Post on 03-Apr-2018
7/28/2019 Neil Rackham
1/49
1999 Neil Rackham, John DeVincentis
Creating Value through theSales Force
Neil RackhamAuthor of lots of stuff
7/28/2019 Neil Rackham
2/49
1999 Neil Rackham, John DeVincentis
In one sentence:
Whats the purpose
of a sales force?
In one sentence:
Whats the purpose
of a sales force?
Station Break . . .
7/28/2019 Neil Rackham
3/49
1999 Neil Rackham, John DeVincentis
Whats the purpose of a sales force?
The reason for a sales force is to ensure that the
customer has the right information about theadvantages of your products at the right time, so that
the purchasing decision is influenced in your favor.
Regional Sales ManagerPrinting Equipment Company
The reason for a sales force is to ensure that the
customer has the right information about theadvantages of your products at the right time, so that
the purchasing decision is influenced in your favor.
Regional Sales ManagerPrinting Equipment Company
Some answers . . .
The sales force convinces the client to buy from you
rather than from a competitor by showing how yourservices are superior.
Senior Consultant
Systems Integration and Software Company
The sales force convinces the client to buy from you
rather than from a competitor by showing how yourservices are superior.
Senior Consultant
Systems Integration and Software Company
7/28/2019 Neil Rackham
4/49 1999 Neil Rackham, John DeVincentis
Whats the purpose of a sales force?
The sales force exists to show customers that youhave something worthwhile to offer that meets their
needs.
SalespersonOffice Products Company
The sales force exists to show customers that youhave something worthwhile to offer that meets their
needs.
SalespersonOffice Products Company
The sales function is like a translator: its job is to
take your products and services and translate theminto language that the customer understands.
Sales Manager
Control Systems Manufacturer
The sales function is like a translator: its job is to
take your products and services and translate theminto language that the customer understands.
Sales Manager
Control Systems Manufacturer
The purpose of a sales force is to communicate to
customers the value of your offerings.
Senior Vice President
Sales and Marketing, Large Regional Bank
The purpose of a sales force is to communicate to
customers the value of your offerings.
Senior Vice President
Sales and Marketing, Large Regional Bank
7/28/2019 Neil Rackham
5/49 1999 Neil Rackham, John DeVincentis
The common factor:
Each definition is about
7/28/2019 Neil Rackham
6/49 1999 Neil Rackham, John DeVincentis
The shifting marketplace
numerouscompetitors
buyer has many
options/choices
no perceived
uniqueness
no competitors
buyer has no
alternative
source perceived
uniqueness
Substitutable
products/services
Unique
products/services
10 9 8 7 6 5 4 3 2 1
7/28/2019 Neil Rackham
7/49 1999 Neil Rackham, John DeVincentis
Where are you?
In 3 years
Today
3 years ago
Substitutable
products/services
Unique
products/services
10 9 8 7 6 5 4 3 2 1
10 9 8 7 6 5 4 3 2 1
10 9 8 7 6 5 4 3 2 1
7/28/2019 Neil Rackham
8/49 1999 Neil Rackham, John DeVincentis
Whats happening in the USA
In 3 years
Today
3 years ago
Substitutable
products/services
Unique
products/services
10 9 8 7 6 5 4 3 2 1
10 9 8 7 6 5 4 3 2 1
10 9 8 7 6 5 4 3 2 1
6.4
4.5
3.7
SSI Data: 47 corporations 773 salesexecutives
7/28/2019 Neil Rackham
9/49 1999 Neil Rackham, John DeVincentis
Why are productsand services in
most marketsbecoming less
unique?
Why are productsand services in
most marketsbecoming less
unique?
Station Break . . .
7/28/2019 Neil Rackham
10/49 1999 Neil Rackham, John DeVincentis
New products/services Value-added services and
support
Product bundling & pricing
Customized options
Create Differentiation
Market Forces
Corporate Strategies
Decrease Differentiation Products/services look moresimilar
More of them (Increasingcompetition)
More demanding clients
New Technologies (quickertime to market, internet, etc.)
7/28/2019 Neil Rackham
11/49 1999 Neil Rackham, John DeVincentis
Creating value vs. Communicating value
Selling processmust create value
for clients
Not enough forsalespeople tocommunicate
value
Salespeople mustbecome valuecreators
Market Forces
Product/servicecreates thevalue
Salespeoplecommunicateproduct
benefits
Salespeoplesucceedthrough valuecommunication
Corporate Strategies
Substitutable
products/services
Unique
products/services
10 9 8 7 6 5 4 3 2 1
7/28/2019 Neil Rackham
12/49 1999 Neil Rackham, John DeVincentis
Station Break . . .
and customers are changing too.
Whats the biggest difference in
how major customers behave
today compared with 3 years ago?
and customers are changing too.
Whats the biggest difference in
how major customers behave
today compared with 3 years ago?
7/28/2019 Neil Rackham
13/49 1999 Neil Rackham, John DeVincentis
Most people agree that
Customers are getting tougher to dealwith
They treat you more like a commodity
But they also demand more expertiseand support than ever before
They are using new purchasingtechniques to force greater concessions
from their suppliers
7/28/2019 Neil Rackham
14/49
1999 Neil Rackham, John DeVincentis
Buying strategies in the new purchasing world
Difficulty of obtainingsubstitute product/service
Strategicimportance
ofproduct/service
high
low high
ShopShop
LeverageLeverage
Manage
Risk
Manage
Risk
PartnerPartner
7/28/2019 Neil Rackham
15/49
1999 Neil Rackham, John DeVincentis
Define valueDefine value
Station Break . . .
7/28/2019 Neil Rackham
16/49
1999 Neil Rackham, John DeVincentis
What is value?
Value = Benefits Cost
Practical test:
Value is something the customeris prepared to pay for.
Practical test:
Value is something the customeris prepared to pay for.
7/28/2019 Neil Rackham
17/49
1999 Neil Rackham, John DeVincentis
What things do we do for our
customers during the salesprocess that are so valuable
that customers would be
prepared to pay for them?
What things do we do for our
customers during the salesprocess that are so valuable
that customers would be
prepared to pay for them?
Station Break . . .
7/28/2019 Neil Rackham
18/49
1999 Neil Rackham, John DeVincentis
Customer value survey
We asked 1,100 buyers from UScompanies:
Has anyone ever made a salescall on you that was so valuable
you would willingly have pulledout a check book and written them
a check for the call?
B i i V l i F t F S l
7/28/2019 Neil Rackham
19/49
1999 Neil Rackham, John DeVincentis
Bringing Value in Face-to-Face Sales
Talking brochures add no value.
Information on customer relevant trendsand issues adds minor value.
Acting as the customers advocatecreates value.
Problem solving and customizingsolutions add high value.
Helping customers change strategicdirection adds most value.
7/28/2019 Neil Rackham
20/49
1999 Neil Rackham, John DeVincentis
Where customers perceive value
Talking brochures: negative value add
Time-stamped info on industry/competition
Customer advocate
Problem solving & customized solutions
Change of strategic direction
-2004 Neil Rackham, J ohn DeVincentis
7/28/2019 Neil Rackham
21/49
1999 Neil Rackham, John DeVincentis
The value map
VALUE
DISADVANTAGE
VALUEVALUE
DISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
High cost
offering (Y)can compete
with low cost
offering (X)if it has
more benefits. XX
YYCost
Benefits
7/28/2019 Neil Rackham
22/49
1999 Neil Rackham, John DeVincentis
but . . .
VALUE
DISADVANTAGE
VALUEVALUE
DISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
Y cantcompeteat higher
cost withoutadditional
benefits. XX
YYYYCost
Benefits
7/28/2019 Neil Rackham
23/49
1999 Neil Rackham, John DeVincentis
Value map in selling
VALUE
DISADVANTAGE
VALUEVALUE
DISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
YYSALESCOST
VALUE CREATED IN SELLING PROCESS
7/28/2019 Neil Rackham
24/49
1999 Neil Rackham, John DeVincentis
Value selling strategy
VALUE
DISADVANTAGE
VALUEVALUE
DISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
OPTION 1:Create more value
in selling process11
OPTION 3:Hybrid of
options 1 & 2
33
OPTION 2:
Slash sales costs
22
YYSALESCOST
VALUE CREATED IN SELLING PROCESS
7/28/2019 Neil Rackham
25/49
1999 Neil Rackham, John DeVincentis
Which optionhas the highest
success rate?
Which optionhas the highest
success rate?
Station Break . . .
VALUE
DISADVANTAGE
VALUEVALUEDISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
11
33
22
YY
7/28/2019 Neil Rackham
26/49
1999 Neil Rackham, John DeVincentis
The toughest strategy to execute
VALUE
DISADVANTAGE
VALUEVALUE
DISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
11
33
22
YY
Most people believehybrid should be
easiest
Very, very difficultwith many failures
Th 3 t l t
7/28/2019 Neil Rackham
27/49
1999 Neil Rackham, John DeVincentis
The 3 customer value types
a bigger, better tasting pie
ExtrinsicExtrinsic
valuevalue
buyersbuyers
VALUE COSTBENEFITS=
IntrinsicIntrinsic
valuevalue
buyersbuyers
a cheaper, no-hassle pie-
EnterpriseEnterprise
AssetsAssets
StrategicStrategic
valuevalue
buyersbuyers
a balanced diet
+
I t i i l t
7/28/2019 Neil Rackham
28/49
1999 Neil Rackham, John DeVincentis
Intrinsic value customers
Understand the product Perceive product/service
as readily substitutable Focus on the cost Resent time/cost
associated with salespeople
E t i si l st s
7/28/2019 Neil Rackham
29/49
1999 Neil Rackham, John DeVincentis
Extrinsic value customers
Focus on how productis used
Interested in solutionsand applications Value advice and help
Willing to invest time andmoney with sales peopleto create solutions
Strategic value customers
7/28/2019 Neil Rackham
30/49
1999 Neil Rackham, John DeVincentis
Strategic value customers
Focus on leveraging supplierscore competencies
Prepared to radically changecurrent process to get bestfrom suppliers
Connection between supplierand customer so closeindividual roles are blurred
Selling models for value creation
7/28/2019 Neil Rackham
31/49
1999 Neil Rackham, John DeVincentis
Selling models for value creation
COST OF SALE
IntrinsicConvenience
CostAvailability
ExtrinsicProblem solving
Customization
StrategicBusiness process changes
Leveraging total enterpriseresources
VALUE
CREATION
POTENTIAL
Enterprise
model
Transactional
model
Consultative
model
The 3 selling models
7/28/2019 Neil Rackham
32/49
1999 Neil Rackham, John DeVincentis
The 3 selling models
TransactionalTransactional
Value created through cost reduction
and ease of acquisition
Value created through cost reduction
and ease of acquisition
" I know
what I need;
I don't want
to wastetime/effort"
ConsultativeConsultative
Value created through advice,
problem identification, problem
analysis, and customized solut ions
Value created through advice,
problem identification, problem
analysis, and customized solut ions
" I don't
know theanswer; I
need help/
expertise"
EnterpriseEnterprise
Value created through leveraging
enterprise capabilit ies beyond
products
Value created through leveraging
enterprise capabil ities beyond
products
" I need a
partner; I'm
willing to
change myorganization"
Consultative and transactional sales on the value map
7/28/2019 Neil Rackham
33/49
1999 Neil Rackham, John DeVincentis
VALUEDISADVANTAGEVALUEVALUEDISADVANTAGEDISADVANTAGE
VALUE
ADVANTAGE
VALUEVALUE
ADVANTAGEADVANTAGE
11
33
22
YY
Consultative and transactional sales on the value map
Transactional
Sale
Transactional
Sale
Consultative
Sale
Consultative
Sale
Enterprise
Sale
Enterprise
Sale
SALES
COST
VALUE CREATED IN SELLING PROCESS
1999 Neil Rackham, John DeVincentis
Positioning the sales effort the change
7/28/2019 Neil Rackham
34/49
1999 Neil Rackham, John DeVincentis
Positioning the sales effort - the changeTransactional
Customers
TransactionalTransactional
CustomersCustomersConsultativeConsultative
CustomersCustomers
sweet spot
captures most customers
sweet spot
captures most customers 1999 Neil Rackham, John DeVincentis
Positioning the sales effort - the change
7/28/2019 Neil Rackham
35/49
1999 Neil Rackham, John DeVincentis
Positioning the sales effort - the changeTransactional
clients
TransactionalTransactional
clientsclientsConsultativeConsultative
clientsclients
Transactional clientsTransactional clientsbecome even more
transactional due to:
segmentation strategies internetperceived commoditization
1999 Neil Rackham, John DeVincentis
Positioning the sales effort - the change
7/28/2019 Neil Rackham
36/49
1999 Neil Rackham, John DeVincentis
Positioning the sales effort - the changeTransactional
Customers
TransactionalTransactional
CustomersCustomersConsultativeConsultative
CustomersCustomers
Consultative clientsConsultative clients
up the bar:
up-front investmentincreases
client expectation is higherwinners over-invest in
attractive opportunit ies
1999 Neil Rackham, John DeVincentis
The sweet spot vanishes
7/28/2019 Neil Rackham
37/49
1999 Neil Rackham, John DeVincentis
e sweet spot va s es
Transactional
clients
TransactionalTransactional
clientsclientsConsultativeConsultative
clientsclients
A sales force positioned here will failA sales force positioned here will failunable to compete transactionally too li ttle and too late for winning the consultative
business
sweet
spot
1999 Neil Rackham, John DeVincentis
Optimizing the selling investment 1
7/28/2019 Neil Rackham
38/49
1999 Neil Rackham, John DeVincentis
Investment
by Supplier
Investmentby Customer
BALANCEBALANCE
Optimizing the selling investment 1
WASTEWASTE
RISKRISK
Optimizing the selling investment 2
7/28/2019 Neil Rackham
39/49
1999 Neil Rackham, John DeVincentis
Investment
by Supplier
Investmentby Customer
TRANSACTIONALTRANSACTIONAL
CONSULTATIVECONSULTATIVE
ENTERPRISEENTERPRISE
strip coststrip cost
create newvalue
create newvalue
create
extraordinary
value
create
extraordinaryvalue
Optimizing the selling investment 2
Optimizing the selling investment 3
7/28/2019 Neil Rackham
40/49
1999 Neil Rackham, John DeVincentis
Investmentby Supplier
Investmentby Customer
TRANSACTIONALTRANSACTIONAL
CONSULTATIVECONSULTATIVE
ENTERPRISEENTERPRISE
Most sales forces are here
too expensive to succeedtransactionally
under-resourced andunderskil led to succeed
consultatively
Optimizing the selling investment 3
X
7/28/2019 Neil Rackham
41/49
1999 Neil Rackham, John DeVincentis
Is this for real? Are thesethings happening to our
industry?
If so, what should we doabout it?
Is this for real? Are thesethings happening to our
industry?
If so, what should we doabout it?
Station Break . . .
Using sales resources
7/28/2019 Neil Rackham
42/49
1999 Neil Rackham, John DeVincentis
Using sales resources
We can no longer afford to put the mostresources to the biggest customers: this is the
era of lean selling, especially in transactional
sales.
We must put our sales resources where we can
create most customer value.
The winners shift transactional business to
cheaper channels.
They put more resources into the opportunitieswhere they can create most value.
S i
7/28/2019 Neil Rackham
43/49
1999 Neil Rackham, John DeVincentis
Can the same salespeoplesell both Consultative and
Transactional business andbe successful?
Can the same salespeoplesell both Consultative and
Transactional business andbe successful?
Station Break . . .
Mixing Transactional and Consultative
7/28/2019 Neil Rackham
44/49
1999 Neil Rackham, John DeVincentis
Mixing Transactional and Consultative
Rackhams Law
No sales force can be effective if the same
salespeople are selling both Transactionaland Consultative products.
Why?
Why Transactional and Consultative
7/28/2019 Neil Rackham
45/49
1999 Neil Rackham, John DeVincentis
Why Transactional and Consultative
dont mix
Economic reason
Any salesperson who is talented enough to
make Consultative sales is too expensive touse in Transactional accounts where
customers dont want, dont need and wont
pay for high level sales talent.
Why Transactional and Consultative
7/28/2019 Neil Rackham
46/49
1999 Neil Rackham, John DeVincentis
Why Transactional and Consultative
dont mix
Psychological reason
When salespeople have both Transactional
and Consultative opportunities, they alwayspay too much attention to the low-margin
transactional business at the expense of
higher margin [but longer sales cycle]
Consultative opportunities.
. . . So what do I do about it?
7/28/2019 Neil Rackham
47/49
1999 Neil Rackham, John DeVincentis
. . . So what do I do about it?
Talking brochures cant survive. So dontbe caught in the vanishing middle; up the
bar and aim for bigger consultative sales.
Talking brochures cant survive. So dontbe caught in the vanishing middle; up the
bar and aim for bigger consultative sales.
1
2
3
Ask yourself, would the customer write a
check for this call? -- thats how you know
if youre a value creator not just a value
communicator.
Ask yourself, would the customer write a
check for this call? -- thats how you know
if youre a value creator not just a value
communicator.
Create more value through understanding
customers more deeply than ever before,by problem solving and by customizing
solutions. See products & services as
tools, not ends in themselves.
Create more value through understanding
customers more deeply than ever before,by problem solving and by customizing
solutions. See products & services as
tools, not ends in themselves.
St ti B k
7/28/2019 Neil Rackham
48/49
1999 Neil Rackham, John DeVincentis
Lets spend a few minutes
thinking of questions we have
about selling
[Before I answer a question Ill get a
vote on how many people areinterested in it. The more votes, themore detailed the answer.]
Lets spend a few minutes
thinking of questions we have
about selling
[Before I answer a question Ill get a
vote on how many people areinterested in it. The more votes, themore detailed the answer.]
Station Break . . .
7/28/2019 Neil Rackham
49/49
1999 Neil Rackham, John DeVincentis
CONFIDENTIAL
2002 Neil Rackham, John DeVincentis