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Business Performance International - Sales Rev

Sales Rev

Ausgust 2008

Welcome to the August 2008 edition of Sales Rev!

Firstly, congratulations to Australia’s Olympians. Another great effort and special congratulations to the Australian sailors who performed so well in a difficult and trying venue. Now get ready for the Paralympics and if that doesn’t inspire you nothing will.

Cheers,

Rob

Contents

Bayside Business Breakfast

Turn Your Team Into a Winning Organisation

I will be speaking on what it takes to be a Winning Sales Organisation at the world famous monthly Bayside Business Breakfast Series on Tuesday 2nd September 2008. These breakfasts are well attended, professionally run and I look forward to seeing you there.

Click here for more information and registration details.

Sales Messaging

  • Is your well honed sales team looking for an edge when presenting?
  • Are you struggling to differentiate your offer from competitors?
  • Are your team putting your clients through death by a thousand PowerPoint slides?

Then a Power Messaging training course could be the answer for you. Corporate Visions Inc have been training sales professionals around the world to develop their key messages and deliver them in a way that creates a lasting impact. Here is a testimonial from a recent Power Messaging course:

"Just returned from the 2 day Power Messaging Workshop and boy, was I impressed.  I had a fantastic 2 days and it has literally changed all my ideas of how I am going to present in the future."
Tracey Hallgren

Generation Z

Interesting anecdote on our younger generation. My eleven year old needed to do his tie by himself recently and forgot how to do it. His solution,simply go onto You Tube and look up ways to do a tie.

There he found a great video with a running commentary that he replayed until he had done.

Now there’s something for Carson Kressley to think about.

Changing Times

The new AC/DC release "Black Ice" is due out in October and for the first time will be sold in retail land exclusively by Wal Mart . Why, well according "experts" the other music stores and chains simply could not match the marketing commitment that Wal Mart were prepared to put behind the release. How times are changing, I wonder what Bon would have thought.

What changes are happening in your distribution channels?

The Virtue of Value  From Miller Heiman

Why cost + margin is a poor means to determine sales price

Whether you are selling a product, a service, a solution or some combination of all the above, your prospect is sure to ask, "What is my return on investment?" The search for a good ROI tool and a meaningful way to present its output so as to provide financial justification for a purchase is one of the sales representative's most important tasks. Without a good way to prove that the upfront investment is worth it, the sale may be in jeopardy.

Nearly half of sales representatives surveyed use an ROI (or other related financial justification technique) to close their deals. These sales representatives using an ROI technique were 29 percent more likely to exceed quota.

Are your deals at risk because you can't produce a compelling payback?

The Price is Right

The magic of ROI is not just in the ability to close a transaction but, more importantly, in the ability to better price a deal. Many sales executives take their own organization's ROI model and attempt to graft it on to a customer or, if they are able, they re-fashion a client's financial justification technique – ROI, IRR (Internal Rate of Return), EVA (Economic Value Add), TCO (Total Cost of Ownership), or NPV (Net Present Value) – to support their proposed solution. When a sales representative can do this, the keys to the pricing kingdom are within reach.

First let's examine (using the fictional Acme, Inc sales organization) how pricing is usually accomplished – by adding an adequate percentage uptick to costs to ensure a gross margin target is covered.

The Make-up of Mark-up

It costs Acme, Inc. $5,000 to build an enterprise widget. The CFO has determined a 50 percent gross margin is required, so the widget price is set at $10,000. This is the standard approach to mark-up pricing (i.e. start with your costs inputs and build on top of that some acceptable margin that does not offend the customer's ability to pay but returns enough to justify the production of the widget). If the sales rep can show greater than $10,000 of value in purchasing the widget, a sale is possible.

The View on Value

Let's flip the pricing question around and, instead of focusing inward on Acme's needed return, look at the customer's return. Assume the following:

  1. Cost per Acme widget is still $5,000
  2. Acme corporate still needs a gross margin of >50 percent
  3. The customer has a 25 percent hurdle rate (i.e. a level set by the financial controller which defines the payback threshold over which a solution is considered acceptable) over 18 months
  4. The Acme sales representative can make a case that his widget will produce $25,000 in present day value for the potential customer (over the 12 months)

This establishes an upward maximum of $20,000 possible price for the widget. In other words, the Acme representative can sell the widget for $20,000 and still meet the customer's financial figure of merit. So, by basing price on value, the Acme representative can double the sales price ($10,000 to $20,000) and triple margin ($5,000 to $15,000).

Master the Payback

We began by providing an insight into the use of ROI and other similar approaches in the overall sales community – even in 2007, less than half of all sales representatives use them to close a deal. And yet, those that do are substantially more likely to exceed quota. Finally, we have shown that use of an iron-clad financial justification can drive higher sales price through a value-based model.

There is even more relevant data available that shows how use of ROI can improve closure rates, increase cross-sell opportunities, justify follow-on deals, retain customers, and increase aggregate deal size.

For more information on Business Performance International solutions such as Miller Heiman Sales Performance Consulting & Training and Sales Messaging from Corporate Visions please contact us on 03 9887 6967 or leisa@businessperformance.com.au