Chapter OneHow Customers Make Decisions
Whether we're talking about an overall strategy for a market, or a specific strategy for an individual account, selling strategy is about customers. The measure of an effective selling strategy is how well it succeeds in influencing customer purchasing decisions. If we assess a strategy's success by its impact on customers, then it follows that the better we understand the customer decision process and how to influence it, the better our strategy will be. What counts is the customer. Selling strategies that ignore the customer, or that don't take sufficient account of customer behavior, will be likely to fail. That's why the central focus of this book is on understanding customer behavior. We'll be using research studies and cases to explore the customer decision process and to show you how it changes during the course of a major sale. As we'll see, different selling strategies succeed at different phases of the selling cycle. The strategy that works best during the early stages of the sale may become ineffective as the selling cycle progresses.
It's all too easy, in major sales, to let your selling strategy get weighed down by procedures and techniques. We've seen many account strategies collapse because they became so complex that they forgot the basic fact that decisions are made by people. All people, whether influencers, decision makers, purchasing agents, or evaluation committees, normally go through distinct psychological stages when they make decisions. By understanding these stages and how to influence them, you'll find it easier to form practical account strategies that have a positive effect on your customers. Effective strategy begins with an understanding of how people buy. The strategies you develop as a result of adopting the buyer's perspective are a powerful way to guide your actions through difficult competitive sales.
I've become very cautious about strategy models that focus exclusively on how to sell. Many of the clients who have come to us at Huthwaite for advice on increasing their sales productivity have shown us elaborate models of the selling process. These models are usually in the form of a series of selling steps they require their salespeople to take. A typical example might have selling stages like prospecting, qualifying, factfinding, presenting, proposing, and closing. Each of these stages represents an activity that the seller is required to perform to execute the strategy. Generally each stage is also associated with paperwork the seller or sales manager must complete.
We usually find ourselves giving two pieces of advice. The first, simply, is to reduce the paperwork. In some organizations salespeople spend up to 10 hours a week completing paperwork in the name of selling strategy. Much of this time is unproductive; much of the information is faked to a point where it's an unreliable guide for management action. A measure of the health of a sales organization is the amount of time it spends relating to customers compared with the time it takes relating to the internal needs of the company. By this measure many organizations are sick, and we've seen some that border on the terminally ill. So our first piece of advice is usually to cut the paperwork.
Our second piece of advice is to build a selling strategy that focuses on the steps the customer takes in making a decision, not on the steps the salesperson takes in making a sale. The two are not the same. As we'll see in future chapters, strategies based on the selling process are usually far less effective than strategies based on the buying process. Our problem, as salespeople, is that it's far easier to understand the steps of selling than those of buying. And it's far more dangerous, because we tend to base strategy on what we understand, rather than on what's effective.
The Research Base
Before we examine each of the stages of a buying decision, let's briefly consider the origin of the ideas covered in this book. I wish I were writing as a sales genius who had decided to share with you my unique insights on selling strategy. Unfortunately, I'm not. Let me confess: I'm not a sales strategist, I'm a voyeur. I've spent many years watching other people sell. I've directed research teams that have studied more than 35,000 sales calls in 27 countries. With my colleagues here at Huthwaite, I've watched the behavior of over 10,000 salespeople. We've studied many markets where strategy is paramount. In the computer markets we've worked with IBM and Digital, in telecommunications with AT&T and GTE, in banking with Citicorp and Chase Manhattan, and in the business equipment markets with Kodak and Xerox. From the mass of data we've collected from these and many other corporations that Huthwaite has worked with, we've been able to draw conclusions about customer behavior and how it changes during the sale. These conclusions, we believe, can have profound implications for account strategy.
Our research uses a method called behavior analysis. At its most basic, it involves watching sales calls and counting how often sellers or customers use certain key behaviors. This allows us to build statistical models that show how particular behaviors are associated with sales success. The behavior-analysis method has allowed us to bring sound research principles of experimental psychology to the complex and subtle art of selling—an art that has stubbornly resisted objective analysis. As far as I know, our team at Huthwaite is the first group of researchers to use these behavior-analysis methods as a tool for understanding selling and learning how to make it more effective.
The Customer Decision Process
We said earlier that the customer decision process in a major sale normally progresses through distinct stages. Three of these stages take place before the decision, and a fourth stage happens after the decision has been made. These stages are usually visible even in simple sales. Think about your own purchasing decisions—buying a car, for example. How does your decision process begin? If you're completely satisfied with your present car, then there's no decision to be made. The decision process begins when you no longer feel totally satisfied. You begin to perceive problems with your car. Perhaps it's getting old, or it's less reliable, or it doesn't look as good as newer models—for whatever reason, you feel dissatisfaction. You're now in the first of the three phases of the buying decision, which we call Recognition of Needs. During this stage, you move from minor irritation to real dissatisfaction, and then finally to a point where you decide you're going to do something about it. Once you've made the decision to act, you leave the first stage of the buying process and move into the second, Evaluation of Options. In the Recognition of Needs stage, your chief concern is, "Do I need to do something about my present car?" Now, in the Evaluation of Options stage, your concern becomes, "What are my choices? Do I fix my existing car? Do I lease or buy? If I buy, then which one? How do I choose between the competing models?" This stage normally begins with a confusing array of choices and options. As it continues, you become increasingly clear about the option that suits you best. Finally, you settle on the option that you feel fits your needs better than any other option. Let's imagine you decide to buy a good quality used car that you've seen in the showroom of a local dealer.
Once you've arrived at this clear preference, you're moving into the final psychological stage of the purchasing decision. We call it the Resolution of Concerns phase, and, as we'll see, it can be one of the most significant and complex stages of any decision. During this stage, although you've decided you need to change and this car is the best of the options you've considered, you may nevertheless feel reluctant about going ahead. You think about things like "What if there's some hidden defect I haven't discovered?" "How will I tell the family I've decided to spend all this money?" or "Is their after-sales service really as good as they say?" Until you've overcome these fears you won't be ready to move ahead to make the final decision.
The process I've described in buying a car would probably apply equally to any purchasing decision where (1) the decision is made over a relatively long time period, rather than in a single meeting or sales call; (2) there are competing alternatives to choose from; and (3) there are penalties or risks if you make a bad decision. So buying a can of beans in a supermarket isn't a decision that goes through the three stages because, even though there are competing alternative brands, the decision is usually made immediately and has negligible penalties if you've made the wrong choice. However, most of the major purchasing decisions we make as individuals do go through the sequence of Recognition of Needs, followed by Evaluation of Options, and finally Resolution of Concerns. The whole customer decision process, including these phases, is illustrated in Figure 1.1. Think about the last time you made any large buying decision, such as the purchase of a house. You can probably remember each stage, how it felt, and how, as a buyer, you had different preoccupations at each point.
The same stages are present when one of your key accounts is making a major buying decision. First, people in the account become dissatisfied with the existing situation and begin to recognize a need to change. During this Recognition of Needs phase, the most effective selling strategy, as we'll see in Chapter 3, is to uncover the source of dissatisfaction and to increase the customers' perception of its intensity and urgency.
Once people in the account are agreed on the need to change, the sale moves into the second stage, the Evaluation of Options. During this phase the account is weighing the various options and their merits. Sometimes this involves a formal procedure with written specifications, a proposal process, and an evaluation committee. At other times the procedure may be loose and relatively informal so that only one person needs to be convinced of which option is best. In either case, your optimum selling strategy during this stage of the sale is to influence in your favor the criteria the buyer or buyers are using to evaluate available options. We'll be looking more closely at how to do this in Chapters 4 and 5. Finally, when there's a consensus in the account on which options adequately meet their criteria, the third and final decision phase, the Resolution of Concerns, begins.
In this final phase the buyer may show great anxiety about the risks of going ahead with you and your product. As we'll see in Chapter 6, sometimes these concerns are expressed openly to you. However, that isn't always the case. Often the issues that arise during the Resolution of Concerns stage may stay hidden or may be expressed in the "respectable" form of price issues. A good selling strategy at this point in the sale must find a way to uncover and resolve fears and concerns of this kind. It's here, in the final stage of the sale, that you are likely to be pressured to negotiate special terms or to make some additional concessions to get the business. In Chapter 7 we'll examine strategies for effective sales negotiation.
Next comes the decision. In smaller sales, once the decision is made your selling ends. That's not normally true in major sales. There's usually a stage of Implementation when you continue to support and help the account after the sale has been made. During this stage there are some interesting sales opportunities that many people miss. We'll see in Chapter 8 how to take account of these opportunities in forming an effective post-sale strategy.
Why the Stages Matter
The research project that first gave us hard statistical evidence that sales fall into the stages I've just described was carried out across 13 of the Xerox operating companies in Europe. For the first time we had the evidence we needed for a customer-based model of account strategy. It was an important discovery because we knew in theory that a good strategy model had to be customer-based, not seller-based. Unfortunately, until the Xerox results were available, we didn't have enough information on the psychology of the customer decision process to enable us to build a valid customer-based model.
Like most other people who worked in sales, the researchers at Huthwaite knew a lot more about selling than we did about buying. We could produce strategy models of how to sell; in fact, we had produced several of them. Each of these models had been based on the relatively conventional steps of the sale as described from the selling point of view. First you prospect, then you refine your prospects into suspects. Next you make approach calls to collect data and find facts. You then make sales presentations. Then you propose. Then you follow up your proposal, and finally you close.
There's nothing intrinsically wrong with this kind of strategy model based on selling steps. But increasingly we felt uncomfortable with our own selling-step models because we didn't think they helped answer important questions about customer buying behavior and how to influence it. For us, the Xerox research was a breakthrough. Since then we've worked to develop those germinal findings into practical methods and strategies for increasing the probability of sales success at each of the decision phases.
Account Strategy in the Recognition of Needs Phase
We said that during the first phase of a purchasing decision, people in the account are recognizing a need for change. This need usually begins as dissatisfaction with existing methods, systems, products, or suppliers. During this phase customer dissatisfaction grows until it reaches a critical mass. When dissatisfaction reaches a sufficient level of intensity or urgency, the account makes a decision to change.
The most effective selling strategy during this phase is to uncover dissatisfaction in the account and to develop that dissatisfaction until it reaches the critical mass. Few people would quarrel with developing dissatisfaction as the main strategic objective in the early stages of a major sale. It doesn't need a massive research project to show that dissatisfaction is necessary for change and that the vendor who can effectively uncover and focus dissatisfaction has a strategic advantage over competitors. The objective of our research was to discover exactly how successful salespeople create and develop customer dissatisfaction. Our first finding was simple but crucial. Successful people ask a lot more questions during sales calls than do their less successful colleagues. We found that these less successful people tend to do most of the talking. They become involved in product discussion very early in the sale. Frequently, they give presentations as a means of generating customer interest.
What does this mean for account strategy? As we'll see in Chapter 3, effective strategy requires that in the early part of the Recognition of Needs phase you hold back on product discussions and presentations. Instead, an effective strategy concentrates on developing dissatisfaction. Our research found that successful salespeople have some very powerful methods for developing dissatisfaction. In particular, they use questioning sequences that not only help the customer discover and articulate dissatisfaction but also intensify any dissatisfaction which the customer already feels.
Account Strategy in the Evaluation of Options Phase
Once the customer's dissatisfaction has intensified to a point where the account takes a decision to act, we enter the second phase, the Evaluation of Options. During this phase, the customer's attention turns to making choices. Successful account strategy during this, the most competitive part of the selling cycle, centers on understanding, influencing, and responding to customer decision criteria. As we'll see later, effective salespeople are able to change the way in which customers evaluate their products or services. It's particularly important in this phase of the sale for your selling strategy to differentiate you clearly from your competitors.