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The Myth of Goal Setting

Posted by

Ian Brodie on June 26th, 2008.

One of the most often repeated stories to back up the importance of setting clear goals and targets is the “Yale 1953 Goals Study”.

The story takes many forms – but essentially says that in 1953, researchers surveyed Yale's graduating seniors to determine how many of them had specific, written goals for their future. Twenty years later, the researchers checked with the surviving class members and found that the 3% who had written goals had accumulated more personal financial wealth than the other 97% combined.

It's a powerful story with a seductive message often told by consultants, coaches and self-help gurus. Unfortunately, it's just not true. No such study exists.

I seem to be spending much of my time debunking management myths nowadays (see Debunking the myths of non-verbal communication and Challenging the 80:20 rule).

This one has been brought back to my attention by a seminar I recently attended run by some business coaches from one of the world's largest coaching organisations.

In this case, the presenters even got the myth wrong – they said it was based on research at Harvard (a mistaken-retelling first done by Bill Phillips in his Body for Life book). They even went into great detail drawing pyramids and talking about how the researchers had gone back 10 years later again to confirm their findings.

Now I don't know if they were just making all this extra stuff up themselves, or if they themselves had been misled by their organisation – but either way, I was flabbergasted at how they were prepared to “educate” their seminar attendees so strongly on something which they hadn't bothered to check out.

Fast Company magazine, however, did check out the story.

They spoke to self-help guru after self-help guru – each passing them on to another guru as the source of their information – yet each happy to write and speak about the study as fact without checking it out. The original source was eventually tracked as far back as Zig Ziglar whose assistant told the magazine that Ziglar's source was hard to track down as he “reads a lot”.

Thankfully, the researchers were rather more conscientious. They followed up with the secretary of the class of 1953 and a research associate at Yale who told them that from personal experience and an exhaustive search of the archives: there was no such study.

Now this doesn't mean that written goals aren't important. Logic and much anecdotal evidence tells us that writing down your (or your company's) goals can be very helpful in “keeping you honest” and focusing on them. But they probably aren't as important as the story implies.

Worse: the story also implies that all that was needed to achieve great wealth was to write down goals. Nothing about the persistence and pain needed to stick to them – or the thought and creativity needed to make the goals happen.

For me it also acts as a huge Caveat Emptor for buyers of consulting, training and coaching services. If the people you are considering to be your advisors can't even take the time to check out whether one of their core assertions is actually true or not – how much can you trust their other advice?

And a message for fellow consultants and trainers: check your facts. You do our profession a great disservice by mindlessly repeating “facts” and advice that may not be true at all.

Ian

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Strategy

Positive Navel Gazing: Won Sales Analysis

Posted by

Ian Brodie on June 8th, 2008.

Review form Almost every company I've worked for has done regular “loss reviews” when they've failed to win big bids. It was almost a knee-jerk raction by management – “how can this possibly have happened?” – despite the fact that the sales team often knew well in advance that they weren't going to win.

What I see much less often are “win reviews”. Rather than just celebrating a win, analysing it to figure out why you really won, to see if you could repeat that success elsewhere.

In my experience,these win reviews are much more likely to produce future success than loss reviews.

The reason is simple. Loss reviews focus on trying to identify the reasons why you didn't win – “mistakes” – and change them for the next time. But in reality, the reasons why you don't win are usually much less likely to be fixable mistakes than they are to be inherent features of your products and your company. Things which are very difficult to change. Perhaps your culture didn't fit, or your high quality product line wasn't suitable for a low cost customer.

A win analysis however, tries to identify the factors that secured your victory. These factors are almost always things you can repeat. The important thing is to find more customers where these factors are valued.

The trick in both cases is not to try to change unchangeable things (of course, if you do find mistakes then fix them) – but instead to identify which types of customer value the factors you are strong on, and which don't. You can then use these factors as a way of identifying and/or screening potential new customers.

For example, one of my previous customers, an IT services company had a very strong consultative culture. They believed that by working with their client to help them take ownership of their problems and jointly developing the solutions (rather than just “telling them the answer”) they would have a much more sustainable result in the long term.

Like all firms, they won a number of bids, and they lost a number. On many of the bids they lost, the feedback they got from clients was that they didn't want to work collaboratively – they wanted to be told the answer. Often my client would interpret this as meaning they had to try to change their culture – to be more prescriptive in their approach. But whenever they tried this, apart from being culturally uncomfortable for the team, they would end up losing more bids than before.

What they needed was to counterbalance the feedback from their losses with feedback from their wins. They then began to hear of all the occasions where their consultative culture had helped them win projects. With this more balanced feedback they began to understand that instead of trying to win everything, they should focus their efforts on “winnable bids” – bids where their culture, skills and capabilities better matched what the clients were looking for.

They began to ask early qualification questions based on these criteria to allow them to see which bids they were likely to be a good fit for, and which ones the clients were looking for a different approach in. This focused approach allowed them to make major improvements in the number of bids they won – and decrease the effort spent on bids where they really stood no chance.

In similar vein, over at SHiFT Selling Craig Elias talks about the use of new customer reviews to identify the “window of dissatisfaction” where your product or service resonates with the buyer’s selective perception – and then looking for that same window elsewhere.

Meanwhile, Chris Whyatt talks about a great win review he did with ComputerLand a number of years ago which provided a real Eureka moment for him. According to the client, the main reason for their bid victory was that “the proposal felt like it was written for us”. Sadly, my experience has been that this is rarely the case – so a proposal which does so really stands out from the crowd and has a great chance of success.

Ian

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Strategy

Do I really need a USP?

Posted by

Ian Brodie on June 4th, 2008.

Unique It's accepted wisdom in marketing and sales nowadays that every business needs a strong Unique Selling Point (USP).

“Differentiate or Die” has become the clarion call of consultants across the globe, urging their clients to (pay them to) develop clever positioning statements showing how unique and different they are to their competitors.

But does it work? Is a powerful, differentiated USP really critical for the success of every business?

Not in my experience.

The concept of a USP dates back to the 1940's and originated with consumer goods companies battling for advertising share-of-mind. And indeed today, for many consumer oriented products a strong USP is key to creating brand awareness.

But for many businesses – particularly service businesses and companies who serve a local customer base, the concept of a USP is not so important.

Think about it from the customer's perspective: when you're looking to hire an accountant, or you need a taxi, or you want a plumber to fix a leak – are you looking for someone who is unique and clearly differentiated from his competitors? Or are you instead looking for someone who you can trust to do a really good job at a fair price?

Differentiation is great to mark yourself out from the crowd – but in a great many businesses you already stand out from the crowd.

In my own consulting practice for example, I very rarely face direct competitors. My biggest competitor – as I pointed out in the post Beating Your #1 Competitor – is the status quo – the client doing nothing. And to beat that, I don't need a USP. I need to demonstrate compelling value to the client, not uniqueness.

Or take the taxi firm. What will make a potential customer call one taxi firm over another? Usually two factors: availability and perceived reliability. Most successful taxi businesses didn't become successes because they somehow offered something different or unique – they offered what every firm offers – available, reliable transport. The reason they get chosen is that they (are perceived) to be able to do it better than their competitors.

How about an accountant? Do you really want an accountant that does your books in a unique and different way? Probably not. Probably you want someone who does them well at a good price. The role of marketing for the accountant is not to communicate uniqueness, but to ensure the potential customer trusts that the accountant will do a good job.

I work with a lot of professional service firms – lawyers, accountants and consultants. And when we work together on clarifying their vision and goals I always introduce the concept from David Maister's classic book Managing the Professional Services Firm that all professional services firms have essentially the same mission: “To deliver outstanding client service, to provide fulfilling careers and professional satisfaction for our people, and to achieve financial success so we can reward ourselves and grow”.

The challenge for marketing and sales in professional services is not to create some clever, unique proposition – it is to take this great but common proposition of offering outstanding client service and to prove to clients that it's true.

To be continued…….

Ian

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Strategy

Lightbox – 21 Word Home Page

Posted by

Ian Brodie on May 19th, 2008.

In 1998 researchers Jan Benway and David Lane coined the phrase “banner blindness” for the newly observed phenomenon that web users tended to ignore the colourful, animated banner adverts that had previously been thought to be more likely to be seen.

Over a relatively short period of time, web users had discovered that ad banners tended not to contain information of much value to them – and learned to ignore them and focus their attention on text areas and hyperlinks which were much more likely to contain useful content.

Hence “banner blindness” – web users have essentially trained themselves to ignore banner ads (or perhaps it could be argued that a proliferation of useless banner ads have done the training).

And the same thing happens, albeit more slowly, in the arena of real world sales.

When I first started selling consulting it was fairly easy to arrange meetings with executives. The prospect of a meeting with consultants who might bring interesting and useful ideas to their business was intriguing and unusual enough in its own right to secure a meeting.

Of course, over time, executives' time got tighter, and they discovered that not all consultants brought useful and interesting ideas.

Many claimed to be trying to understand the executive's challenges and needs – but just turned up and tried to shill their products instead. So soon, executives got their gatekeepers to turn down the meeting requests.

Next, we found that by quoting the types of improvement or savings we could make for their business, executives would be more willing to see us. Until, of course, they discovered that almost anyone could call and claim to be able to make 17% cost savings, 26% revenue increases or a 34.875% ROI – without any real knowledge or capability to do so other than in the simplest of situations.

So again, executives got their gatekeepers to turn down the meeting requests.

Today, the most reliable way of securing a meeting is to offer value in the meeting itself – to go through a relevant pre-developed report, white paper, or case studies for example. It's more difficult to claim to be able to do that if you haven't invested the time and brainpower to develop the necessary material.

Hopefully it will be some time before this approach and its value gets diluted (by outsourcing the development of low-quality reports to interns for example).

But the message is clear. In marketing you need to be continually upgrading your approaches – adding more and more value to your client interactions – from initial meetings right up to and after the sale.

If you don't, real world banner blindness will ensure you won't even be noticed.

Onward!

Ian

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Strategy

Selling Without Slides

Posted by

Ian Brodie on May 11th, 2008.

Selling Without Slides It's a scenario played out in millions of sales meetings every year.

The eager consultant (or lawyer, accountant or salesperson) has finally managed to get a meeting with one of his A list target customers. The customer meets him at reception, takes him to a meeting room and opens with “tell me a little about your company”.

“I'm glad you asked” says our hero as he brings out his pack of slides (or perhaps a glossy brochure, or even worse, his computer) and proceeds to give a thoroughly professional presentation – which unfortunately, does nothing to further the client relationship.

After a brief discussion afterwards the client offers to “call you when we need something in your area”, and the two never speak again.

Of course, it's hardly news that initial meetings with clients need to be about establishing relationships and trying to identify the client's critical needs. The problem is that far too many of us rely on the use of slides or a pre-prepared presentation as a crutch – without realising that the presence of the visual aid can often be a barrier to establishing the relationship we're looking for.

The first problem is that the potential client is no longer having a face-to-face dialogue with you – they're looking at your slides or brochure – or worse still, they're looking at a screen and you're not even physically close to them.

Secondly, if you present material, the meeting changes from dialogue to presentation. From a peer-level discussion to a “master-servant”, “I'm trying to impress you” dynamic.

Finally, the most likely outcome of a presentation is that they begin to ask questions about the presentation. That's what happens when we listen to presentations – they trigger questions and we ask them.

But, of course, at this point it's really you who needs to be questioning them. Trying to find out what they're looking for, what their challenges and problems are.

A far more effective approach is to be able to briefly describe your company in a few sentences, then turn to asking the client about their company, their challenges and what they are hoping to achieve. You can establish your and your company's credibility far more with intelligent questioning and a few “that's interesting, we worked with a client who had what looked like a similar issue recently, they…” follow-ups.

If you need to illustrate points, try a “pencil selling” approach. Have a few blank sheets of paper situated between you and the client and sketch out what you want to show them. It's far more effective and demonstrates your knowledge of the subject rather than just your ability to show slides which could have been prepared by someone else.

Better yet, you can hand the pencil to the client and get them to share in the process – adding in their thoughts and taking co-ownership of the solution or plan you are creating together.

And without the distraction of slides, brochures, or even worse, a computer to look at; you can begin to establish real human to human rapport. This may be the most crucial aspect of all as a potential client is highly unlikely to begin to open up and tell you about any significant problems they have until you establish a base level of trust and credibility with them. And that's so hard to do when you are presenting preprepared material.

So why do we rely on slides and brochures so much?

Very often it's because we have neither the confidence, nor have we done the homework needed to allow us to work without our visual aids. We can't remember all the key points we want to get across, the major benefits to the customer, and our great testimonials. We put all our preparation time into creating the presentation – rather than in thinking about how we should present it.

Ironically, we need to know our presentation and our slides absolutely off-pat – so that we can then do without them and begin to build a real dialogue with our potential client and stand a much better chance of turning that potential client into a real client.

Onward!

Ian

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Strategy

Back to Basics: The Vital Importance of Sales Activity Targets

Posted by

Ian Brodie on April 15th, 2008.

Activity Targets Everyone recognises the importance of having a clear vision for their business, and of setting specific, measurable objectives. And almost all businesses have clear sales targets for the year – and usually quarterly and monthly targets too.

But what I see much less often are clear Sales Activity targets. Targets for what you are actually going to do not what you hope to achieve.

Managing only using sales targets is, of course, like driving using the rear-view mirror. You get an accurate picture of where you've been – but not of where you are going.

In many industries, the typical sales cycle lasts months – and so your actual sales figures show how well you did months ago – not now. Maintaining an accurate Sales Pipeline gives you much better visibility of how you will be doing in the upcoming months – but again, it's focus is on measuring effect (the probable sales) – not cause (the activities that lead to the sales).

In order to effectively run your business you need to set clear targets for what sales activities you will be performing in the upcoming period – and measuring and managing to achieve those targets. If your business is driven by referrals then you must make sure you and your team are actively carrying out the activities necessary to get referrals.

If you're in start-up mode and you're cold-calling, you must ensure that you are doing enough calls, to the right people, in the right way to achieve your targets.

Why do you need to set these targets? Won't people (including yourself) just “do their job” to hit the overall sales target?

Well, yes and no.

Unfortunately, many critical sales activities are difficult or even painful to do. Very few people like to cold call. And even with referrals, asking a client for a referral can be embarrassing for some people. Firing everyone (perhaps including yourself) and hiring people who find these tasks easy is an option – but not a viable one for most businesses.

Instead, having in place a targeting and measurement system which gives people a visible reminder of what they should be doing is the answer.

Sometimes that yearly or even monthly sales target can just be too far away and too theoretical to drive action. You walk into the office in the morning, and you have emails to answer, some customer service queries to deal with, and perhaps the need to talk to the guys on the production line. All of those can seem much more interesting and preferable to getting on the phone to some potential customers, trying to get some meetings, and facing the potential of rejection.

Even contacting existing customer for referrals can seem daunting in comparison. The end of the month seems a long way away, and sales seem to be doing OK – so you take the easy option and deal with the emails and chat to the production guys about the new product coming on stream next year.

But it's a different story if you've worked out that to hit your sales targets you need to be having at least 3 new customer meetings a week – and to get those you need to be making 5 calls per day. And if you don't do that, sales in 3 months time will crash. W

ith those cold, hard figures staring you in the face (preferably literally – stuck on to your wall or PC) it's a lot easier to motivate yourself to make those calls.

Of course, these targets need to be based on facts. You need to break down your sales targets to how much you realistically expect to achieve for your major sales channels (e.g. cold calls, referrals, networking, inbound from website etc.).

The mix will be different for every business – and change over time as your business grows. For many businesses, customer referrals are the best source of new customers – but for a brand new business with no history and no existing customer you will have to supplement this with other channels initially.

Each channel will then have a different sales pattern or sequence of events that lead up to a sale. For cold calling it may be an initial call to a lead to set a meeting, followed by a face-to-face meeting, then a proposal, then a sale.

Historical data will allow you to see your average sales size for each channel, and your success rates at each of the sales stages and so allow you to figure out how many sales you need to hit your target, how many proposals you need to get the right number of sales, how many meetings you need to have, and how many calls you need to make to get those meetings, etc. The same applies to your other main channels.

Now these calculations will be far from perfect and actual results may vary significantly. But they do allow you to set ball-park targets for your key sales activities – and to break those down into weekly or daily targets to provide a highly visible marker of progress.

They also need to be combined with quality criteria and/or targets which ensure that you're not just playing a numbers game, but instead are carrying out your activities properly. For example, asking a client for a referral doesn't count unless you've briefed them in advance, told them exactly what and who you're looking for, and earned the trust in advance to make sure you get a high quality referral. Making a cold call doesn't count unless it's to a qualified target that you've researched beforehand, etc.

Once you have established those quality criteria, and set yourself activity targets based on what will really drive your business forward; you can then us your activity targets as a daily and weekly “conscience” to make sure you are focusing your efforts in the right areas.

The importance of these targets can't be overestimated. Put simply, if you are not hitting your activity targets day by day and week by week – then you are relying on luck to hit your sales targets.

Onward!

Ian

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Strategy

Medium is Beautiful

Posted by

Ian Brodie on March 25th, 2008.

Who are your best customers? It's a question I often ask my clients. And the answers I most often get are either “the big ones” or “the small ones”.

In fact, because I have a ton of experience in selling to large companies, I'm often asked for my advice on how to “land a whale” or to break-in to big companies.

But in my experience, the best, most profitable customers for most businesses are the medium-sized ones. It's certainly the case for me. And when it comes to prioritising business development – that's where I put my energy.

I love small customers and working with SMEs. They have a flexibility and a freedom that makes a real refreshing change from working with big corporates. The trouble is that the revenues from these businesses often don't justify the fixed “overhead” costs of doing business with them. In the work I do, I invest a lot of time really getting to understand my client's businesses, diagnosing what we will need to do to grow their sales, and understanding the best way of implementing my recommendations so that they will really stick.

That up-front investment is pretty much the same for small or large businesses – but with small businesses the revenues I may get from that investment are usually lower. And because my fees are pretty much at the top-end of the market, smaller businesses often struggle to afford me. So sadly, I have to restrict my work with small businesses to a few a year, where I am really going to learn something and grow myself as a result.

Conversely, although the profits I might earn from large companies are theoretically much higher, I find this to rarely be the case.

Nowadays, large companies have “professionalised” their purchasing processes – and in my experience this often means that they have bureaucratised them. The selection processes for suppliers are long, complex and costly – effectively ruling out many smaller businesses and handing a huge advantage to bigger suppliers more used to dealing with these processes and having pre-prepared stock answers to the typical questions asked.

In an effort to have a “fair” process, suppliers are prohibited from speaking to potential business customers during the selection process and are funnelled through the procurement professionals. This hands a huge advantage to incumbent suppliers who know the company well and know how to frame their solutions and responses to resonate with the company's needs and culture. For new suppliers, cut off from rich interactions with the people who are really going to be impacted by or using their products, they have to rely solely on what has been written in black and white on the request for proposal.

As anyone who has been involved in sales knows, it's frequently the case that the true customer requirements only really emerge from in-depth interactions with expert sellers. So by cutting off those interactions, the process effectively becomes a guessing game where the winner is the supplier that is able to most accurately second guess what the customer is really looking for, rather than the one who is best able to deliver it for them.

And of course, the procurement departments in large companies are frequently charged with ensuring “value for money” by squeezing out every last drop of discounts from their suppliers. It's only the very best procurement professionals who are able to get more value by working with the supplier to ensure greater benefits. The majority simply work at reducing the supplier's price.

Now this is not meant as a tirade against large companies and their procurement practices. There are very good reasons for them having adopted those methods. But what it does mean is that for most suppliers, large companies are usually not their best customers.

In my experience, both personally and for my clients; medium-sized companies are frequently the best customers.

They are large enough to place decent sized orders or engage service providers for large projects. They are still small and flexible enough that the seller can engage with the key decision-makers to properly shape up a solution and demonstrate their capabilities rather than working through intermediaries.

And medium-sized companies often have an ambition level that outstrips the large companies. They're not focused on protecting what they've got – they're focused on growth and are willing to take on new ideas to do so. As an additional bonus for service providers, medium-sized companies rarely have their own internal organisations which duplicate what external providers do – so they are more willing to take on outside help.

Of course, this picture is not universally true. Some small companies buy big from certain suppliers. Some large companies are nimble and focused on value rather than just cost. And some medium-sized companies suffer the worst of both worlds.

But more often than not, when you do the analysis and work out the profitability of each of your customers – taking into account all the costs of doing business with them – medium sized businesses come out on top.

The implication? Don't be afraid to focus your prospecting and business development activities on medium-sized companies rather than chasing the big company “whales”.

Onward!

Ian

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Selling

Ask for that meeting – and grow your sales!

Posted by

Ian Brodie on March 12th, 2008.

Early in my career I learnt a very simple tactic which made a significant difference to my sales – and I noticed recently that I had stopped using it. So as well as restarting its use for myself, I thought I'd share it. It's most appropriate for consultants or other professionals who have to prepare proposals to sell what they do.

Here's the tactic: when someone asks you for a proposal, instead of meekly agreeing and heading off to do it; set a meeting date with them then and there to review it together.

Simple and obvious, and as old as the hills. But easily overlooked.

When you're in a sales meeting with a client and you've talked about what they need and what you can do and they pop the question: “can you write that up as a proposal for me?” – it's so, so easy to agree and to rush off to do the proposal just as they've asked.

Assuming doing a proposal is actually the right thing (often it isn't – often the problem itself requires further exploration with the client – but assuming it is); as we all know, our chances of selling something increase exponentially if we present the proposal personally rather than just sending it in.

However, calling after you've done the proposal to set up a meeting very often results in the client asking if you can just send the proposal in for them to read first – then they'll set a meeting if needed.

Of course, without you there, the proposal doesn't have the same impact, the meeting never happens, and the sale is lost.

But if you ask for the meeting then and there you're leveraging three things:

It's harder to turn someone down face to-face
You've built up a degree of rapport in the meeting
They've just asked you for a favour – so they're likely to reciprocate by agreeing to a meeting

It's an obvious and pretty easy thing to do – but very, very often it's not done.

There are many reasons for this. I've seen sales people simply forget in the heat of the moment. But more usually, there's an underlying fear preventing them asking. They fear that the client may say “no” – and then they'll lose the chance of proposing and of winning the sale.

But if a client is going to say “no” to a simple request like a meeting – how likely is it they're going to buy anything? In reality it's much better to get a “no” right now than it is to waste time on the proposal.

Another problem some salespeope have is that they put themselves in a servile position relative to the customer. They take the “customer is king” philosophy too far and feel that they must do just what the customer asks with no reciprocal obligations. They don't feel it's right to push for anything, but instead just jump through whatever hoops the customer asks them to jump through, hoping that they'll be rewarded with a sale.

That's not the right positioning for most sales – and certainly not for selling professional services where what the customer needs is a real business partner. A peer who can advise and guide them – not just do what they ask slavishly.

So next time you're asked to prepare a proposal, just take a deep breath, and say “sure, that would be great. Let's set a date for a meeting together to review it……”

Onward!

Ian

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Strategy

Challenging the 80:20 Rule

Posted by

Ian Brodie on March 5th, 2008.

The 80:20 Rule It's probably the best-known and most-repeated rule in sales: 80% of your sales come from 20% of your customers. The implication is that you should focus the majority of your sales efforts on those 20% to maximise your returns.

But it's also the most misunderstood and misused rule in sales. Slavishly following the 80:20 rule could cause you big, big problems.

The first question to ask about the 80:20 rule is “is it true?”.

Well, the answer is “usually”. There are many professions where sales do follow some sort of 80:20 or 60:15 or other uneven split. But there are also professions where it doesn't – where the spread of sales is pretty even across customers. So it's absolutely crucial that you know the numbers in your business and don't end up putting all your eggs in the wrong basket.

The second, more important question is: “OK, there is an 80:20 split in my business – but does it persist over time?”. In other words – are the 20% of customers who make up 80% of your business going to be the same today as next year?

In this case, the answer is very often “no”. And this can be a huge trap for business developers who focus their efforts too heavily on today's big customers. In very many situations today's big customers may not be tomorrow's.

Takeovers, changes of management or changes of strategy often result in big changes in the amount of products and services being bought – and in who they are bought from. And in many industries there is a natural cycle of peaks and troughs in purchases.

For management consultants, for example, there is often a natural cycle of entry into a client firm, followed by an expansion period where you build relationships with more client executives and sell more work. However, there is also a natural decline as the issues you were brought in to deal with are addressed, and the clients begin to take over much of the work and the capabilities to do it themselves.

The key message is to be aware of fluctuations in the 80:20 rule. Look at your historical sales and analyse whether the composition of the 20% of customers who make up 80% of sales varies significantly year on year.

And if it does, you need to watch carefully and invest time and effort in nurturing new customers to rise up into the top 20% rather than spending all your effort on the current 20%. Focus on sales potential to drive your efforts rather than just historical sales.

The final question to ask is: “Even if I know my top 20% – does that mean I should devote most of my attention to them?”

The answer here is “usually yes – but not always”. It's common sense to focus on your highest potential customers. But there are sometimes diminishing returns to any extra efforts if you are already devoting a lot of time to a customer. Sometimes spending more time with an “underserved” client can produce a much greater impact on sales than holding yet another meeting with your favourite client.

In all three cases the key is to look beyond the simplistic 80:20 rule to check:

Does it really apply in my business?
Does it persist over time – or do I actually need to focus on “rising stars”?
Will extra effort on my top 20% really increase sales – or are they already being fully served?

Now don't get me wrong – the 80:20 rule can be very helpful as a simple guide to where to focus your effort. But thinking beyond the simple rule will pay big dividends for sales people willing to invest their brain power and challenge the accepted norms.

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Strategy

High Prices really do influence Perceived Quality

Posted by

Ian Brodie on January 19th, 2008.

Wine There's an excellent article in this weeks Economist. It explores a study by Dr Antonio Rangel of the California Institute of Technology which found that if people are told a wine is expensive while they are drinking it, they really do think it tastes nicer than a cheap one.

It's not that they just say it tastes better, Dr Rangel and his colleagues used functional magnetic resonance imaging to show that the parts of the brain associated with pleasure were stimulated more by the wines thought to be higher priced (they were actually the same wines). And this happened with experienced wine tasters as well as everyday drinkers.

Of course, you could argue that we've known this for years – but it's good to see it backed up by hard science. And it's good to see that it's a real impact on perceived quality (which can therefore influence sales) rather than people just saying they think it's better (which won't have such an impact on sales).

This also ties in well with other approaches often taken to improve sales such as the use of testimonials and referrals. In each case, lacking hard, definitive information about the quality of a product, the customer uses secondary sources: the opinions of others or in this case, the price of the product itself.

Of course, this doesn't work in all situations. If one store prices an i-phone higher than another for example, customers won't assume it's higher quality. They have other, more concrete ways of assessing the (relative) quality of a product – in this case, they're identical because they're the same product.

This gives us useful clues as to where referrals, testimonials, and premium quality pricing can be most useful. If it's difficult for customers to objectively evaluate the product's value themselves, then they will search for other clues as to it's value. It's then when referrals and testimonials – and a premium pricing strategy – come into there own.

Conversely, if your product can be simply evaluated and accurately valued by a customer then you may be better off investing your time on other things than getting testimonials and references. And you may have little choice over how you price the product.

Onward!

Ian

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