Wednesday, January 27, 2010

3 Hierarchy of Customer Wants. How to What Your Customers Want. The demand for Substantiated Value. The demand for Solutions. The demand for Outsourcing.

The Hierarchy of Customer Wants

While the barriers to putting customers first can appear daunting, salespeople have no choice but to overcome them. To become truly effective as a salesperson and win favorable customer decisions, your strategic focus must be customer-driven. After all, no matter what drives you and your company, it is the customer's decision to buy that drives sales and corporate success.

This also means that the customer's best interests come before your personal goals and your company's goals. This voluntary, but nevertheless rigorous, commitment to the customer's best interests is one of the integral components of a profession. All professionals in the formal sense of the word—doctors, lawyers, accountants, and so on—are expected to adopt and exhibit this characteristic (and are censured if they do not). If sales is to become a profession, salespeople must make the same commitment.

In order to become a customer-centric salesperson, you first must see the world from your customer's perspective. You need to know what your customers are hoping to accomplish as well as why your customers are looking to you for help. This knowledge provides the foundation that defines and supports the roles, behaviors, and skills you need to master to become an effective salesperson. The specific details of customer knowledge will, of course, vary by the individual customer and industry. But in generic terms, all of the answers that the business customers we've surveyed over the past fourteen years have given us follow one of three common themes. These themes fit into a hierarchy of wants that encompasses what business customers look to salespeople and vendors to provide.

The hierarchy of customer wants is like a pyramid with three ascending levels. The base of the pyramid is the fundamental want that underlies everything customers seek from sellers: the demand for substantiated value. Businesses seek a return on every investment they make, and to be of value, these returns must be tangible as well as measurable in financial terms. The second customer want resides in the middle of the pyramid, supported by the demand for value: the demand for solutions. Customers do not relate to value—cost savings and/or increased revenues—in terms of products and services. Instead, they think in terms of solutions and how those solutions enable them to resolve problems and/or capture opportunities. At the peak of the pyramid is the third customer want: the demand for outsourcing. Outsourcing is the most sophisticated expression of the customer desire for solutions. It requires that vendors actually take ownership of, execute, and manage a portion of the customer's business.

Want #1: "We Want Substantiated Value"
Your corporate customers express success in financial terms, such as revenues, net income, operating expenses, and net earnings. They must be able to judge the value of the products and services you are trying to sell them in those same terms. Further, they do not want anecdotal proof of value, such as case studies of your existing customers. Nor do they want generic proof of value, such as studies that compare the performance of your existing customers against industry averages. They want a customized, quantified return on investment (ROI), and more often than ever before, they want you to guarantee that they will attain the ROI specified. They want substantiated value.

The customer demand for substantiated value is being driven by two growth trajectories. First, it is growing as the products and services you are offering your customers become more sophisticated, and the impact of your offerings on your customers' businesses becomes more difficult for customers to understand on their own. Second, it is growing because of economic conditions. Corporate spending has been reduced and increasingly more carefully scrutinized since the evaporation of the "irrational exuberance" that drove corporate performance at the turn of the century. Since 2000, both of these trajectories have joined to create a nearly unanimous customer demand for proven, tangible value in business-to-business transactions.

Want #2: "We Want Solutions, Not Products and Services"
Your corporate customers are not the least bit interested in buying your products and services. They are interested in operating as efficiently as possible, in fulfilling the needs and demands of their own customers to the best of their ability, and in meeting their corporate growth and financial targets. Your customers' desire for your products and services extends only as far as those products and services can help fulfill these goals. This is the reality that lies behind the second "want" that business customers have articulated in surveys: the demand for solutions.

Some observers see the customer demand for solutions as one that has only recently emerged, but this is not a new phenomenon. Business customers have never been interested in buying products and services. They always made purchases in order to solve problems and capture opportunities. Their interest in solutions, however, is often obscured by their behavior and by the accepted sales wisdom that developed around it.

Take a copy machine, for instance. When the toner cartridge is depleted, the customer buys a new one. He buys it based on product attributes—availability, life of the product, price, and quality. But he actually wants copies, not toner. He knows he cannot get the copies he needs without it. Since the customer already knows that a toner cartridge is the right solution to the problem, you can focus solely on its attributes and win the sale.

But what happens when the solution is not so evident? Say the customer is opening a new office and needs to properly equip it. He could buy a copier or a scanner or an all-in-one printer. He could buy a high-output machine that will be shared on a network or provide smaller machines on each desktop. He could buy outright or finance or lease. All of these alternatives add complexity to the customer's decision. Unless he is an expert on document handling, he probably does not understand the many different solutions available or even the different kinds of document services his office will require. If you call on this customer and attempt to sell him a copier based on its attributes, you are not addressing any of these issues, and therefore are unlikely to win the sale.

In addition to the complexities that arise when the customer's problem is difficult to clearly define, buying decisions also become harder as solutions become more sophisticated. Technology is always advancing, and the number of options that sellers offer customers tends to grow over time. The more choice the customer has, the more difficult the buying decision. Buying decisions also become harder as customer constraints increase. Business customers, especially senior executives, have greater spans of responsibility than ever before. They have less and less time to make more and more decisions, often on issues with which they are not fully conversant. They do not have the time or expertise needed to immerse themselves in the details of your products and services. They need to think in terms of solving problems and/or capturing opportunities. In these situations, customers want salespeople who think along these same lines, rather than in terms of features and benefits. They look to salespeople as consultants and advisors who can guide them through the maze of alternatives to the best solution.

By and large, business-to-business salespeople and their managers are well aware of the demand for solutions. In Business Challenges survey, we interviewed more than ninety senior sales executives from business-to-business sellers located around the world. We asked them, "How will salespeople have to change or develop in the future in order to help drive company growth?" The answer given three times more often than any other, by more than 60 percent of the executives, was "more competence 'consulting.'" They want to develop sales forces that are able to sell solutions. They want salespeople who are experts at sales strategies such as consultative selling and solution selling.
"The sales professional will have to become more competent in the issues that our customers are grappling with," Jack Luker, VP of Sales at Xpedx, explained to us. "Customers are demanding solution-based value propositions that bring measurable value to their bottom line. Product features and benefits are still important, but the thrust of our propositions today must be based on a more elaborate set of value drivers. The ability of the sales professional to rise to this expectation can be a key differentiator."

Basically, your customers want to partner with suppliers who demonstrate a comprehensive understanding of their business and who are capable of solving their problems. Selling discrete products and services isn't enough to fulfill this demand. Instead, your customers are searching for vendors who can apply, implement, and manage solutions to their problems. Major business-to-business sellers already recognize this customer need, but as yet, most have not yet been able to fully satisfy it.

Want #3: "We Want to Outsource Everything Except Our Core Competencies"
Your corporate customers are in the midst of the largest jettisoning of business processes in history, and they are searching for vendors they can trust to execute a wide variety of activities ranging from accounts payable to research and development. These customers are following the lead of highly successful companies such as Beaverton, Oregon–based Nike, Inc., the world's leading shoemaker, which garnered widespread attention as an outsourcing pioneer.

If your customers believe the key to success is focusing all of their efforts and resources on core competencies, what does that mean for all of the other activities they conduct in the process of doing business? Rather than leave those activities starved for attention and hobbled, the logical answer is to outsource them to vendors who see them as core competencies. Thus, the race to capture leadership in the arenas defined by core competencies has also helped create and accelerate the customer demand for outsourcing non-core activities.
Your customers are able to fulfill this demand with ever increasing ease. Advances in information technology have created bridges over geographic boundaries, both enabling and encouraging the outsourcing demand. The digital revolution and global networks allow customers to send their processes, and obtain the products and services needed to execute them, anywhere in the world.

The billions in outsourcing dollars all come from a single source: business customers who want to be able to focus on what they do best (whether it be development, production, distribution, sales, or service), lower their costs, and enhance their productivity. In this process of focusing, they are seeking to outsource everything that is not central to their business, and to do so constructively and at the most cost-effective price.



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