Monday, November 30, 2009

Neil Rackham on Selling in a Recession

Many sales professionals have read Neil Rackham's book SPIN Selling. Rackham advocates a consultative sales approach with lots of questions. His approach is well suited to process sales and high ticket items.

Rackham was interviewed by Gerhard Gschwandtner, the publisher of Selling Power Magazine about selling in a recession. Rackham noted that the instinctive reaction of salespeople is to sell price during a recession. This is a mistake.

More than they want a good price during a recession, people want to avoid risk. In fact, people will spend more for a safer solution. Successful salespeople should show people how their solutions minimize risk.

This reminds me of a research study on air conditioning purchases in a Midwestern market that I read conducted 20 years ago. The conventional wisdom was that high efficiency was more likely to be purchased by affluent homeowners. After all, the affluent consumers had the money. Yet the study revealed that middle class and lower middle class homeowners were more likely to buy high efficiency. At the time, it was a head scratcher for me. It didn't make sense. My boss, Garry Upton, instantly knew the reason high efficiency sold better to people with less money.

"They can't afford a mistake," Garry said.

In other words, they didn't have enough money to risk losing it by making a bad decision. They would spend a little more to buy what was perceived was a better product. It was an inherent form of insurance.

In the interview, Rackham noted that salespeople feel pressured to close and communicate their nervousness to the prospect. In risk-avoidance mode, the prospects shy away from the nervous salesperson. Rackham advises sales managers to relieve some of the pressure on salespeople so that they feel safe in their jobs and communicate confidence, which is interpreted by the prospect that the company is a safe bet.

I agree with Rackham to a point. The absence of sales incentives usually results in lazy salespeople. By nature salespeople are usually money motivated and competitive. Keep them incented.

Rackham also notes that companies go into panic mode during recessions and flail around, mistaking activity for results. They chase every opportunity, but fail to devote the time needed to win more. Rackham suggests focusing on the sales you can win, not winning more opportunities.

But how can you identify winnable sales opportunities in advance? Personally, I advocate the pursuit of every possible opportunity to the point where you can determine the potential for a payoff. Always pursue those you have a good shot at winning. Drop the long shots unless pursuing them doesn't interfere with higher payoff activities. This works in good times and bad.

In summary, Rackham's advice is sound...

  • Minimize buyer risk

  • Be confident, not nervous

  • Focus and optimize your effort.

By the way, if you're in sales and haven't read SPIN Selling, you owe it to yourself to pick up a copy.

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