The End of the “Blue Light Special”

Declining profit margins are a major concern for most businesses. Despite this concern, many sales managers truly believe their salespeople are selling value rather than price. However, price discounting remains the primary cause of profit margin erosion.

An issue of the newsletter published by the Industrial Performance Group, Northfield, Illinois, took aim at the subject of salesmen’s habit of discounting in order to get the order. The article maintained that only by training will a salesperson learn to live without this (discounting) tactic.

The Habit

A habit is something we do automatically in response to a specific situation. Habits are acquired over time and can be difficult to break. For example, when a customer demands lower pricing, there are basically two things a salesperson can do. They can provide the customer with a dollars-and-cents reason to pay more, or they can discount the price.

The majority of salespeople cannot provide customers with a dollars-and-cents reason to pay more for their products — not because they lack the desire, but rather because they simply don’t know how to do it.

Extraordinary time, energy and dollars have been spent training salespeople to sell features and benefits. But if customers are not aware of the dollars-and-cents value they’ll gain from these features and benefits, they will view this product as just another commodity. Once a product takes on the commodity status, customers will do everything they can to reduce the price.

When a salesperson lacks the ability to overcome this downward price pressure, they experience fear whenever they encounter it. This fear stems from their sense that they will lose the sale unless they do something. The typical knee-jerk reaction is to discount the price and throw in a few extras to sweeten the deal.

If this results in getting the sale, offering price discounts and throwing in a few extras quickly becomes a routine the salesperson performs automatically whenever they encounter price pressure. Over time, this routine develops into a bad habit that the salesperson is largely unaware of.

In addition to shrinking your profit margins, price discounting creates a false perception in the customer’s mind about what your product is really worth.

Breaking the Habit

Salespeople develop the discounting habit when they don’t know how to respond to downward price pressure. In order to break this habit, salespeople need to learn how to overcome price pressure by giving customers a dollars-and-cents reason to pay more for their product.

Customers have been hearing the promise of added value from advertisers and salespeople for the past 20 years. Yet in reality, this promise is rarely delivered in a measurable way. Telling the customer that you are a value-added supplier has absolutely no effect on price pressure. In fact, most value-added suppliers find that they are doing more for their customers and making less due to extended terms, additional services and deeper discounts. There is only one form of value that can be used to overcome downward price pressure: dollars-and-cents value. Dollars-and-cents value is delivered to customers by helping them improve their performance, reduce their costs and/or by reducing their exposure to risk and liability.

Dollars-and-cents value comes from your products, as well as from the information and services you provide.

The good news is, you probably are delivering value to your customers. However, your salespeople need to know how to calculate and communicate the dollars-and-cents amount of this value.

Providing the Tools

Selling is hard and becoming more difficult as a result of customer consolidation and the ever-increasing power of purchasing departments. Price pressure is intense and shows no sign of letting up.

Every day your salespeople fight a battle that they may not be prepared for. Wouldn’t it be easier for them to defend your profit margins if they had the knowledge and skills they need?

Perhaps it’s time to make an investment in your sales force.

Staying Current With the Process

In her newsletter SalesWise, consultant Nicki Weiss maintains that “cold-calling” is hardly an effective sales tool:

In business, as in all areas of life, ideas come and go. What worked yesterday doesn’t work today and probably won’t work tomorrow.

Take cold-calling, a traditional staple of generating leads and driving sales for manufacturers’ reps. When I set up my own coaching and training business five years ago, I cold-called relentlessly. The result? I mostly got voice mail, polite but firm assistants who said thanks but no thanks, or a person at the wrong level.

I followed up with emails, which also were ignored. I got a few nibbles, but nothing major, and my work mostly came from referrals and strategic alliances.

I see other reps continuing to bang their heads against the wall, wasting hour after hour, day after day, month after month, cold-calling without great results. For many, this thankless effort destroys their once positive attitudes, their joy of doing business — and, ultimately, their souls.

Why are manufacturers’ reps still stuck in a cold-calling mentality? Perhaps it’s what they have always done, or they are copying the competition, or they have tried another method of generating leads and it didn’t work. Or maybe they simply don’t know about the many other systematic ways to increase their sales without begging someone to let them in the door.

The secret is learning how to develop effective marketing systems that attract business instead of you begging for it.

Motivated, qualified prospects chase you instead of you chasing them.

Think Marketing, Not Prospecting (a.k.a. Begging)

Marketing is the art of making yourself visible to many people. Cold-calling is the process of making yourself visible to one person at a time. Which would you rather do?

It has taken me quite a while to embrace this type of thinking, and to figure out the types of marketing practices that suit me. With my new marketing perspective I have been able to grow my business substantially, leveling out the peaks and valleys that haunt most entrepreneurs. Here are the practices I have learned:

The Rule of Threes is a classic public relations technique that helps you clarify the image you want to project and the business you want to attract (you’ll see below how the “threes” work).

• Figure out your objective (be prepared to feel egocentric). “My objective is to:”
• Become visible to many (manufacturers’ reps, rep firm sales managers and owners) in ways that showcase my experience and talents as a trainer and coach, so that people who are attracted to my style can find me and hire me.
• Figure out three channels (venues or media) where you can become visible. The choices for my business are these:
  • Free e-newsletter (because I also like to write).
  • Free educational teleforums.
  • Weekly breakfast networking/mastermind group that focuses on giving each other referrals.
• Show up in each of your channels at least three times within a three-month period. Other channel ideas include:
  • Speaking at association meetings.
  • Speaking at trade conferences.
  • Writing articles for trade publications.
  • Lunch-and-learns.
  • Direct mail letters.

Direct Mail Letters

If you want to contact a particular company, don’t cold-call. Rather, use targeted direct mail by identifying at least two to three people in the organization to whom you can send a letter. Find these names by calling the organization and asking for a salesperson — they’re often happy to help you navigate their company. Or find names on the company website.

Craft a one-page letter that concisely explains why you’re contacting them, your competitive advantage, and that you’d like to arrange a 10-minute meeting.

Be sure to name each person on each letter. Here’s an example to give you some ideas:

Dear (first name only):

I’m writing to you, Mike, Cindy, and Hal, to find the most appropriate person or people to deal with regarding scheduling a 10-minute in-person appointment on October 10 or 11.

At [name of your organization], where I am [your title], our business is helping companies such as yours to [very brief description of your offer]. The benefits we deliver are [three biggest benefits, with the greatest benefit first]. Our key point of difference is ____________, and we are proud of our position as the ____________ of ____________.

If you grant the appointment, I will present [brief description of key points of your presentation, focused on benefits]. When I follow up with your assistant in the next couple of days, please let them know if you wish to schedule the ten-minute appointment and what times are good for you. Otherwise, please direct me to the appropriate person you want me to deal with regarding a 10-minute appointment.

Warm regards,

Mail the letters on the same day in envelopes with stamps. Receiving the letters will create a buzz in the target organization, and the recipients will be expecting your call (making the contact warm, not cold). Be sure to follow up with each person within four business days of posting (two for mail delivery, two to read the letter).

“Freebie” Learning Sessions

Holding free learning opportunities can create strategic alliances with organizations who have your ideal customer in their data base. Strategic alliances can benefit both of you. For example, you may sell to a large distributor whose customers could buy more of your products, if they only knew more about those products. Here are some suggestions for forming alliances that could have ripple effects on your sales.

• You could partner with one of your distributors or OEMs to offer one-hour, free lunch-and-learns for their customers (if their customers are located within easy driving distance). They advertise the sessions to their database; you provide the content, behind-the-scenes administration, and facilitation.
• You could ask one of your large clients to personally invite all their customers to come to your free workshop at an upcoming conference. Your client looks like a hero for offering valued customers something extra, and you look like a hero for providing great content and a stimulating discussion.
• If you’re comfortable facilitating conversations on the phone, you can plan a conference-call program for the customers one of your key manufacturers/distributors or for members of an association.

These ideas work if you create topics that can help your customers and, in turn, their customers, to solve a problem in their business. The idea is not to make a sales pitch about your company.

You offer the program for free so your ideal customers will show up. The minute you charge even $.29, the power of this type of marketing goes away.

Find Support

If you are serious about building your rep firm, find someone who can help you and hold you accountable. My business would not be in such good shape if it weren’t for the help I get from my coach.