
- Making even the slightest inroads now, on sales volumes that never excited you in the past, may pay big dividends down the road when your customers start consuming more and now YOU are the supplier. That is exciting, and should be quite motivating. That’s the reason to push harder!
I am not willing to give most sales managers credit for well thoughtout targets. Many are just reacting to their bosses, who are often too removed from the word on the street and are just trying to make some numbers work. But certainly it can be an exciting time to be in sales when it is NOT business as usual, for some of the reasons above.
The High Cost of In-Sourcing
Let’s not consider, for now, of the normal outsourcing argument, that often it is possible to save significant money by using outside assistance from people who are set up to do whatever it is that needs doing. To do that kind of outsourcing is often (but not always!) a no-brainer.
Let’s talk about other cases, though. I recently worked with a company whose overarching philosophy was to do everything in-house, presumably with the simple view that “We already have these people, and they have talent, so why should we spend additional money by outsourcing?” Or, in the case of technology, “We can figure out this problem on our own. There are lots of good resources out there.”
This latter point really does resonate with me. It is almost always true. In fact, for the sake of this article, let’s dwell on that.The vast majority of people in the U.S. that are involved in IT have zero formal training in it. And we are not talking about your brother-inlaw that somehow cobbled together a web site for his company. This group also includes real, highpowered techies and tech business visionaries. Got a problem? Google it. And then maybe you’ll end up joining one of the hundreds of great technology forums that address every popular area of IT, inhabited by lots of people that are willing to share their knowledge.
But there are a few reasons why straightup outsourcing of your technical issue is a better choice, despite the availability of these awesome resources:
- Faster time to market implementation. Often, all of the flailing around trying to cobble together a solution has measurable opportunity cost. And when I say “often”, I really mean “anytime you are doing this as part of some business objective, rather than a) for your health, or b) to make the world a better place”. Why not just go and get the thing done and move on to meet your objective, within your company’s’ core competencies?
- To answer questions that you do not know enough to ask, or at least had not thought of asking. I have used technical forums many times, and my question was answered and then I successfully moved from Challenge 97 to Challenge 98, moving across the raging river on those slippery stones hoping to make it to the other side. I have also, by necessity, given whole projects to outside firms. I was happy I did because as I subsequently looked at what they did, and I learned techniques that I would have never used or even thought about. That knowledge was integrated into dozens of other existing processes, greatly benefiting my organization.
- To develop a relationship and a backstop for times of need. Business relationships, especially tactical ones that center around complex solutions, take some time to develop. When things go bad, VERY bad, you cannot just start dialing numbers from the Yellow Pages and yelling “HELP”. The value of someone that knows you, and has not only a vested relationship with you and your company, but also some knowledge of how you are doing things, cannot be overstated. So starting with your next challenge, consider picking someone else’s brain. Maybe you’ll take on the next dozen on your own, which is great. But when you find the right outside resources, you will quickly see how you can benefit.
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