The Best Kept Secret of the Selling
World
by Jeff Thull
 Problems
cost money! More often than not, however, the only cost
that clients and salespeople focus on is that of the proposed
solution. The cost of the problem is more critical, and
that cost remains the best kept secret in the selling world
and certainly the most overlooked.
We define a problem as an undesirable, or less than positive,
situation your client is experiencing. The cost of the problem
is the financial impact that situation has on the client's
business due to the absence of the value your solution could
bring. The cost of the problem is the financial impact of
staying the same, and the cost of the solution is part of
the pain of changing. When clients do not have a clear picture
of these two cost groups, the timing and quality of their
decisions are guesswork.
Sales professionals frequently ask me two questions: "How
can I speed up the sales cycle?" and "How can
I protect my pricing from last minute negotiating pressures?"
It’s amazing to see what happens to timetables and
priorities once clients truly understand the cost of the
problem. Their perceptions of value change their thinking.
Here's an example of how it works…
One of our clients provides management software to hospitals.
Several months ago, they proposed a $700,000 solution to
a hospital. The hospital’s executives agreed to the
purchase and included the $700,000 in the budget.
The executives did not calculate the cost of the problem
that the software could resolve. The decision to purchase
the system was driven by the desire to keep up with the
latest technology, which I call the "nice-to-have"
motivator. It soon came out that the purchase of the new
system had been delayed from the first quarter to the second
quarter and then to the following year. The funds planned
for the software purchase had been allocated to another
hospital project.
When the solution providers found out about the second
delay, they requested a meeting with the hospital’s
CFO. The purpose was to determine if the CFO knew the financial
impact the project delay would have on hospital reimbursement
revenue.
During the meeting, the CFO asked the salesperson what
he thought the financial impact of the project delay would
be. The salesperson replied that in the rush to get the
project into the budget, the impact had not been calculated.
He asked if the CFO would like to work with him to put together
the numbers, which would allow the CFO to judge if the delay
was the correct course of action. The CFO agreed and they
met the following week.
As a result of their work, the cost of the problem was estimated
to be $220,000 per month in lost revenue. The financial
impact of delaying the software purchase was significantly
more than the impact of the hospital’s alternative
project. As a result, the hospital changed its priorities
and requested that the new system be installed within 90
days.
There are many initiatives begging for funding, especially
in complex business environments. Managers can get so caught
up in trying to address those issues that it’s sometimes
simpler to do nothing. But if they have the tools to do
a thorough financial impact analysis, they can prove how
much money a problem is costing. Response and action may
be immediate.
The cost of the problem influences the decision process/sales
cycle like nothing else. If you get a handle on the cost
of the client’s problem, the sales cycle can shrink
dramatically and your credibility will rise exponentially.
The fact that you are able to help clients determine the
severity of the situation and address their concerns and
expectations positions you as a very credible and valuable
advisor.
What Happens Once You Know the Cost of the Problem?
Once you have diagnosed a client's situation and defined
the financial impact on the business, there are three possible
outcomes:
- The financial impact is great enough to justify the
investment and you move forward.
- The financial impact of the problem you’re addressing
is not as great as that of other issues. In this case
you plan when your project will move to the top of the
client’s priority list.
- The financial impact is not enough to justify your
solution. Given this situation, you may have to scale
back your proposed solution to match the financial impact,
or you may want to look for an opportunity elsewhere.
The primary question most often in your client's mind
is: "Why should I invest my limited resources in
your solution?" |
The primary question most often in your client's mind is:
"Why should I invest my limited resources in your solution?"
If the only way you can answer that question is by talking
about the features and the value of your solution, you will
not be responding to the client's real concern. You must
help your client understand what it costs NOT to go forward
your proposal.
Ignoring the Cost of the Problem Can Be Fatal
Ignoring the cost of the problem results in two critical
errors in the seller’s judgment:
- The salesperson assumes that the client knows the cost
of the problem and will use that knowledge in the decision-making
process.
- The salesperson assumes that the client has the ability
to do a proper self-diagnosis of the problem. If that
were true, then all the salesperson would have to do is
present the solution.
Even if both of these assumptions are correct—which
is rare—the greatest error made by the salesperson
is the failure to collect and analyze the relevant financial
information.
|
Developing a mutual understanding of the cost of a critical
issue or problem is a mark of a true professional salesperson. |
Here's the point. The client who does not go through this
justification process on a regular basis will not be as
thorough as you can be. As a trained professional, you can
bring many more cost factors into the client's equation
and thus enhance the quality of the decision process.
Developing a mutual understanding of the cost of a critical
issue or problem is a mark of a true professional salesperson.
It's the best way to prevent stalls and handle price objections
before they ever come up. It clearly separates the amateur
from the professional.
Jeff Thull is President and CEO of Prime
Resource Group, and a thought leader in the area of sales
and marketing strategies for companies involved in complex
sales. He’s the author of the bestselling book Mastering
the Complex Sale: How to Compete and Win When the Stakes
are High and the newly released, The
Prime Solution: Close the Value Gap, Increase Margins, and
Win the Complex Sale.
For more information contact: Prime Resource Group, support@primeresource.com,
www.primeresource.com.
Read our other article by Jeff Thull, How
to Prevent Unpaid Consulting.
Also, Management Consulting News interviewed
Jeff Thull twice:
Jeff Thull
discusses why solution selling fails
Jeff Thull on
the sales strategies of top-performing consultants
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