Monday, April 26, 2010

Confident Selling

Part 2 of a 3 Part Series on Consultative Selling

One of the sources of fear in selling comes from a lack of confidence in the value of the product or service* that you are providing.  The cure for this is not psyching oneself up or two shots of tequila but rather understanding the value of what you have to offer to your customers (marketing term:  product/market fit).  So how does one go about doing this?
Step 1:  Create a Target Customer Hypotheses - Who is your target customer?  What are there needs and wants?  How do they learn about your type of product?  What is there ability to pay?  What is their life like before they use your product?  How is it different afterwards?

With respect to needs and wants, you are looking for three things:  overt pain, latent pain, and wants (see example below).  Solving overt pain has the highest value and is usually an easy sell.  Latent pain requires one to elevate awareness in the customer's mind.  Don't expect to get paid much satisfying a mere want.

Step 2:  Create a Product Feature Hypotheses - How can you fulfill the customer's needs?  What are the core features required vs. the nice-to-haves?

Step 3:  Create a Value Proposition Hypotheses - What is the ranked priority of customer needs and which of my product features is the customer likely to value the most?  The least?  What other ways could the customer fulfill their needs (marketing term:  competitive substitutes) and what is their price?

Step 4:  Test the Concept - Identify some number of people ( the sample size will depend on what type of product you have) who fit the Target Customer Hypotheses and talk to them or find some other method of obtaining feedback.  Are your hypotheses about the customer's needs etc. correct or do they require adjustment?  Is the customer interested in your Product Feature Hypotheses or do they require adjustment?

Step 5:  Iterate Until Validation - What is validation?  The only legitimate form of validation is a monetary commitment either in the form of a purchase order, a contingent P.O., or a binding letter of commitment.  Free does not count.  Non-binding letters of commitment do not count.  A beta testing commitment probably does not count unless the customer is having to commit significant dollars and people to executing the beta test.  Only at validation do hypotheses convert to facts.

Those of you familiar with Steve Blank's Customer Development Methodology and the Lean Startup movement will recognize that this comes straight out of the Customer Development playbook.

While this seems simple, I can assure you that truly understanding the value of what you have in quantitative terms suitable to being able to set pricing takes time and lot of work.  In my mind, anyone who can get this down in less than three iterations is brilliant.

The end result:  you should have a gut level understanding of the value of what you have to offer and more importantly who your target customer is.  The last is key because in my experience, the worst price negotiations usually occur with people who are slightly off the target customer profile.

And now you're ready to sell, right?  Well, not quite.  The final step:  deciding what to say, will be the subject of the next post.

*  For shorthand's sake, wherever I use the term product, I mean both products and services.

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