Can you teach entrepreneurship? Part 7: Be a master of big sales
Success in a startup requires skill in big sales. It is not widely known or accepted but big sales (e.g. which include hiring employees, getting investors and selling expensive products), require a set of skills that are very distinct from selling low price products (say, for less than $100). Sales is often something that we think of as an art and not easy to teach. However, I think that Neil Rackham, though his very long and careful studies of large sales in SPIN Selling, is changing this and his book is a huge resource for startup founders who want to learn sales techniques that are proven to be effective. In this blog, I will describe some of my key learnings.
Even if you sell a low priced product, I think that most of the selling that a startup founder does involves big sales. You know something is a big sale if the buyer has to do a lot of thinking before deciding to buy. Selling a newspaper is not a big sale. Selling video game often involves the buyer doing some research, but I still wouldn't call that a big sale. Big sales require lots of thought and analysis on the buyer's side: selling an enterprise software solution for $100k; or, convincing early employees to join or convincing investors to invest. These are all examples of big sales, and they require some specific techniques that are not widely known or even accepted.
The best way to ask is not to ask, the best way to sell is not to sell
If you google "closing techniques" you can find long lists of (sometimes hilarious) techniques to try and force a customer to buy. One example, "the assumed close", might go something like this "So I'll have the delivery man get the washing machine to you as soon as possible. When would suit for delivery, Wednesday or Thursday?" Such, techniques - which essentially involve putting the customer on the spot and forcing them into a decision - may have some success for small sales (e.g. a pencil, newspaper or the like) according to Rackham. However, for big sales, the technique of putting the customer on the spot very negatively affects the likelihood of closing the sale. Rather, to close a sale, it is much more effective to ask the potential customer about what the payoff would be for them if they adopt your solution. If you do this well, it is the potential customer who should ask to buy rather than you who should ask to sell.
Apparently, traditional sales training often includes guidance on how to handle concerns that are raised by potential customers. However, in Rackham's studies, he finds that these handling techniques don't improve sales performance. Rather, Rackham finds that it is much more effective to focus on minimising the likelihood of the customer raising concerns. Rackham contends that, in big sales, rather than suggest what features might be of help to the customer, better instead to ask the customer about the implications of their current problems and then about the payoff that your solution could offer. In this way, the customer isn't focusing solely on the drawbacks of your solution, which certainly exist. Rather, the customer is taking a holistic view of the net benefit for them.
The SPIN selling technique - the best way to convince someone is to help them convince themselves
Based on his findings from large numbers of studies, Rackham has developed heuristics for selling, one of which includes the SPIN - situation, problem, implications and need payoff - steps to guide a salesperson's questions during selling. First you establish the customer's position in their company, their role and their background - this is the situation part. Then you establish the problem faced by the customer, followed by a deep dive into the implications of that problem for the customer (lost productivity, wasted raw materials, product defects, employee safety, etc.) . Finally, having established the implications, you help your customer to establish the payoff for them if they adopt your solution (termed the need payoff). One of the main findings of Rackham's work is that more implication and need payoff questions have a very strong positive effect on the likelihood of reaching a sale. Establishing the situation and problem are important for the salesperson (and to inform a startup's strategy) but ultimately, it is in the implications and need payoff that the value for the customer becomes most clear. Here's the rationale - in a big sale implications and need payoff are important because your solution is expensive and prospective clients need to convince themselves that the value for them is greater than the price as which the solution is being offered. The higher the price, the more time will need to be spent for them to convince themselves of the value.
After reading SPIN Selling, I feel that sales techniques for startups absolutely must be taught and big sales should be an emphasis. I think that the status quo is for entrepreneurs to hope that sales can be learned by experience. At worst, I think that the learning by doing approach - without the right prior teaching - is ineffective. More likely, I think it is damaging. We now know that traditional training techniques have been shown to be counter-productive in large corporation. That, for me, is a sobering thought and should set startup alarm bells ringing. Startups are uncertain environments. We desperately need rigorous studies that are backed up by large amounts of data. We need to teach the heuristics that arise from these studies and move away from a "learning on the job" or anecdotal approach to sales that I fear can be counterproductive.