Chapter OneWhen Do Executives Get Involved in the Decision Process?
Selling to senior-level executives requires a different set of skills and strategies from the more traditional departmental-level transactional sale. Until the early 1980s, product was king. When a company introduced a new product, it was in many cases proprietary, allowing the company to get a lot of mileage out of being the "best in class" or "leading edge" before a competitor got around to leapfrogging it with an alternative offering.
Because of strong product differentiation, manufacturers dominated the business environment. For them, the standard go-to-market approach was a direct sales force, whose key functions were to provide basic product information, a point of contact with the vendor, and a human face to associate with the product. This sales force typically was made up of geographically assigned salespeople, each of whom called on a large number of accounts within a particular territory. This sales force most often sold to operations-level employees within individual departments like procurement or purchasing.
In the mid-1980s, priorities shifted. Customers were knowledgeable about and comfortable with existing products, and they no longer needed a direct sales force to supply product information. Now they wanted low prices. Not altogether by coincidence, India and China stepped in as offshore providers of lower-cost manufacturing and services, and western producers flocked to them in a bid to meet their customers' demands for savings while preserving their own margin. Supply Chain Management, Business Process Reengineering, Total Quality Management, and Six Sigma had their roots in this wave of stripping cost and inefficiency from the buy-build-sell chain. The shift to lower-cost channels of distribution—or multichannel marketing— also began in this era, spawning hundreds of thousands of call centers, resellers, and online ordering portals in many industries.
At the same time, customers began to wonder how they could extract even more value from their suppliers, and they woke up to the fact that salespeople who were desperate to make a sale could be given the task of providing free consulting on ways to solve the more complex business problems. All of us who sold in that era needed knowledge of our own products, how they fitted into our customer's operation, and how to assemble other components of a solution using products and services from third-party suppliers—we had now become solution architects and partner relationship managers, for whom selling a solution became a matter of juggling multiple relationships across our own company, the customer's company, and other vendors' companies. We were moving from the neat model of being a representative of one brand to being a broker for many products, services, and stakeholder agendas. To paraphrase from the tale of globalization that Thomas Friedman paints in The Lexus and the Olive Tree (HarperCollins, 1999):
Sony moved from the stereo and CD market into the digital camera market where a 3.5-inch diskette became the film, the computer printer became the photo-processing store, and email became the post office. Sony learned it could be Sony, Kodak and Federal Express all at the same time as a one-stop business solution. Kodak responded to the challenge by promoting itself as a personal computer company. Compaq and Dell responded by saying computers were now commodities and they'd evolved to selling "business solutions." Accounting-consulting firms that had previously held business solutions as their bread and butter were less worried about the computer companies and more concerned by the likes of Goldman Sachs and other investment bankers that started selling tax and investment advice. You could read about these trends in books available at Borders stores, which now sold CDs—Sony's original market. Everyone is now in everyone else's business.
That's the world of "business solutions," and by definition it demanded that as salespeople, we had to move beyond the operations and middle managers if we were to be heard above all the noise—we had to be more visible at the executive level.
Then in the 1990s another trend emerged. Business solutions that had once seemed complicated to put together, and hence needed the input of salespeople, now became commonplace. Customers got the hang of it, identified the best vendors, and started compiling these solutions themselves. The internal departments responsible for building these multivendor solutions started to get very good at it. Some of them were spun off as separate businesses; one-stop-shop systems process integration was born in the information technology market, and integration then spread in different forms to other industries.
Salespeople had educated the market on how to do it, and they were now competing with their very own customers for services work that had become more profitable than selling the product itself. With the rise of Amazon.com, eBay, and other portals, the commoditization of high-value services only accelerated. We remember not so many years ago people saying: "Okay, so we get that customers can buy PCs over the Internet now. But they'll never buy something as complicated as servers without seeing a rep!" Then came Dell.com.
BUILDING A FOUNDATION OF C-SUITE KNOWLEDGE
Recognizing this trend in 1995 and looking for answers, an Atlantabased sales training company called Target Marketing Systems (creator of the Target Account Selling workshop) conducted a study in conjunction with Hewlett-Packard and the University of North Carolina's Kenan-Flagler Business School in Chapel Hill. This research was managed by Steve Bistritz, Ed.D. (a coauthor of this book), who sought to discover what salespeople had to do in the Internet age to remain relevant to senior executives, and what factors most influenced the executive decision-making process.
The original purpose of the research project was to examine not only how professional, business-to-business salespeople interacted and interfaced with CXO-level executives in client organizations, but how they built lasting, trust-based relationships with those same client executives. In addition, there was an interest in learning from the executive's perspective what salespeople had to do to conduct and deliver effective meetings with executives. The initial study had an interesting origin: coincidentally, Hewlett-Packard was at the same time attempting to establish a new national sales organization that would focus on selling to senior client executives, and the company genuinely wanted to understand what it took for those salespeople to gain the trust and credibility of those executives.
From its perspective, HP was actually trying to determine how its salespeople could ultimately come to be perceived as trusted advisors to those same client executives. The company decided to cosponsor the study and did so by contributing to the cost of the study process and participating in the planning and execution of the study itself. By the way, today the phrase trusted advisor has become an overused expression in the selling environment, but back in 1995 it was not commonly used, and HP's use of the phrase may have been one of the early examples of its use.
The rationale for Target Marketing Systems to cosponsor the study was that the company was in the midst of developing an instructorled workshop for professional salespeople on selling to executives and was interested in determining the best ways for salespeople to create, maintain, and leverage relationships with senior-level executives in client organizations. In perusing sales journals and the existing literature in 1995, the original research manager could not find any articles written by CXO-level executives that discussed their relationships with professional salespeople or why they would want to meet with those salespeople. At that time, most books and articles on the topic of selling to executives were written by salespeople or sales executives and focused on the salesperson's anecdotal experience in dealing with senior client executives, and a literature search did not find any books or articles published in that time frame that spoke about creating and establishing those relationships from the executive's perspective. Many of these books contained numerous war stories from the author's vast experience, but none of them were written from the perspective of the client executive.
Interest also developed at the University of North Carolina's Business School because a professor of marketing at the school, Dr. Jay Klompmaker, was also a member of the advisory board for Target Marketing Systems. He saw the research project as an outstanding opportunity for four of his graduate students in the MBA program—all of whom had previous experience as business-to-business salespeople— to participate in a practical and useful study that could make a significant contribution to the sales profession. Their participation in the study process subsequently became part of the practicum requirements for the MBA. He also duplicated the literature search on the topic and reached the identical conclusions about the lack of available information about selling to executives that was written from the executive's perspective.
Preparation for the project interviews took nearly six months; a detailed questionnaire was developed for the interviews, a list of potential client executives to be interviewed was created, and practice interviews were planned and conducted. Numerous iterations of the survey questionnaire, combined with a series of practice interviews, resulted in a concise but effective survey. The executives to be interviewed came mainly from established executive-level contacts of employees within Target Marketing Systems and Hewlett-Packard. The executives themselves were not prescreened in any manner, except that each executive had to be willing to commit to an hour of his time for the actual survey process. The criteria for selecting the specific executives were that they clearly had to be senior-level line executives, typically at the vice president or CXO level. It is important to note that purchasing and procurement executives were specifically excluded from the survey.
The experienced sales professionals on the MBA track at UNC interviewed more than 60 senior executives, ranging from vice presidents to chairmen. These interviews were conducted in person or by telephone and lasted up to 60 minutes. The reason for conducting interviews in this manner was that we wanted to make certain that the responses were coming directly from the executives themselves. If we had sent an executive our questionnaire on this topic, it could easily have ultimately been completed by the executive's administrative assistant or secretary or by a lower-level executive. In our opinion, this would have compromised the process. In addition, we wanted to be able to capture some of the anecdotal comments made by the executive, and this could be done only in face-to-face or telephone interviews.
Executives were selected from diverse industries, including transportation, textiles, telecommunications, utilities, financial services, technology, printing, and office furniture. Four years later, in the spring of 1999, the same study was expanded in collaboration with the Center for Business and Industrial Marketing at Georgia State University in Atlanta, with more than 125 senior executives being surveyed in total.
In preparing for the initial interviews with executives, HewlettPackard arranged for each of the four MBA students to conduct a series of practice interviews with some of HP's own senior executives. These in-person practice interviews took place at HP's corporate headquarters in California. The purpose of these practice interviews was to carefully vet the questionnaire that had been developed, make certain that there were no questions that could be misinterpreted or issues that could arise, and also confirm that the MBA students were thoroughly prepared to conduct effective 60-minute interviews with client executives.
To ensure that the process was conducted appropriately, the research manager accompanied the MBA students to each of the practice interviews to validate the process and help set the tone for each interview. We also wanted to verify that each of the four MBA students was prepared, confident, and competent, because their next step was a live interview with a senior-level client executive. These initial interviews were very successful and provided us with additional insight into how to conduct the interviews with client executives, as well as how to treat the executives during the process. The executives at HP who participated in the practice interviews also told us that the process provided value to them because they gained additional insight into how they could perhaps work more effectively with the salespeople they dealt with on an ongoing basis.
To test for cultural variance, the research was expanded in 2005 by Nic Read (this book's other coauthor), who at the time was president of the sales consulting firm SalesLabs and an advisor to the Hewlett-Packard Business School in Beijing, China. Hewlett-Packard again proved invaluable in the research process. Its business school in China, in concert with Ivy League universities, provided executive MBA programs to Chinese executives. Over a two-year period, when executives and senior managers finished a course of study, they were asked to complete a detailed questionnaire about how they viewed China's entry into the World Trade Organization in terms of the challenges it created for local companies that needed to raise their standards to become globally competitive, the implications for them as leaders, and what they looked for from the salespeople and vendors who were knocking on China's door with new solutions. Nic's team collected surveys and interviewed more than 400 chairmen, vice presidents, and managing directors of Chinese state-owned enterprises and multinational companies in the insurance, biotech, pharmaceutical, telecommunications, banking, airline, steel, and information technology industries. This study lifted the total sample of executives who were interviewed to more than 500, from which surprisingly consistent findings were extrapolated on how executives get involved in the buying cycle and what salespeople need to do to gain their trust and create value.
The following sections reveal what we learned.
EXECUTIVE INVOLVEMENT IN THE BUYING CYCLE
Salespeople who want to build relationships with executives must enter the picture early in the buying cycle because this is when 80 percent of executives usually or always become involved in significant purchase decisions (see Figure 1.1).
The executives' motivation at this stage is to understand current business issues, establish project objectives, and set the overall project strategy to deal with what might be termed a breakthrough initiative: something that is critical to the client's success because of significant payback from its implementation or serious consequences if action is delayed or not taken.
According to one executive from the office furniture industry:
I get involved in the "what" and "why," not so much the "how." At the beginning, I put in a lot of personal time making sure the project's on the right track and moving in the right direction.
Another executive from the airline industry told us:
I'm planning now for how my business will look ten years from now. It's difficult to forecast on our own, so we depend on the ideas of suppliers and partners in the same industry, on the belief that separately we might be wrong, but together we're probably right. Vendors who can't engage in that forward thinking don't get off the ground with me.
Comments regarding executive involvement in the early phase of the buying cycle were consistent in each of our three studies.
During the middle phase of the buying cycle, executives tend to reduce their involvement and delegate decisions to subordinates or committees. Executives in the survey said that once a clear vision is set, it's time to empower the people below them. "Once we've defined the parameters, my tendency is to get out of the way," said one respondent. Most of the executives never or only occasionally involve themselves at this stage.
However, all three research studies confirmed that executives get significantly involved once again late in the buying cycle to evaluate whether the vendors can really deliver the original vision and to measure the results of the implementation. They want to understand whether the vendor delivered the value that was originally committed. They also told us that the closer they get to the contract being awarded, the less they are likely to supersede the recommendations of the evaluation team; the purchasing decision has usually already been made in their minds, if not on paper.
Do you see the problem here?