Articles

A useful resource of articles on better business relationships.

What’s changed in sales methods over the past 30 years and what it means for modern sales-based organisations.

How does a sales-based organisation know which sales methodology is best?

Solution selling, SPIN selling, Insight Selling, Smarter Selling, RAIN Selling, Consultative Selling, Challenger Selling….and the list goes on. Over the last 30 years, sales ‘experts’ and authors the world over (us included) have devised, formulated and promoted a range of different selling methods that have all spelt the demise of the traditional ‘push’ sales approach.

And it seems that with every new method, the authors claim to be introducing a revolutionary new approach. But are they really?

David Lambert, my co-author on Smarter Selling, and I weren’t so sure. We suspected that each new method was really just putting new labels on existing approaches, or making a small evolutionary change to existing sales methods. More than anything, we thought the influx of so many sales methods into the market is likely to be quite confusing to most sales based organisations, who will be left wondering who’s right, who’s wrong, and what’s actually different between the different methods?

So, we decided to take matters into our own hands and review what’s actually changed in sales methods over the past 30 years – and has it been an evolution or a revolution?

Download the paper here.

Relationship Capital - a new management currency?

Late in the 20^th Century, Harvard marketing guru Theodore Levitt introduced the term “relationship marketing” to suggest that establishing long‐ term relationships with customers and clients was preferable to transactional marketing.

Levitt reflected that the difference between transactional and relationship marketing is to the difference between a marriage and a one‐ night stand.

“The sale, then, merely consummates the courtship at which point the marriage begins,”

wrote Levitt.

“The quality of the marriage determines whether there will be continued or expanded business, or troubles and divorce.”

In the intervening years, numerous studies have established the benefits of creating and maintaining strong customer relationships. Strong relationships equate with greater customer loyalty and retention, which ultimately result in higher sales, market share, and profits. Equally, numerous studies have focused on the factors, both behavioral and attitudinal, that underpin relationship strength and have demonstrated a link between these factors and relationship strength.

From a behavioral perspective these include factors such as duration of the relationship, frequency of contact/order, regularity of contact/order and monetary value. From the attitudinal viewpoint variables such as satisfaction, trust, commitment to stay with the supplier/provider and the perceived costs of switching to an alternative provider/supplier, are important.

Surprisingly though, while the value of strong customer/client relationships is widely accepted, the measurement and management of the value of such relationships remains an underdeveloped science. Indeed, despite the huge investments made by organizations in customer relationship management systems (CRM’s), or perhaps because of them, the human touch is more absent from business relationships today than it was when Levitt introduced the notion of relationship marketing.

As Kirsten Sandberg, executive editor of Harvard Business School Publishing, put it:

“The snazzy technology was supposed to make one‐to‐one interactions with customers a reality, but experts say all it has done is enable companies to disappoint their customers faster and more efficiently – anytime and anywhere. Customer loyalty hasn’t increased.”

Clearly, something has gone wrong.

In the drive to define business management as science and systematize sales and customer interactions, firms have lost focus on a key principle of good sales and customer management: People buy from people.

Organisations do not typically buy from organisations.

Of course there are situations where organizations buy from organizations. Where the brand name is so strong, that purchases are made without strong personal contact. Though the list of big name collapses in recent years should make us wary of trusting names: Kodak, Westinghouse, Schleker, Nortel, Lehman Brothers and more. The 2008 financial crisis in particular, taught us that blindly trusting brand names, especially in banking (that historically most conservative and “relationship” oriented business), is not necessarily wise.

Coincidentally, my Smarter Selling co-author, Keith Dugdale, and I were in New York at the time of the crisis and were sitting in the offices of Bank of America on 14 September, the day they bought Merrill Lynch for a knock-down price.

The events of 2008 also taught many companies a harsh lesson in valuing the strength of relationships.

As one banker commented to us:

“We thought we had strong client relationships, but when times got hard we had some nasty shocks. Clients who had been with us for many years simply walked away.”

Post 2008, the world has focused on technology advances to drive growth, and deliver accountability. Interestingly though, while our consumer lives are increasingly free of human touch, our work lives increasingly rely on our ability to influence others across different departments, and often between organizations and across time-zones to collaborate, innovate and get things done.

To get things done, people must work with other people – and in an environment where trust in corporates (and many public figures) has been undermined, a re‐examination of the strength and value of an organization’s relationships with itself and with the outside world, is critical to valuing the overall strength of a business and its future prospects.

Taking this a step further, attributing value to the cumulative and inter‐ connected relationships of all the people in an organization; both internally (with colleagues) and externally (with customers, clients, suppliers and broader contacts) reflects an organization’s relationship capital.

What is Relationship Capital?

We define Relationship Capital as:

The value of all relationships that all people within an organisation bring to that organisation.

Further, Relationship Capital may be calculated as:

The sum of the strength of each individual’s relationships with other parties, with respect to each other party’s degree of power and influence.

These can be relationships with suppliers, partners, ex‐employees, nodes (people with high influence not necessarily associated with any organisation), or other functions within your organisation.

Factors to consider in calculating Relationship Capital include:

power and influence of the other party
type of relationship
strength of relationship
number of touch points on both sides

In accounting terms, Relationship Capital constitutes a key element of “goodwill” or intangibles. Goodwill reflects the difference in the valuation of organizations between say, their share price, and the value of their physical assets and current revenue streams.

This difference in values is often explained by intangibles such as the value of the brand name; copyrights and patents; proprietary systems and processes; and employees’ knowledge and skills. These sources of value are often referenced as structural capital, intellectual capital and human capital.

The value of relationships, both within and beyond the organization is another intangible source of value. Intellectual capital and human capital are already part of the corporate lexicon. Relationship Capital should now be added to that lexicon.

About the author

Edited and updated by David Lambert from an original article by David Lambert, Keith Dugdale and Patrick Boucousis

David Lambert and Keith Dugdale are co‐authors of Smarter Selling (FT‐Prentice Hall (FTPH), ISBN 0273 712 462).

Patrick Boucousis is the founder and Managing Director of Traxor, an innovative Australian software company.

engage-universe.com delivers business relationship and sales skills training to executives, professionals and sales teams around the world, helping build business trust.

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Effective client advisor relationships

This report, published by Financial Times (FT) Corporate and carried out between May and August 2012 contains interesting insights and recommendations on the client-adviser relationship and coincidentally (for we had no involvement), those insights align closely with the IoweU approaches and tools introduced in the book Smarter Selling (FT Prentice Hall).

This survey of FT readers and members of the Managing Partner Forum draws insights from 569 respondents from across the globe: 45% from the UK; 26% from North America; 18% from Europe; 9% from Asia-Pacific, and 3% from elsewhere. 64% of participants came from management and fee-earners at advisory firms across four sectors: law, accounting, property and consulting and 36% are owners, and senior- or mid-level executives at client businesses.

The report focuses heavily on clients perceptions of value and on the role of “commerciality” in shaping that perception, concluding that:

“Although clients’ businesses have become more agile and innovative, there is frustration that many advisory businesses have not implemented the same degree of change.

Technical competence and the responsiveness of individual advisers are increasingly seen as hygiene factors: critical if absent but no longer as influential in selection.

Clients also want a more strategic, commercial dialogue with their advisers, particularly in a more complex, uncertain and global business environment.”

1. Relationships that deliver value

The report notes:

‘there is a large disconnect in the perception of value for money’ with 51% of accountants rating themselves as excellent, but only 19% of clients giving an excellent rating.

Should we be surprised? After many years of hard work dedicated to acheiving technical competence, and of being promoted on the basis of developing competence, it is to be expected that advisers equate technical competence with value.

This is a finding that has been seen many times before and in many industries – indeed, it occurs in all advisory fields where deep technical knowledge is a requirement.

The report goes on to state:

‘ Clients are looking for advice that is not solely technical but takes into account the wider issues and risk faced by their business.’

What clients want, and indeed what firms want (because it drives the much talked about, but seldom achieved, cross-selling), are T-shaped advisors as opposed to I-shaped.

The report has even worse news for consultants. While 51% of consultants consider that they offer excellent value for money only 2% of clients agree.

Yes, that is 2% – it isn’t a typo!

Perhaps all those jokes about consultants and the lack of value they bring has had some influence on clients’ perceptions – or is it that consultants, who often have very ad-hoc relationships with their clients (as opposed to trusted partner relationships) are not good at communicating the value that they bring?

2. From technical advice to commercial advice

The report suggests that advisers need to leave their technical comfort zone and focus more on both commercial aspects and the future.

Here though the report misses a crucial point. As pointed out by Matt Dixon and Brent Adamson in The Challenger Sale (2011) and as long ago as 2006 by Dr Neil Rackham (author of SPIN Selling, the critical differentiator is the ability to uncover opportunities, as opposed to seeking only risks:

‘Salespeople following problem-based models often fail to uncover opportunities until very late in the call – if at all. What is needed is an approach that encourages discussion of opportunities much earlier in the sales process.’

Advisers who rely on technical competence and focus solely on risk will fail to build partner relationships.

IoweU codifies relationships into 4 broad categories, including those that are predominantly ad-hoc or technical in nature.

The goal for IoweU is to develop the type of trusted partnership relationship advocated in the book, The Trusted Advisor. Where Maister, Galford and Green focus on what a trusted adviser relationship looks like, and the benefits that flow from such relationships, Smarter Selling and the IoweU approaches and tools focus on how to build and maintain such relationships.

Partner relationships demand deep understanding of both the technical aspects of the business and the broader commercial landscape, allied with the personal interests and preferences of the individuals involved. In such relationships, value is readily recognised and moves in both directions.

Such relationships take time, energy and more than a little skill to build. Plus of course, not every client is looking for a partner relationship.

Once achieved though, they enable advisers to the service they offer, and avoid the twin traps of commoditisation and price-focus.

To find out more, and to objectively assess the current state of your key relationships, access the free online questionnaire (no registration required by clicking here or on the chart above.

Better questioning using SHAPE

To build trust and better understand future aspirations and current challenges, IoweU practitioners employ a comprehensive toolkit, that is applied at their discretion. This is not some ‘one-size, fits-all’ ABC formula. The modern world is far too complex for such tired and over-simplistic concepts.

At the core is an approach called SHAPE. Five types of question (Surface; Hunt; Adjust; Paint; Engage) which, when asked with skill and adept listening, enable the adviser to to build a complete understanding of the client’s world- of their current situation and future desired situation – in order to work out if and how they might help the client SHAPE their desired future.

SHAPE is supplemented by the use of a Value Sheet – a simple four-column tool that drives future, value-oriented conversations as opposed to current, technically oriented ones.

Further IoweU tools are provided in the form of Focus-5 (which specifically directs technicians to ask broader, commercial questions) and Spicy Questions – 8 specific types of question that add spice to conversations and encourage ‘out-of-the-box’ thinking.

For further information on SHAPE questioning, and how it can help you build better relationships and increase business, visit engage-universe.com

engage universe delivers business relationship and sales skills training to executives, professionals and sales teams around the world, helping build business trust.

Subscribe now to receive insights and updates to help you improve your business
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The importance of understanding your business relationships in a tight economy

We recently had a conversation with two senior execs in competing organisations. Both very confident that they were leading the market in terms of growth and that the other was really struggling.

To each we posed the question.
“Forget the competitor, is your growth attributable to:
a) your great offering;
b) how highly your customers think of you; or
c) is it because of the incredible economic growth in Australia over the last decade?”

The answer, from both people, after some probing, was, ‘I don’t know”. And here lies the challenge we think many of the world’s companies face. They don’t know.

In a tight economy, companies need to know why their customers buy from them. i.e. what relationship they have with their customers. Some companies are already in shock and many others could still be in for a nasty shock.

The most common relationship we find is where the customer uses a particular seller because the seller has a great offering.It is as good as or better than any competitor’s offering. Now, this can be a very profitable relationship in good times, when people spend freely. However, any loyalty is often superficial and can disappear very rapidly if the customer finds a product that is better or is as good and cheaper.

Moreover, while most organisations feel that their offerings are technically superior to their competitors’ in one way or another, the customer typically perceives little or no real difference. And, in today’s ultra-competitive world, where new offerings appear constantly, it is very hard to differentiate the technical excellence or quality of an offering for long. We label this kind of relationship a “technical” relationship since it is based largely on the technical quality of the offering.

In a tightening economy as price becomes more important, this is a very risky relationship to have.

It would have been interesting to find out 12 months ago what sort of relationship the up-market hotels and retail chains in the UK thought they had with their customers. The UK Daily Telegraph in April 2008 reported that while high street sales have recently fallen, Primark, the discount clothes retailer, has seen trade increase by 4 per cent. Aldi, the budget supermarket, has reported a 25 per cent increase in sales, with rising numbers of middle-class customers. Travelodge, the low-cost hotel chain, has increased sales by a quarter. This is in sharp contrast to the overall hotel sector, where occupancy rates fell 1.3 per cent in three months.

The above is great news in the short term for the lower cost provider, but possibly only temporarily. The response from Tesco, the UK’s largest supermarket chain has been to launch its own versions of the discounters’ products within its existing stores. This way it hopes it can keep its existing customers happy while hopefully attracting new ones too.

And so the downward price spiral will continue until one of them changes tack or becomes non-profitable. It is simply not sustainable to keep on reducing the price

There is also significant commentary in the USA about the “Latte Indicator” which uses the public’s appetite for coffee as a way of measuring the economy. Whilst this may at first appear to be a fairly superficial measure, it does have merit. Here is an industry where one brand in particular had become embedded so well into the psyche of many Americans that it was felt that it was no longer a “discretionary” purchase.

The tightening up of the US economy has challenges this hypothesis. Whilst the profits in the company are growing, that is due primarily to the number of new stores being opened. The customers and profit per store are falling and this is having a direct impact on the bottom line.Customers are either drinking less coffee or finding a cheaper caffeine kick. This trend may have been inevitable, however we believe that it’s impact could have been mitigated to some extent by building a customer loyalty based on more than a brand and decent coffee.

Now, many would argue that all customers are principally interested in price and we would agree that it is always a factor. However, it does not have to be the only, or even the key, factor.

There are “price-busters” out there, however as often as not, it is the seller who drives the relationship to be about price. Let me give an example. One chain we know of is an excellent Saturday day trip with the family. They have a coffee shop, kids play ground and we can buy what we want from people who are very helpful. We have never compared their price. Why is it then that the marketing campaign is all about it being the cheapest place to go? They are driving customers into a price driven, technical, relationship.

If you get your marketing right and your interaction with your customer right, then you can shift the buying criteria of many people from price to value.From buying the product alone, to buying the way the salesperson interacts with the customer.

An electrical goods chain almost seem to have a policy of the first question they ask being “What is the best price you have been offered”?What follows is a conversation about the various products they can offer and how cheaply they can offer them and what extra technical features we can get if we pay more.They create a price-driven, technical relationship.

If instead the salesperson bothered to ask a few simple questions such as “what do we want out of the TV?”, “Have we had a plasma before?”, “What will you use the plasma for?”

“How big is the room?” “How often will you use it?” etc, not only will we buy the right product, we will appreciate the help and I’m far more likely to buy from the shop where we was helped.

That shop will also be the most likely destination for my next electronic purchase.We know this sounds obvious, but we find this approach in most B to C and B to B selling very rare.

A different scenario is a where a customer has an urgent and possibly significant need.They may or may not ask for competitive bids, but they will probably ask for a proposal and a quote – because price is still a key selection criteria.The sale may be significant and the unexpected revenue can be very welcome.

In such situations many organisations forget to take care of the underlying relationship whilst addressing the project at hand.They may do an excellent job or sell an excellent product – but they define the relationship as ending when they raise the invoice and thus behave accordingly through the project.

One challenge of these types of relationship, which we Iabel “ad-hoc” (because they are intermittent and unplanned) can be the “real” profitability.We have seen situations where the proposal process alone takes out all the perceived profit. Price negotiations can be very severe too.

Sometimes sellers will even “buy” the work thinking that they will raise the price of future work – and then discover that not only can they not raise the price of future work – the future work does not come to them.All they achieve with this strategy is setting a precedent for low price.

In a tightening economy these surprise calls do still come, however price becomes even more of an issue and “beauty parades” between competing providers become common, mostly as a device to drive down cost.

Customer behaviour can rapidly move from “deal-hunter” to “price-buster” – where all that matters is the dollar because the seller has given them no other reason to buy from them.

As the profitability of the above relationships reduces in a shrinking economy, so sellers reach out to new potential customers.That makes sense, but the key is how you reach out.There can be a temptation to try to socialise with or entertain potential customers.This is done because it is easy.We believe there are two fundamental risks with starting such a social relationship.Firstly, not everyone enjoys social activities and by inviting the roughly 50% of people who are “introverts”, you may have taken a step backwards, as the last thing they want to do is be sociable – especially with strangers.You have just invited them to their idea of hell!

The other and possibly more significant and frustrating aspect of a social relationship is that of converting it to significant revenue.It can be very hard to turn a relationship that has been going on for months in terms of fun, to a relationship involving business.And if you succeed, you can be sure a “mate’s rate” will be part of the deal.
If you are going to reach out to potential customers then do so, but do so in a way that moves from no relationship to one of trust.Trust can be partly a function of time but it is more a result of behaviour.If you get the opening conversation or email containing the right language, you can immediately demonstrate to your customer that you are different, are there to help them and can be trusted.

We often find it easier to move to a trusting relationship with someone we have never met, than we do to shift a current poor relationship.This challenges the hypothesis that it is easier to get more money from current customers than from new customers, but we have found it to be true.75% of our current customers were not customers 12 months ago.

If the relationship is so important, why is it that most organisations simply measure the revenue from the customer and not the relationship?We think it is partly that it is easy to measure numbers and hard to measure feelings.But partly as well we don’t think most companies have stopped to really think about it, especially when the numbers have been so good for so long.

Many companies do of course survey their customers, but surveys are often ignored or filled in too quickly. Also, they may hint that you do not care enough about what your customers think to ask them personally.

Our suggestion is that you seek face-to-face feedback – but make sure the person asking for feedback isn’t the person who delivers the service or product!If the person conducting the meeting is part of the sales team then it is unlikely that the customer will be honest as many people will tend to avoid uncomfortable situations.Giving bad feedback can be a very uncomfortable situation.Better to employ an independent party to speak to your clients asking hard and revealing questions such as “What would we have to do to lose the work?”.

Then, once you have some feedback, put in place a programme to help your people develop the mindset to help, and the skills to build trust.

To finish, let us leave you with a question to ponder.If your nearest competitor in terms of offering, quality and price were to drop their price by 20%, would your customer still buy from you regardless, would they expect you to drop your price accordingly or would they move their purchase to your competitor.The answer may give you an indication of where your relationship sits.

Written by Keith Dugdale and David Lambert, co-authors of Smarter Selling, published FT-Prentice Hall, 2007 (ISBN 0273712462).

engage-universe.com delivers business relationship and sales skills training to executives, professionals and sales teams around the world, helping build business trust.

Subscribe now to receive insights and updates to help you improve your business
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