In any large consultative sale there are costs associated with buyer and seller coming together. How those costs are assigned to each party is a valuable indicator of who possesses the power in the relationship. Order-taker agencies routinely incur most of the expenses associated with the courtship, while some well-positioned expert agencies are able to drive their average cost of sale to close to zero. In this issue of the Win Without Pitching Newsletter we look at three ways to drive your average cost of sale lower.
Three Ways to Lower your Cost of Sale
Some narrowly positioned agencies still incur a high cost of sale, and that's simply because they have not realized the potential (in cost of sale, pricing, terms and other areas) that their positioning has afforded them. Such are examples of short-comings in sales process and they can be remedied with a few rules, three of which are set out below.
1. Distinguish Between Proposals and Contracts
The quickest way to lower your cost of sale it to get out of the proposal writing business. The proposal is the words that come out of your mouth; the document is the contract. Written proposals can be necessary in complex technical sales and are often required in selling to bureaucracies. In all other cases you don'’t start writing the document until you have some form of verbal agreement that the prospect intends to engage you based on your proposal (the words that came out of your mouth) subject to putting the details in writing. If the prospect is still talking to other agencies, you shouldn't be putting pen to paper. Trade the act of writing something up for a commitment from the prospect that he will walk this stretch of the road with your firm only. If at the end of that walk he decides yours is not the firm for him, he's free to re-engage with the others. If other firms are still in contention and he wants written proposals from all, you may be better off doing the take-away and letting him proceed with the other firms (for now.) The important point here is the document never wins the deal; it's merely a summary of the things that were said, or should have been said. Don't look to the document to do in writing what you should have done in conversation, including overcome any price objection.
2. Restrict Access to Personnel
High internal expenses or soft costs of time are almost always an indicator of poor process regardless of the positioning of the firm. The common mistake is allowing the business development person, whether employee, executive or owner, to bring other senior people into meetings with prospects. Some are more guilty of this than others and those that are guilty are often egregiously so. Your creative director, senior strategist and head of account services are not hired and trained to sell – they’re hired and trained to solve. Put them in front of a prospect and that’s exactly what they will do: solve his problem. You do not solve your client's problems before you are engaged, so, with rare exceptions you do not put a problem solver in front of the prospect unless he also happen to be your closer, which is almost always the principal or CEO. You might typically begin a new client engagement by assembling your team to be briefed by the client and begin working through his challenges. If you find yourself or someone else in your firm assembling such a team before you have a signed contract and a deposit, alarm bells should ring! Restrict the personnel that your business development person is allowed to bring to a meeting to one: the designated closer, only. The closer can then determine what other resources might be needed for the meeting.
3. Create a Travel Policy
The great thing about getting on an airplane to meet with a prospect is the costs are largely hard costs and they are evident to all. You're required to take a day or two out of your schedule, buy a plane ticket, maybe rent a car and even stay in a hotel. It adds up quick, and it's harder to rationalize than a two-hour drive. Why is this a good thing? Because before you incur such expenses you can ask for something in exchange from the prospect. And what you want in exchange, before you book that flight, are two things. The first is an agreement from the prospect that he will assemble all the decision makers for your meeting. (If you've been diligent in your qualifying then you will have identified all the decision makers before you make this request, allowing you to mention them by name. “We'll be glad to incur the expense in time and travel for this meeting. All I ask is that we include Bob, Sue and Heather in that meeting.”)
The second agreement you want to secure in exchange for travel is an agreement that the prospect will make a decision about whether or not they will engage you at the conclusion of the meeting. (“And let's agree now that at the end of that meeting, we’ll come to an agreement, one way or another, on whether or not we will do business together.”) Sound like a fair trade?
If this is a late-stage opportunity then you should always get agreement number one, and usually get agreement number two except when the prospect already has a multi-agency selection process in place and are unwilling to deviate. An unwillingness to agree to these terms might mean that you are dealing too low on the decision-maker totem pole, it may mean that the prospect does not recognize and value your expertise (giving you no power), or that you are simply premature and the prospect is still a long way from buying. Regardless, this is a meeting better held on the phone and/or web, without the travel expenses.