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When it’s time to provide pricing for a customer most companies tend to rely almost exclusively on their costs to determine the selling price. But that is a mistake. Sometimes we can make huge margins on certain items and still be competitive. At other times we have to tighten our belts because if we didn’t our selling price would not be in the ballpark; to do otherwise would be foolish from a marketing perspective.

Every day companies around the globe price items too low and too high because they primarily look at the costs when pricing. The fallout from this is lost business from pricing too high and lost dollars from pricing too low. Obviously there must be a floor on gross profit when creating a selling price, but other than that, cost shouldn’t be a significant factor.

The reality is that we need to price according to what the market, and more specifically the customer, will bear. We need to focus on what the final sales price should be, not on the cost in determining a sales price. Our customers don’t know, and probably don’t care, what our profit margins and costs are; they are solely interested in the sales price and this should be your focus too.

Studies show that salespeople frequently have gross profit percentages on their orders that tend to congregate around numbers divisible by five. Now why in the world is that? The reason is the math is faster and they are erroneously focusing only on cost in their calculations. The foolishness of this is that the salesperson is either under pricing and leaving commission dollars on the table or overpricing and jeopardizing the sale - all for the sake of mathematical convenience and a selling price based solely on cost.

Calculating a sales price based on market variables takes more time and effort. If you take the time, you’ll make more money and lose fewer sales.

Bluebirds. It’s a term you don’t hear too much anymore, but it’s still a good one. The definition is hard to pin down but I’ll give it a try. Bluebirds: When a salesperson receives a large order that was gotten without a tremendous amount of work. Here’s an example. You’ve been working for six months to close a large order when out of nowhere a company you’ve never heard of before contacts you. Within one week you close an order with this company that is larger than the one you’ve been working on for six months. Bluebirds happen to all salespeople and when you least expect it.

Once, early in my sales career, I was talking to my sales manager about my results at the end of a good month. He said to me, “Scott, you had a great month, congratulations.” I responded by saying, “Well, if it wouldn’t have been for that big Bluebird my results would have actually been kind of stinky.” He was a big tall guy and responded by wagging his finger at me saying, “Every order you have to earn. The easy ones are payment for the really hard ones. Some are easy and some are really hard, but you earned every single one of them. Don’t ever diminish the value of your sales efforts, no matter how small or big.”

He was absolutely right. Nothing is easy in sales. At the end of the month, quarter or year you look at your results in total. How you got there is not the issue; the issue is that you got there. Think about it, you normally don’t get recognized for the really hard orders you close. You don’t go around trumpeting how great a salesperson you are for getting a really tough one. Conversely you don’t need to diminish your successes if they don’t require a large amount of blood, sweat and tears.

The attitude that your accomplishment is somehow less when you get a Bluebird must come from our Puritan backgrounds. If it feels good and it’s easy, it must be bad. Stop doing this to yourself. Give yourself a mental boost and accept and enjoy all your sales successes, no matter how hard, or easy, they are.

There are four types of customers in every company.

1. The customers you are currently selling. These are the customers, big and small, that are paying the bills. They constitute the “customer base.” You have accumulated these customers intentionally, accidentally, by good luck, by bad luck, etc.

2. The customers you used to sell. For one reason or another the customer has left the fold. The reasons for this are endless: out of business, moved to a competitor, don’t have a need for your products or services anymore, etc. It is difficult to know why we lose many of our customers.

3. The ones you would like to be selling. I’ve never met a VP of Sales who didn’t have a grand vision for the kinds of customers his “salespeople-should-be-getting.” No company is ever happy with the customers they have; they want bigger and better ones. They want brand names. They want ones that they’d be proud to talk about at a party. This can be a source of discomfort for the salesforce. Salespeople look around and think, “Gee, we may not have the sexiest sounding customers, but they are paying my bills and the company’s. What’s the problem?”

4. The ones you should be selling. This is where the rubber hits the road. After careful consideration it is possible to determine what your sweet spot is. A smart company will ask the question, “What kinds of customers will leverage our strengths and make us the most money?”

Current customers are important because they pay the bills, today. But current customers that are high maintenance and low revenue can hurt more than they help. Sift through these and terminate some of them. Free up your time to find better customers.

The junk pile of lost customers can be sorted. Look for the ones that might be salvageable and that have a lot of potential. Have a fresh face contact them and see if they can be resurrected. Things may have changed since you last dealt with them. A change in chemistry may be all that is needed.

If your ideal customer description doesn’t fit the type of customer you’d like to talk about at the country club, then either come down to earth or get a job where you sell that kind of customer. Determining your best prospect is one of the most important things you and your company can do. You don’t have to wait for your employer to do this; you can start today in your own account base or territory. Accurately defining your sales sweet spot will cause your sales effectiveness to expand exponentially.

The title of this post sounds like something your mother would have told you. Guess what? She was right. I’ve spent many years making customer and prospect calls with salespeople. One of the most common things I see is salespeople not paying attention to the customer or prospect. Do I need to tell you how detrimental this can be to the sales process? The salesperson has worked for days, weeks or months to secure the appointment and then doesn’t treat the meeting as they should, with sacred respect. Getting in front of a prospect or customer can be difficult; take advantage of the time they are giving you.

Let me break the problem down into three common components.

1. The salesperson runs through their presentation at lightening speed. It’s obvious that the salesperson is bored, and even disinterested, in what they are saying and just wants to get through it. But what the salesperson forgets is that the customer or prospect hasn’t heard it before. The customer or prospect is not bored; this is new stuff to them. Your company has spent a lot of time and money helping you develop a good presentation (well, we hope they have, not always true). Slow down! Give the customer or prospect a chance to absorb all of the information.

2. The salesperson never really makes eye contact. I can’t begin to tell you how many sales presentations I’ve seen where the customer or prospect is literally beginning to fall asleep. I’ve seen others where they were looking at emails during the salesperson’s pitch. Basic presentation skills require that you look at who you are talking to and adjust what you are saying accordingly. If your customer or prospect is not paying attention, change strategies. You’re wasting everyone’s time if you don’t.

3. The salesperson has little or no energy while presenting. One of my pet peeves. Communications 101 says that without energy your message will be less believable, exciting, interesting and motivating. I wish I had a dollar for every time I’ve said to a salesperson, “All you needed was a 500cc injection of adrenalin and your presentation would have been much better received.” If you can’t muster some energy and enthusiasm when presenting, you may be in the wrong career.

Slow down, look at the customer or prospect and keep a high degree of energy and enthusiasm during your presentations and appointments. None of these things are rocket science, but they can absolutely make or break your effectiveness.

When I began my sales career my sales manager used to beat on me about the importance of qualifying prospects. After a few months on the job I realized that his emphasis was well placed. What a time waster it can be spending your valuable time and energy with unqualified prospects. I observed that this was a huge differentiator between the top sales producers and those with lesser success.

The way we qualify prospects is by getting information. The primary way we get this kind of information is by asking pertinent questions. Most new salespeople tiptoe when it comes to asking questions to quickly qualify a prospect. A prospect once told me that he understood that I was there to sell him something and our meeting wasn’t purely a social call. He actually encouraged me to ask him qualifying questions so we could get down to business. Our customers and prospects can teach us so much about sales.

I’ve been doing business recently with a Fortune 500 company that knows how to qualify a prospect. The salesperson had obviously been well coached and did a great job. I wasn’t the least bit offended by his questions and it saved both of us a lot of time. Here is how he covered his bases.

Decision Maker = “Would you be the signatory on the contract?”
Legal = “What is the legal approval process on contracts at your company?”
Budget = “What are your current costs for this service and what is your budget?”
Product Fit = “From what I’ve described so far, do you feel our service will meet or exceed your requirements?”
Competition = “Who is providing your service now and what other vendors are you considering?”
Time frame = “On what date do you want to have a contract signed?”

He had these questions written down on a legal pad in preparation for the call. Fantastic! I knew, and he knew, that we weren’t meeting, at least initially, just to socialize. We were meeting to see if we should join into a partnership and he wasn’t going to waste a lot of his time, or mine, in determining if marriage was a possibility. Once he qualified me he started to work on our business relationship and the details of our transaction. I appreciated his professionalism and respect for my time.

When prospecting, quickly qualify by boldly asking the questions you need to ask. Your prospects understand you have contacted them to sell them something and they don’t want to invest their time in you unless they feel they could benefit (WIIFM). And you certainly don’t want to invest your time if you don’t think the relationship will yield sales. Both you and the prospect are qualifying one another. Get to the point.

We’ve all done it. We’re guilty of doing or not doing something to or for a customer that resulted in poor customer service, and they weren’t too happy about it.

Sometimes it could be debated as to whether or not we actually wronged a customer and on other occasions it’s fairly clear that we dropped the ball. The old school of thought used to be that “the customer is always right.” Wrong. Customers make mistakes, make ridiculous demands and stretch the truth with salespeople all the time. But if you have an upset customer, they think you are responsible; they don’t think they had anything to do with the problem. If the customer is a strategic customer you don’t need to worry yourself with evaluating the legitimacy of their complaint; you’re going to fix the problem and not ask too many questions. However, if the offended customer is not a strategic customer and there is a clear indication that they are making unrealistic demands, then you will most likely ration what you are willing to do to set things right in their mind.

Below is a quick reference guide for responding to customer complaints and problems.

1. Immediately acknowledge the problem and accept responsibility. Not being defensive is critical here; it will only make things worse.

2. Don’t try to refocus the blame on your company, your boss, other employees, “those stupid people in the shipping department,” etc. The customer needs to be mad at someone and you represent the company at this point.

3. Ask them what you need to do to fix the problem. Just asking this can be a balm to their anger and in about 99% of all cases that I’ve been involved in they will ask for less then what your company would be willing to do.

4. If you are going to provide some kind of remedy to the customer then tell them what you are going to do and do it quickly. While you’re delaying about what kind of remedial action your company is going to take, the customer is stewing. If you wait too long you’ll permanently damage the relationship even though you’ve decided to provide them a remedy. Talk about a lose-lose.

5. Stay in touch after the dust has settled. Once you’ve worked through a problem with the customer it’s especially important for you to stay in close touch with them for a while. The problem and its resolution can be viewed as major surgery in the customer’s eyes and you need to provide post-operative followup to rebuild the damage inflicted on the relationship.

Remember when you were growing up and you had a fight with your best friend? In most cases you worked your way through things and were even better friends afterwards. The same is also true for upset customers. Effectively handling the problem head on can result in a better relationship with the customer on the other side.

It’s a joy to post to this blog because I never have to look for material. Really, never. By just living every day I see many examples of good, and unfortunately bad, sales skills. Sadly I have to report about my observation of some poor sales skills. Here’s what happened. I was attempting to get some help with my home computer through a home computer service company. Okay, I’m somewhat technical but not enough to resolve the problem I was having. Engaging a computer service company is really service in its purest form; I am buying their know-how and brainpower. There are no products here.

I talked to a salesperson that was intelligent and seemed knowledgeable. As I talked to her I was gaining confidence that this was going to be the company I would contract with to fix my computer woes at home. Everything was going great until we started talking about price. We saved the pricing discussion until everything else had been covered. She quoted a price per hour that was at least 1/3 of what I was expecting. My first reaction was to be thrilled with the cost savings I was going to realize. After about three nanoseconds however, I realized that a legitimate company with qualified personnel could not, and would not, price at this level. I chose to move on to another company.

What is the dynamic here?

1. Service is not a commodity. You’re not selling corn, steel or shower heads when you sell service. Knowledge, information and intelligence can be sold for a premium. Service absolutely defies commoditization. Think about it, no two service companies provide exactly the same service; therefore pure price comparisons are impossible.

2. Any economist will tell you that customers appreciate discounts and will move their business to companies that provide the best prices, up to a point. When service prices are overly discounted buyers begin to think that the service being sold is inferior. This was my experience with the computer repair company.

3. Service businesses need to do the opposite of what commodity businesses do in pricing research. Whereas commodity businesses perform market research to insure their pricing is competitive (i.e., not much higher than the competition), service businesses should do research to ensure that their prices are high enough. Do you expect Harvard University to have the lowest tuition rates? As a student you would be confused if they did and would wonder if Harvard was all it was cracked up to be. Your customers and prospects feel the same way about your business.

Have you ever considered why people brag about how much they pay their lawyer per hour? Why do you think people brag about how much their doctor charges? They feel this indicates the quality of the service they are getting and how important they must be to get this level of service.

Service providers, think twice before you dive to the bottom of your pricing bag. Will you lose some business because of pricing if you don’t sometimes massively discount? Yes, but you will more than make up for this lost business (and probably not very desirable business either) with the additional revenue you accumulate through high value pricing.

When it comes to effectiveness in sales it breaks down to a few essentials. After working with hundreds of salespeople I’ve observed that there are three important skills that every successful sales professional must have. If you are comfortable with these three things, you have the building blocks for sales success.

Skill 1: You need a refined ability to ask your customers and prospects open ended questions to develop a relationship and gather information. Remember that an open ended question is any question that requires an explanation to answer. As mentioned in an earlier post, most salespeople probably could use some work in this area.

Skill 2: A closed ended question only requires a one or two word answer and has a place in the sales process. It is important that you are competent in asking closed ended questions at the right time. When is that? They can be used effectively in two situations. The first scenario where they are helpful is in qualifying a prospect. When you first talk with a prospect it is appropriate and desirable to ask them a very limited number of directed closed ended questions to help qualify them. An example would be, “John, how many copiers do you have in your office?” However, be careful not to machine-gun them with a series of closed ended questions at this point. Once the prospect is initially qualified, you’ll want to move on to open ended questions. The second situation where closed ended questions can be used effectively is to move a customer or prospect toward a close. For example, “Mary, if I can meet your budget can we get this on order?”

Skill 3: The ability to prevent and handle objections is a primary skill in sales. Anything that a prospect or customer does that attempts to stop the selling process is an objection. We know that preventing an objection is far better than handling one once it’s been raised. “Before I quote any prices I want to let you know that our service package will cover you 24X7 and has a guaranteed one hour response time so there might be more cost than you are currently paying.” Can we always prevent objections? Of course not, but the ability to both prevent and handle objections is a key element in your sales success.

Sometimes it’s difficult to know our ability levels in these areas. Get with your sales manager or another sales peer you respect and ask them to observe you in action or role play with them. Once you assess your skills then work on your weak areas and practice. NFL players spend 95% of their time evaluating and working on their skills and 5% actually playing the game. We don’t have the luxury of that much practice time, but it’s smart to incorporate some kind of personal assessment and development into your profession for these three skills.

There are many competencies that are necessary to be successful in sales, but these are three that I have consistently observed in every sales leader.

I’ve been on the giving and receiving end of sales training for my entire career. Let’s face it folks, sales training is a soft science. Every practitioner of sales training has their own spin on things. True, there are some absolutes when it comes to sales. However, there are sales training charlatans who claim that if you deviate from their sales scripts whatsoever you are nothing short of incompetent. Some of these charlatans might even work as sales trainers at your employer. To them I say balderdash!

When I am facilitating (can’t say “teaching” anymore) a sales training course I constantly am reminding the participants to use the concepts I am presenting but not my exact words. Why? If you use another person’s words when talking with a customer it can sound shallow, insincere or stilted. It’s important that you use good sales principles, but it’s equally important that they are played out through your unique personality. Sales concepts, yes. Exact duplication of words, no.

My wife and I bought a new mattress recently at a well known mattress retailer with stores throughout the US. I’m always interested in seeing how salespeople conduct themselves and what sales techniques they use. It was obvious from the first second that our salesperson had been heavily coached on the sales techniques that his employer wanted him to use. After spending an hour with this guy I don’t think my wife and I had a single clue about his personality because virtually every word that came out of his mouth was lifted right from the sales training scripts he had learned. It was awful. He came across as canned, insincere and indifferent.

Every year the US produces millions of college graduates who start a career in sales with energy, enthusiasm and a fresh outlook. Their employers spend billions of dollars on sales training to ensure that their conversations are scripted and loaded with the silly business jargon du jour. The corporations they work for want all these salespeople to look the same and say the same things. “It’s for control and standardization,” they’ll tell you.

But what do customers want? They want sales professionals that have a unique personality, that are real and can partner with them. Have you ever had a customer or prospect tell you that they didn’t want to do business with you because you weren’t cookie cutter enough? Being real with your customers is incredibly disarming and endearing. Corporate America has their reasons for trying to “standardize” you, but don’t let them steal one of your best selling assets, your personality.

I don’t care what you call it, but selling a customer a broader range of goods and services is a major win-win for everyone. I like the term cross-selling, but you also hear it called add-on-selling, associative-selling, connective-selling, up-selling, etc. When I work with salespeople I frequently notice a resistance to cross-selling; the benefits are so impressive that it surprises me that there is any hesitancy. Where is this hesitancy coming from?

1. Fear. Here’s what the salesperson is thinking, “I’m selling Debbie this service that makes me a lot of commission, but if I push to sell her another service she may get upset and throw me out on the street and I’d lose everything…including my home, car and children.” When was the last time a customer got offended because you asked them about one or two related products or services in addition to what they were already buying from you? Usually the customer is pleased to find that they can source other products and services from you. They want their life to be simpler and having fewer vendors helps accomplish this. You must also use common sense when it comes to cross-selling; you can overdo it with customers if you aren’t sensitive to when to stop asking about additional products and services. Cross-selling is something that is done a little at a time.

2. Hassle. Yes, it takes a little time and work to cross-sell. The time investment, however, to add revenue to an existing customer by cross-selling is substantially less than trying to create that same revenue with a new customer. For the majority of my entire career I’ve been an evangelist for cross-selling as one of the quickest ways to increase revenue.

Now that I’ve covered two of the main reasons that salespeople are resistant to cross-selling, let’s discuss the benefits, and they are significant.

1. Vendor Consolidation. I’m not aware of any company that is trying to increase the size of their purchasing department. They want to decrease the number of people purchasing and make them more accountable for partnering with their suppliers. How do they do this? They have fewer vendors and work closely with them. This is called vendor consolidation and the more products and services you sell your customer the more likely you are to be considered a strategic supplier.

2. More Money. If you sell more products and services, you make more commission. If your company’s commission plan is set up correctly you and your employer both win. As stated above, this is one of the quickest ways to increase your sales.

3. Stickiness. All the research, and common sense, indicates that there is an almost perfect correlation between how many products and services a customer buys from you and the likelihood they will remain with you as a customer. The more products and services you sell a customer the greater the probability that you will retain them as a customer.

For me, this one is easy. It’s a win-win for all parties involved when you cross-sell: you, your customer and your employer.