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Sales expert Neil Rackham explains how reps can create value for customers by delivering competitive information and customized solutions.

Sales expert Neil Rackham explains how reps can create value for customers by delivering competitive information and customized solutions.

As customers demand ever-greater value from their suppliers, creating that value in products becomes increasingly important and challenging for salesforces. How to turn salespeople into value creators is the single greatest challenge faced by todays suppliers, says renowned sales master Neil Rackham. Rackham, the professor of professional selling and author of SPIN Selling, says the more differentiated a product, the easier it is to sell. But thanks to strong market forces such as increased and global competition, more demanding customers and quicker times to market products, regardless of industry, are becoming less unique.

Thats an important trend thats true globally, Rackham says. And it has huge consequences on the way we sell.   The old business model assumes youre a 10 on the uniqueness scale, but in todays markets before you can even get out there to sell your mousetrap, someone has something thats essentially the same. Offering just another mousetrap in the ever-increasing sea of options does not deliver enough clear value to command business, Rackham says. So salespeople must create extra value for their companies. They must become value creators, not just value communicators.

But customers also are changing, he says. They are getting tougher to deal with: treating all products more like commodities, demanding more expertise and support from their suppliers and using new purchasing techniques to force greater value. Overall, Rackham says, markets are dominated by larger purchasers that are more powerful and negotiate more aggressively, and even individual customers are demanding a bigger share of the value their suppliers create.  And relationships that seemed protected and locked in are being questioned and are under threat, he stresses.

Rackham says value, generally defined as benefits minus cost, is a perception that customers have that is not necessarily intrinsic to a given product. So companies must focus on what they can do during a sales call that will be so valuable to customers that they will be willing to pay for it. But does pharma ever make these kinds of sales calls? In a cross-industry study of 1,100 buyers, more than 80% of buyers said they had experienced a sales call so valuable they would have been willing to pay for the call itself. But nearly all said it doesnt happen enough.

A good product story definitely wasnt enough, respondents said. In fact, that was the #1 thing mentioned as detracting value from a call. Customers chief complaint was a product pitch, Rackham says. So theres negative value today in being a talking brochure. And that simply wasnt true before the Internet made product information so readily available on demand.

Other information is highly valued by customers, however. Rackham says reps who can deliver sought after information such as business and industry trends and competitive information can create value for their customers. Being a customer advocate or conduit to the rest of the company also is valuable.  But problem solving and customization of solutions is the top way to create value for customers, he says.

Companies and their salespeople must recognize, however, that there are essentially two types of customers, Rackham explains. Some buy almost exclusively on cost. Are you easy to do business with and are you cheap?  These are termed transactional customers. The others consultative customers value a companys expertise and problem solving capabilities. They seek customized products and salespeople who create value beyond the basic attributes of a given product.

This split in customer type has become the #1 shift in selling in the past five to 10 years, Rackham says. And organizations are developing differing responses to these differing customers. Five years ago, most customers were satisfied with getting a little advice, help and service, while suppliers got slightly better margins. But today, customers either want cheap and convenient with no extras or the expertise to solve problems and create customized solutions, something theyre willing to pay a premium for.

Rackham says there used to be a sweet spot between the two types, where most customers could be found. But the divide between the customer types has grown, he says, and the sweet spot has disappeared. So if your sales effort is invested there, you fail, he says. Youll be unable to compete transactionally and offer too little, too late for winning the consultative business. And you prove this when you say customers are treating your products more as commodities, while demanding more expertise and support than ever.

So, can the same sales force serve both customer types? Rackham doesnt believe so, for two reasons. From an economic perspective, he says, any sales person talented enough to make consultative sales is too expensive to use for transactional opportunities where customers dont need and arent willing to pay for high level sales and service talent. It also doesnt work psychologically, Rackham says: When sales people have both types of buyers to sell to, they always pay too much attention to the low margin, transactional business at the expense of higher margin consultative opportunities.

Big customers may be very transactional and will demand significant price concessions, Rackham says. Middle market or small customers are more likely to need consultative help and often are more willing to pay better margins for it. Yet, most sales forces, he says, still organize and segment their customers based on size.

Particularly with the cost of sales calls having doubled in the past five years, Rackham cautions that sales organizations must put sales resources where they can create the most customer value. And pharma has some stark realities to face, he says: No other industry can afford to spend so much to get so little face-to-face time. The cost per minute of face-to-face time in pharma is twice as much as in the average business-to-business sale. And customers in all marketplaces are becoming increasingly impatient with talking brochures. But my colleagues who understand pharma estimate that at least 40% of the average pharma sales force is talking brochures.

Pharma must ask itself if its present sales model is sustainable, Rackham says. He advises the industry to take a hard look at value creation. How to turn its salespeople into value creators is the most central and urgent issue, he says: The question about why customers would pay for a sales call is something youre going to have to drive through your sales forces. The only way youre going to be able to afford such a high-cost model is if it is doing enough good and is perceived as valuable enough by customers to justify it. So ask that question ruthlessly of your sales forces. And if they havent got a reason, then theyre just talking brochures and theyre dead and maybe you are, too.

To learn more about Neil Rackham and his work, visit http://neilrackham.com