Tuesday, June 12, 2012

In a Downturn, Provoke Your Customers
HBR, March 2009
by Philip Lay, Todd Hewlin, and Geoffrey Moore
The companies you serve are slashing their budgets—but you can still make the sale.

This is a fascinating article on doing business in hard times. How many of you run into problems at your customers because their discretionary budgets are gone? The underpinning of this approach – going to your customers with a provocation to help stimulate their interest and therefore “find” the budget – requires you to REALLY know your customer and the context/system/environment in which they do business. A very important factor is that you must try to reach the most senior people because it requires finding the dollars.

I did this in 1982 recession without having the benefit of having a name for it. I was selling an undifferentiated product into a market that was declining but had substantial cash flow for DuPont. The industry sales-to-capacity was low as you would expect in a severe recession. One of our largest customers had their own capacity that satisfied about half their needs. I approached the most senior purchasing person with a provocative idea – if you shut down your capacity, we will offer a supply package that you will not be able to say no to. The capacity went down within six months with a substantial cost (they found the budget) and when the market came back, our sales-to-capacity was better than our competition and we benefited for years.

I recommend reading the article.

No question about it: This is a tough time to be selling to business customers. The budget allowances simply aren’t there. If you thought it was hard to make a sale before—when typically 85% of a customer’s budget was allocated to existing commitments and only 15% remained for discretionary spending—you’re finding out how much harder it can be, as even that fraction disappears in across-the-board cuts. Making matters worse, your customer relationships have lost much of their power. With less money to go around, proposals are subjected to higher levels of review in buying organizations, and the managers you’ve traditionally dealt with are no longer the decision makers.
All this would be thoroughly discouraging if not for one fact: Companies have survived downturns before, and some have even profited from them. In the research and consulting we’ve done since the 2001 dot-com bust, we’ve seen how. Rather than resign themselves to hearing the standard “Sorry, we have no budget for that,” some vendors—even some very young start-ups—have found a way to reach their customers’ resource owners and motivate them to allocate the necessary funds. Using what we call provocation-based selling, they persuade customers that the solutions they bring to the table are not just nice but essential…………

Learning to Be Provocative

Underlying provocation-based selling is the idea that the vendor should help the customer find investment funds even when discretionary spending appears to have (at least temporarily) dried up.

Sybase, a data management and mobility company, did just that in the spring of 2008, as it tried to pry business out of financial services clients. Companies it had served for years were cutting overall operating costs severely. Instead of using precious meeting time to discover what customers were fretting over, Sybase salespeople told them what should be keeping them up at night: the fact that managers across the industry were failing to look at risk in a comprehensive and integrated way. Financial institutions tended to have separate risk-management systems for credit cards, mortgages, commercial lending, equity investment products, fixed income, commodities, and derivatives. Sybase’s message was that a risk-management failure in one area (say, home mortgages) would have direct consequences for the risk exposures in other areas (for example, collateralized debt obligations and other derivatives), so companies had to find a way to bring their risk positions together in a single view. By revealing the scale of the threat and the opportunity, Sybase could sell its Risk Analytics Platform (RAP), a new tool for integrating risk management, to clients who had not previously been troubled by the lack of one.

This was provocation-based selling at its finest: The vendor identified a process that was critical for customers in the current business environment, developed a compelling point of view on how it was broken and what that meant in terms of cost, and then connected the problem to a solution that the vendor was offering.

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