Thursday, March 5, 2009

Selling In A Buyers Market

Last week I attended an event sponsored by NETSEA, an area organization for technology sales & marketing executives, where the topic of the night was selling in the current down economy. After some materials were presented by Doug Banks, editor of Mass High Tech, on the economic metrics today versus the Internet bubble burst of 2001-2003 the conversation turned to selling strategy and tactics.

There was a panel who spoke to the virtues of selling value, understanding your customer, repositioning against competition, focusing on ideal clients, etc. etc. Next many of the audience members started to chime in on their selling and marketing tactics in this type of economy. While all of the points and advice were relevant and are great foundational practices, they all seemed a bit too much like motherhood and apple pie recommendations for me. Finally, I had to offer my own counterpoint to this discussion…

“The problem is that you are all focused on selling when you should be focused on how people BUY your products and services,” is I think what blurted out of my mouth. All of the previous suggestions were focused on how to sell something and this missed the point that economic down markets are extreme buyer’s markets. We have an excess of inventory, excess capacity, and too few people that are buying most products & services. This tilts the balance of power at the negotiating table to the favor of the buyer, not the seller.

How often do you take a step back from your sales process – identify, set meeting, do a needs analysis so you can find out what you can sell, demo your product, qualify the decision maker, submit a proposal, and get the deal signed – to think about what is going on in the buyer’s mind, within their department, or within their company? If you are not putting yourself in the buyer’s shoes, then you will not be very successful in a down market.

Buyers have plenty of competition for their attention. Unless you have some type of extremely unique product or service, most buyers will have several options from which to choose. All they need is two choices to make your life difficult, and if they have 3 or more choices then their position of strength is even more emboldened. Having multiple sellers competing for a buyer’s attention is not a new phenomena, this happens all the time in a competitive market. However, in a down market this phenomenon takes on new meaning because the sellers that understand and manage the BUYING PROCESS will beat their competitors that only manage the selling process.

The buying process is nothing new as it always exists as the yin to the selling process’s yang. Additionally, the best selling organizations and individuals are always thinking about and working to understand the buying process. However, often the buying process is often confused as simply the process that the prospect is going through which mirrors the steps in the selling process. While the seller is demonstrating software or capabilities, the buyer is evaluating functionality and determining the fit – but is that all they are doing? As part of the proposal process, the seller will find out who will be part of the review and decision process – but is it just identification of people and check box criteria, or are there other considerations in the evaluation (buying) process?

We are now in an extreme buyer’s market. Buyers will dictate terms of deals, timing for purchasing decisions, and generally have the upper hand in negotiations. Assuming that we can all agree that sellers should universally focus on the value of their products & services, and the return on investment for a client, here are four other areas that savvy sellers will focus upon as they work to understand and manage the buying process during this downturn.

1) ALTERNATIVES - DO NOTHING OR USE INTERNAL RESOURCES. During times of economic growth most of the alternatives that a buyer evaluates are other providers of products & services – i.e. competitors. However, when the economy is in a downturn all companies look to manage expenses and cut costs so they can match reduced revenue with a reduction in overhead and capital expenditures. This means buyers will ask certain questions as they consider alternatives; a) can I do nothing without a negative impact – if yes, they won’t buy, or b) can I use internal resources to achieve the same result by building the product, delivering the service, or doing some type of work around – if yes, they won’t buy.

During the selling / buying process, to be successful you need to fully understand all of the alternatives that the prospect is evaluating and, most importantly, how feasible or realistic is it that the prospect might be able to use internal resources to solve the same problem as your product or service.

2) FIT WITH CULTURE, PROCESSES, AND PEOPLE. Every company in the world owns software or technology products that they do not use, but are probably still paying for via licensing or some other financing vehicle. Every company! In a downturn, prospects will place much greater scrutiny on the fit of a product or service in their organization. They want to make sure they will use, and get value, from what they purchase with their limited resources (budgets). They cannot afford to buy products or services they will not use. Fit does not just mean functionality. Subtle variables for fit are always scrutinized but become less subtle when resources are in short supply. These include the solution’s fit with a) organizational processes, b) the people that will be using the product or service, and c) company culture.

During the selling / buying process, it is critical that you fully understand how your products & services will be used, by who, in what organizational processes, and how your offering matches with the culture of the buyer’s company.

3) SACRIFICE OF RESOURCES - TIME, MONEY, AND ATTENTION. One of the long held adages in sales is that you can get things three ways – fast, good, or cheap, you just need to pick 2 of the 3. Good and fast is not cheap, and fast and cheap is not usually good. Just as quality plays into the products & services that you are trying to sell, the buyer is also evaluating what type of sacrifices they will have to make if they purchase something from you. The most obvious sacrifice is that they will expend some money and budget on your offering that is no longer available for other uses. Sacrifice might be related to the time it will take to use or implement your solution. Will a purchasing decision require them to use other human resources or political chits to get your solution implemented?

Money and budget are the obvious questions that one might ask in the selling / buying process, but you should also understand the individual, departmental, and organizational sacrifices of resources (people, time & money) that need to be made to implement your solution.

4) RISK ASSOCIATED WITH THE PURCHASE / DON'T PURCHASE DECISION. As a buyer evaluates the purchase of your product or service, risk comes in two forms – the risks of doing something and the risks of doing nothing. Additionally, the measure of these two forms of risk can be tabulated by capitalizing upon, or missing, an opportunity for more revenue, less profit, or some other positive business outcome. As much as you may believe that your product & service is good for the buyer, you have to understand the risks that are associated with making the buying decision. Individual risk is different than organization risk, and that must also be considered. Something that is low risk for the organization might pose significant individual risk for the buyer – for example, the buyer might lose their job for a poor decision even if there was no significant impact on the company.

Ask the buyer to help you understand the risks for themselves, their department, and their company that are associated with the purchase of your solution.

While these concepts are good advice in strong economic times, they are critical during downturns. The more you know about alternatives, fit, sacrifice, and risk from the perspective of your prospects and potential buyers, the more successful you can be in securing a buying decision. Using some of these concepts will also differentiate you from other sellers.

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