On Channel Partners and Independent Sales Reps

In our never-ending quest to find the most effective (and inexpensive) way to sell our products, sooner or later we begin to think about using Channel Partners and/or Independent Sales Representatives (CP/ISR).  I mean, after all, having your own sales force is expensive – you have to pay your reps salaries whether they sell something or not, commissions when they do, and expenses every day.   In addition you need to have at least one level of management to supervise their activities (usually more.)

On the other hand, Independent Reps and Channel Partners are, most often, compensated only if they sell something.  Sure, their commission rates are higher than those of your “captive” reps but, they don’t require expense reimbursement, benefits, or a tremendous amount of supervision or overhead.

Almost seems like a no-brainer, doesn’t it?

Like most things that seem simple, the devil is in the details.  It is quite possible that these alternate sales channels will be very efficient and effective for you.  However, there are considerations that should be taken into account as you determine if they are right for your company and business philosophy.  Let’s take a look at a couple of the most important ones:

Control

You “own” your salaried sales force.  You can dictate and monitor how much time they spend on activities you feel are important to your organization’s success.  They can only present your product(s), and you can ensure that the product messaging is delivered consistently.   Management is usually “hands-on”.

With Independent Sales Reps/Channel Partners, you can really only monitor their performance relative to their contractual obligation to you.   They typically provide representation for other companies’ products, and will determine how much time and effort they put into each one.  Management is usually “arms-length”.

Motivation

Captive sales reps are motivated by a number of different things: money, recognition, security, promotion (career path) and perks.  All of these can be provided and managed by your company.  Competition takes on personal importance when between members of the same organization.

Independent contractors are motivated by money alone.  The reasons that they do not work within companies typically involve their desire to not be involved with what they perceive to be corporate politics and restrictive structure.  They prefer to operate out of their own self-interest and to determine where they can make the most money for the least amount of work.  They are competitive, but only with themselves.

From this analysis, one might assume that I prefer the “captive” sales rep option.  In fact, that is not true.  Either model can be viable if managed correctly.  Since the vast majority of organizations have experience with their own internal sales force, I thought it might be valuable to review some of the key areas to concentrate on as you contemplate engaging ChannelPartners/Independent Sales Reps.

Gaining Mindshare

Assuming that CP/ISR’s represent multiple products, the challenge is getting them to focus more time on yours.  For you, this is a sales opportunity, and, like in all sales opportunities, the key element is to look at your proposition from the “prospect’s” point of view.  What things are important to the independent representative?

  • Money – Can you demonstrate how the return on investment of their time makes it cost-effective to focus on your product?  How will you show that they are paid fairly, accurately, and in a timely manner?
  • Easier, faster sale – Since the CP/ISR is commission only, what can you offer that will enable them to move your product rapidly through the sell cycle – marketing, lead gen, technical/product information support, etc?
  • Hassle-free implementations – These folks live by their reputations.  Can you demonstrate how your company stands behind them to ensure consistent smooth delivery and/or implementation?
  • Reliable customer service – Unless you contract with the CP/ISR to provide customer support, they may not have the time (or inclination) to provide it.  What can you offer to help ensure customer satisfaction?
  • Effective Training – providing effective product training is a given.  What else might you offer that will enhance the CP/ISR’s ability to be successful?  What about enhanced sales skill training provided at your company’s expense or subsidized based on attaining pre-defined metrics?   (I’d like to suggest SMART Selling, of course, as well as programs for demonstration skills, phone skills, etc.)   This additional type of  training provides benefits to both sides of the equation as well as building loyalty.

Effective Partner Management

Like any sales representative, the CP/ISR requires management focus.  However, based on the Control profile above,  these folks don’t like being managed.  An effective Channel Manager will balance the company’s need for revenue production with the CP/ISR’s needs.  This position is a combination of sales and management.  Sales, from the standpoint of maintaining the partner’s mindshare; Management from the standpoint of ensuring that the partner is performing at a level that will meet your company’s revenue goals.  The underlying challenge is to make sure that the partner recognizes the value of the Channel Manager, and that the Channel Manager effectively builds a strong relationship with the partner.

One very important tool to maintain communication is the use of a CRM.  The responsibility for the CP/ISR to keep the CRM updated should be part of the negotiation prior to appointment.  However, to facilitate this discussion, the effective Channel Manager will select a CRM that is simple for the CP/ISR to use and identify the benefit for the CP/ISR in using it.  Such services as pre-loading company-generated leads from marketing programs and  industry/territory prospect databases with key personnel email addresses and phone numbers will go a long way in showing the benefits of using the CRM.  Don’t forget to provide CRM training to your independent contractors.  Without the agreement and ability to use the CRM, your company will have no effective way of managing your sales pipeline.

Last, but certainly not least, developing a territory plan and listing the key prospects on which a CP/ISR will focus should also be negotiated as part of their contract, along with revenue production required to retain their contract.  Within this plan, the CP/ISR should be asked to list what they need in terms of marketing and/or support in order to be successful.  The plan should be short and not cumbersome to complete.

As you can see, these are the same concerns that you have to address under any sales model.  The difference is that you have to handle the independent contractor as you would a customer in order to get the representation you need.

I hope that this helps you as you contemplate the most effective deployment of your sales organization.  As always, your comments, ideas, and suggestions are welcomed.


Posted in SMART Selling Tips | Tagged , , , , , , | 6 Comments

Diamonds and Stones

The other day, I was driving around with my iPod on “Shuffle”, and one of my favorite songs, John Denver’s “Some Days Are Diamonds, Some Days Are Stones”, started to play.

The song made me think about how products that we sell are viewed by our prospects.  Let me explain.

Stones are fragments of the earth’s surface that may be strong, pretty, ugly, durable, or fragile.  Stones are everywhere and are considered essential – for building, manufacturing, electronics, decorating, and for throwing at people.  Everyone knows what a stone is and, at some time or another, has used one.

Diamonds are a compressed fragment of prehistoric life that has been transformed into an incredibly hard rock.  Some are placed in the hands of experts and fashioned into multi-faceted jewels.  Like stones, everyone knows what a diamond is.  However, unlike a stone, a diamond is hard to find and, most often, is looked upon as a luxury item only to be purchased under very special circumstances.

What struck me was the thought that the products that we sell can be seen as stones by some and diamonds by others.

When is a Diamond a Stone?

Diamond bearings are used in instruments for laboratories.  Diamond cutting tools cut much faster and accurately than other tools.  Metals can be sliced thinner than human hair by the diamond blade.  Some saws have diamond-studded edges that can cut hard material like rocks, concrete, and some metals.  Diamonds are used to manufacture fine wire, such as the wire used in electric toasters.  Dentists rely on diamond drills to care for their patients’ teeth.

So, what’s the point of this?

Here are some conclusions to ponder:

  1. Some things that appear, at first, to be luxuries may become necessities.
  2. Stones are everywhere.  Diamonds are hard to find.

Now, think about some of your recent sales situations.  Did any of your prospects tell you that they would have loved to purchase your product, but they just didn’t have the budget?

If you were listening carefully, what they really said was, “In today’s business climate, we are not buying luxuries (diamonds), we are only buying necessities (stones) -and we see your product as a luxury.”

This is a time for creating stones out of diamonds!

In our world of sales, diamonds are the unique capabilities in our products that differentiate us from our competitors.

Instead of spreading your diamonds on the table and expecting their brilliance to convince the buyer to part with his cash, I would like you to try the following:

  1. Determine what unique capabilities (diamonds) are contained in your product.
  2. For each one of the diamonds you have identified, ask yourself, “What does this do, and what problem might it solve for my prospects?”
  3. Once you have identified the potential problems, think about the consequences that a prospect might suffer if these problems are not addressed.

Now, using SMART Selling , begin your next prospect call by exploring the challenges facing them, and probing for the consequences (Issues) that are related to the problems (Causes) that you have identified in 2 & 3 above.  Once the Issues and Causes are on the table, ask your prospect what they think it will take to solve them.  Because they probably won’t specifically mention your product capability, the opportunity will come for you to introduce your diamond (Unique Capability) and explain how it relates to their identified problem.   By following this process,  you will have successfully converted your “luxury” diamond to an “essential” stone.

Give it a try.  Let me know how it works for you.  For now, I’m going back to my John Denver album.

I wish you the best, and,

Good selling.

Posted in SMART Selling Tips | Tagged , , , , , , , , | 1 Comment

Why Companies Consistently Miss Their Sales Numbers.

The other day, one of my clients asked me if I could identify the key indicators that a company’s sales team would not make its targets. He wanted a concise list – not a lot of verbiage.

After some thought, I came up with the following 6 key things to watch for. What do you think?

1. Reps fall in love with own product to exclusion of understanding of customer needs – “It’s all about me”.
2. Unable to identify & effectively communicate unique value contribution by understanding, prioritizing, and matching to customer needs
3. Compensation Plan Problems
     a. Too rich – lack motivation
     b. Too lean – frustration – panic activities
     c. Does not provide proper direction
     d. Rep doesn’t understand comp plan
4. Staffing
    
a. Lack of skills necessary for sales environment
     b. Lack of process
          i. Internal (operational)
         ii. defined sales cycle process
     c. Lack of appropriate metrics and monitoring
     d. Lack of coaching/management
     e. Improper territory alignment

5. Service level issues (outside of sales)

6. Product development issues (outside of sales)

Your comments are welcome!

Posted in SMART Selling Tips | Tagged , , , , , , , , | 5 Comments

Has the Internet Killed Solution-Based Selling?

The other day, I pushed the button on my car’s remote control, and nothing happened. No matter how many times I pushed the button, the door didn’t unlock. I called the dealership and they told me that I needed new remote that would cost about $100 plus a $50 programming charge.  They explained the benefits of having a factory remote and a professional, guaranteed programmer. Seemed a little high for such a little thing.  So, I went to the internet and plugged, Pathfinder remote control into my search engine, and got over 104,000 results. I looked through about 5 or 6 of the results, read the specs and reviews, and narrowed my alternatives down to either factory or after-market units.  One of the after-market companies offered a guaranteed remote control for my car at $35 including instructions for programming (which involved opening and closing a door and inserting and removing the key in the ignition five times). I clicked. Bought. Received my remote in 3 days.  Programmed it in 2 minutes.  And, lived happily ever after. No needs analysis.  No proposal.  No demo. No sales rep. Welcome to the internet, my friend!

The Situation

It’s true that I picked a situation where the product could be considered to be a commodity.  But, there is a reason for that.  I believe that the internet has, in the minds of an increasing number of our prospects, commoditized many of our products. Let’s start with the definition of the problem:  When a prospect views one or more products as equally capable of satisfying their need, the only differentiator is price. In “solution-based selling”, or “customer-focused sales” programs, such as SMART Selling, we are taught that sales require the partnership of sales rep and prospect to analyze the problems facing the prospect and develop a set of capabilities that the sales rep can provide which will solve the problems.  The process of creating this solution develops the personal connection between buyer and seller.  And, since research shows that “people buy from people they trust”, this personal connection is vital. Yet, with the high speed, impersonal internet, I can use Google or Bing to describe my problem (as I define it) and instantly get thousands of results that:

     Help me identify the underlying causes of my problem,
     Present me with possible solutions,
     Discuss the relative merits of alternatives,
     Present me with prices of products/services that have solved the problem for others, 
     Provide reviews of my alternatives by folks who have used them.

As a result, with the internet, the only reason I may have to interact with a sales person is to get a demonstration (if necessary) or obtain a formal quote or proposal for each of the products I have selected.  I can even make a list of the specifications I have decided that I need, and send that off as an RFP. Good for me as a buyer.  Bad for you as a sales rep.  Unless you are the low-priced alternative, you lose.  And, if you represent the low-priced alternative, your company is probably evaluating whether they really need a highly-paid sales force at all.

A Change in Cycles An analysis like this could make any professional sales rep feel like the only alternative is to change careers or find a tall building to test their ability to fly. But, hold on for a little bit.  Perhaps what we have here is a change in entry point, but not necessarily in process.  Let’s take a look at the typical Sell Cycle for a non-commodity product compared to that for a commodity or “semi-commodity

(Note: The items highlighted in red indicate when a sales rep typically begins interacting with the prospect in each sell cycle.)

Non-Commodity aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaCommodity

Research Territory                                                                  Research Market
Build Territory Plan                                                                Build Marketing Plan
Prospect                                                                                     Build Website
Generate Interest and Rapport
Discuss Issues and Problems
Determine Capabilities & Solutions
Develop Cost Effectiveness (Value)
Assess Authority to Purchase
Develop Plan with Authority
Survey Other Involved Parties
Demonstration (Proof of Concept)                                      Demo/Webinar
Proposal                                                                                    Price
Negotiation                                                                               Order
Implementation                                                                       Fulfillment

There is a significant difference in the Sell Cycles.  With the Commodity cycle, the entire process of problem definition and solution creation, along with value determination is performed by the prospect without the involvement of a sales representative.  Is this really “Good for the buyer” as I said before?  Maybe not.

Why Would I Ever Want to Talk to a Sales Rep?

Perhaps this would be a good time to think about why or when a prospect might benefit from talking with a sales rep.  Since most prospects will do almost anything to avoid talking to one, the reasons have to be compelling.  From the prospect’s point of view, could a sales rep:

     Have more direct and varied experience solving problems like mine?
     Be able to identify hidden underlying problems that may change requirements?
     Provide insight into pitfalls that could be avoided?
     Assist in strategies to convince others in my organization?
     Transfer knowledge of significant trends that may affect current direction or thinking?
     Educate me on the intricacies of a complex product?
     Show me additional uses of the same product to enhance its cost effectiveness?

If you look at this list, and I’m sure you can add other items to it, you begin to see a few things.

1.     We are not selling commodity products.  There is kind of an inverted logic in this statement.  If our products were truly commodities, we wouldn’t be needed.  They would be available on the internet at the lowest price.

2.     Although our prospects think they know more than we do, they may be missing some information.  This potential lack of information increases their risk of buying the wrong product to address their needs.

3.     Just because a prospect thinks a product is a commodity doesn’t mean it is.  Remember, the buyer wants you to be a commodity so that you and your competitor will fight to get to be the lowest price alternative.

Based on this, it is my contention that, in the internet world, solution-based selling is not dead.  But, it has been changed.  The fundamental principles of putting prospect before product and problems before features are still valid.  However, because of the change in entry point, we must be even more committed to living by those principles.  We need to help our prospects see the benefit of involving us in addressing their needs.  We have to get ourselves back into a leadership role.

Tips and Conclusion Here are some tips that should help:

1.     Be prepared to be looked at as a commodity. Understand that when you receive a request for a demo or price quote, if you provide either without at least attempting to engage the prospect in a discussion of why they are looking at your product in the first place, you are playing roulette with your time and resources.  You’re putting your money on a number and hoping for the best.  Be accommodating, but firm.  “I am really glad that you contacted us and want to see our product in action.  In order to make sure that I show you the right things in it, could you help me understand what prompted you to look at us?”  Or, if you are asked to show one particular set of things, “I’ll be happy to show you how that works.  It would be really helpful to me to understand how you anticipate using that capability since their might be other options that are also available and even more effective.”  Your objective is to engage them in a conversation that will move them back up the non-commodity Sell Cycle to where they should be.

2.     Watch out for RFP’s. The majority RFP’s are generated one of two ways: (a) it is generated using significant input from one of your competitors, or (b) it is developed from internet research.  It is not difficult to identify one that has been influenced by your competitor.  As you read it, you will see specific features listed that are unique to that competitor. Likewise, it is easy to identify an internet research RFP.  In it, you will see every conceivable feature listed as a Requirement – even if they are mutually exclusive or redundant.  In this case, should you decide to respond, you will end up spending a lot of time trying to explain your response, and still end up with a confused prospect who will, most likely, defer any decision. In either case you are way behind and out of synch in the Sell Cycle.  Your odds of winning are quite low.  You can win, but it will take significant work and commitment on your part to do so. There is a detailed strategy I have taught sales reps to use when faced with an RFP.  I will summarize the key points:

     a)    Determine if it is worth your time to respond (size, significance, etc).  If not, go find   another prospect.

     b)    If it is, contact the writer of the RFP and request a meeting to discuss some of the features that are requested.  If they refuse, advise them that you would love to respond, but it is your company’s policy not to respond unless you can have a discussion to clarify some of the items in the RFP.  If they still refuse, give serious consideration to not responding.
     c)    If you are successful in getting the opportunity to discuss the requirements, begin by complimenting them on their work, and then continue by asking what prompted the RFP – what challenges are they facing, etc.  You will be moving them back in the Sell Cycle to where you can begin to reshape their solution to match your capabilities.

3.     Guard your resources. When you come in at the entry point in the Commodity Sell Cycle, the prospect is going to be asking you for something –  a demo, a price, or some other information.  These are your resources and are as valuable as the money the prospect may choose to spend with you.  If you are going to give something, get something in return.  What do you want?  Information.  Ask them – What are the challenges that led them to investigate your product?  How do they foresee your product being able to help address them?  How are others in the organization involved?   Again, your objective is to move them back up into the non-Commodity Sell Cycle so that you can work to develop a solution that recognizes and values your unique capabilities.  Just listing them won’t do.

In conclusion, climb back off of the ledge.  The world still needs professional, consultative, customer-focused sales people.  But, like all professionals, we need to adapt to the changes in our paradigm.  The internet has changed how people enter into the selling process.   That doesn’t necessarily negate the solution-based SMART Selling process.  It requires us to adapt our tactics to help our prospects get the best solution to their challenges — our product.

Posted in SMART Selling Tips | Tagged , , , , , , , , | 1 Comment