How Customers Decide to Buy

Reposted from Inc Magazine article by Geoffrey James

Before they plunk down the money, customers make these five exact decisions–in this exact order. Your job is to help them do so.

Do you ever wonder what’s going on inside your customer’s head? There’s actually a pretty systematic process that most prospective customers go through, says Duane Sparks, author of Selling Your Price.

Before making the decision to buy, he says, customers go through the following five distinct “decision-making” thought processes:

1. Do I want to do business with this person?  Who is this person, really? Do I trust him? Do I like her?

2. Do I want to do business with this firm? Are they reputable? Are they credible? Do I have a history with them?

3. Do I want and need these products and services? Is there a problem that they solve? Is there a goal that they make possible?

4. Does the value meet my expectations? Will I get a quick return on my investment? Is the price in line with other offerings? Is this a unique solution?

5. Is this the right time to make a decision? Is there a reason to buy now? Is the problem about to explode? Is an opportunity slipping past?

This pattern plays itself out in every sales-oriented conversation. Take cold calls, for instance, where the goal is to make an appointment for a more substantive sales conversation.

Decisions in a Cold Call …

In a cold call, the customer makes the first decision based upon the tone and confidence in the caller’s voice. The customer then makes the second decision based upon brand awareness (e.g. “I’m from IBM”) or a short description of what your company has done for a firm whose name is familiar to the customer (“We just helped Acme …”).

After interest is piqued, the customer then makes the third decision based upon the benefits stated in the first few sentences. (“… save $1 million in inventory costs.”)

The fourth decision is not whether to buy, but whether to have a conversation about the possibility of buying.  The customer now makes that decision, followed by a decision about whether  to conduct the conversation now or delay it to later.

See?  Customers makes those decisions in that exact order.  It’s the way their minds work.

… Or in a Sales Presentation

Here’s another example: a sales presentation to large group of decision makers.

The audience makes the first and second decisions based upon the reputation of the presenter and the presenter’s firm. Often that reputation is “borrowed” from the respected members of the group who are sponsoring the presentation. (“Joe, our CFO, invited us to hear this guy speak.”)

The actual sales presentation–if it’s a good one, that is–carries the burden of first defining/clarifying needs, then presenting a solution, and finally explaining why this is the right time to buy.

Get the Process Right

There’s an important lesson here.  In order to sell effectively, you need to focus on helping the customer make each decision in the proper order.  If you try to “jump the queue” and force a decision that naturally comes later, you’ll end up delaying the sale or even losing it.

For example, in a cold call, if you start talking about price before the customer has decided whether you’re trustworthy, the customer will almost always assume that you’re trying to “pull a fast one.”

Similarly, if you start talking about problems and solutions to a group of people who don’t believe you’re a credible person from a credible firm, you’re simply wasting everybody’s time.  The decision-makers won’t listen–in fact, they can’t, because their minds are still spinning around on “Can I trust this guy?”

Establishing Credibility

By the way, the need to establish credibility (i.e., decisions No. 1 and 2) is why many presenters begin by introducing themselves and their companies. However, it’s much better if “your reputation precedes you,” so that the first two decisions are already made before you present.

For example, in a cold call, if you’re talking to a prospective customer as the result of a referral from somebody whom that customer trusts, you can move directly to decision point No. 3, because the first two have already been fulfilled.

Similarly, if you’re presenting to a group of people, make certain that as many attendees as possible have “endorsed” your presence and that the invitation to the meeting includes the information that establishes trust and credibility.

How do you Forecast Your Cash Flow?

By David Evans CEO of EastSeat, LL and reprinted from Inc Magazine LINK

Cash Is King: 5 Simple Rules for Creating a Cash Flow Plan

Cash is paramount for running a business. Here are five easy rules for creating a positive cash flow plan for your company.  With Opening Day of Major League Baseball over, I breathe a deep sigh of relief as a ticket broker. It means my company, EasySeat, has started shipping all of the baseball tickets that it has been purchasing for the last 7 months.

That means cash flow will soon turn positive again.

In EasySeat’s business model, cash is king, and ensuring that we have enough cash to fund inventory and operations is critical to our success. Successfully managing, and understanding, cash flow is not a skill reserved for MBAs. Every business owner should understand their cash flow.

Here are five easy rules for creating a simple cash flow plan:

1. Project monthly sales (and curb your optimism) When projecting sales for cash flow purposes, don’t be the optimist. Use worst-case-scenario estimated sales figures or historical monthly averages. Any sales figure used for cash flow planning should be something that is readily achievable. Remember, this process is used to make sure that the business has sufficient capital to operate, not an exercise in projecting success.
2. Remember receivables. Not every sale is created equal when it comes to cash. Cash and credit card sales are available for ongoing operations immediately, but sales with terms can take 30, 60, or even 180 days or more to turn into usable funds. Factor this timing into any projections, and most importantly, remember the potential impact on cash flow before extending terms to new customers.
3. Consolidate predictables. Every business has a core monthly cash burn that includes things like rent, payroll, and telephone service that are consistent and predictable. Consolidate these numbers into one operating expense figure that reflects how much cash must come in the door every month to stay in business.

4. Adjust for growth. It’s critically important to account for the capital required to grow. Many successful businesses fail by not having sufficient cash to fund their growth. New sales often require new expenditures for equipment, employees, and marketing. In most cases, the expenses come before the sale which requires that the cash is available in advance.

5. Plan for the unforeseen. To quote Donald Rumsfeld, these are “known unknowns.” For example, if the Yankees make the World Series, it’s a huge opportunity for increased sales at EasySeat. At the same time, it will mean extra inventory to purchase, and therefore, extra cash to buy those tickets. Scenarios such as this need to be factored into any cash flow forecast to ensure that, when opportunity arises, the business is in a position to capitalize. If there is a place to be optimistic in planning cash flow, it’s here. If the situation never materializes, it simply leaves the company in a much stronger capital position.

These five simple rules can be used to create a basic cash flow plan, but it’s important to understand the ramifications of the numbers. The monthly “predictables” (#3) is the amount of cash required to run a business status quo. To grow, enough cash must be available to fund the new expenses that will drive growth.

Whether the plan is status quo or growth, any cash flow forecast must include a contingency plan or “slush fund” to account for potential new opportunities or challenges. Keep a running total of monthly cash flow, sales minus expenses, and the lowest net total is the amount of extra cash required to run the business or achieve a sales growth goal. If this amount is negative, it must be available to the company in the form or credit or existing capital. Once planning cash flow has been mastered, cash will still be king, but it’ll be more of a figurehead.

The Fremont Group has developed a cash flow forecasting system that is available to all members at no charge.  When becoming a member at any level, request our Excel-based program.  Predicting your cash flow on a weekly basis, understanding the way your money travels around your company, and taking proactive steps to maintain a positive cash flow are all done through this program—possibly the most important tool a small business owner can use.

5 Ways to Reward Your All-Star Employees

Article from Inc Magazine–Full article found at http://www.inc.com/jay-love/5-ways-to-boost-employee-recognition.html?utm_source=money-and-finance&utm_medium=email&utm_campaign=incid40486week07

There’s no such thing as too much employee recognition. Learn five ways to reward your team.

By Jay Love

I hope you’ll agree with me after reading this post that there is no such thing as too much employee recognition. In fact, I would imagine that the average employee at most companies is starving for recognition of any type. Heck, most of them rarely see any feedback at all except for the “dreaded annual review,” but that’s a subject deserving of its own blog post.

Over the course of leading numerous organizations I’ve had the privilege of being a part of, our teams used personality testing to supplement our training of staff. For every type of role, 85 percent or more of the people tested replied that they would be much happier and would work harder if they were recognized for their efforts. This seemed like a no-brainer to me since most of my teachers—at every level of my education—used this strategy wisely.

If you’re familiar with The Carrot Principle, you probably remember reading about how beneficial employee recognition can be to a company’s bottom line. The authors described a study of 200,000 employees that revealed that employee recognition not only increased efficiency, but paid off significantly for the companies that effectively implemented them.  In some cases, these companies’ return on equity and assets were as much as three times as higher than that of other companies.

So, why are so many leaders still neglecting this invaluable practice? I believe many do for various reasons. Here are a few that immediately come to mind:

  1. That is precisely how they have seen it done time and time again in previous organizations.
  2. Most leaders received so little recognition on a regular basis themselves that they have no idea how powerful it can be in growing and retaining staff.
  3. It takes extra effort.

If you’re among the leaders within your organization, you may be able to initiate some change at your workplace. Start by sharing this list of five ways to boost employee recognition. I hope you and your co-workers will like them as much as our staff here at Slingshot SEO does! Here goes…

5 ways to provide recognition for your team:

  1. Quarterly reviews. Mandate one-on-one feedback sessions between each supervisor and team member on a quarterly basis. To ensure these are effective, have each manager carve out one hour for each employee. (At Slingshot SEO, we review the status of each quarterly goal and career objective, as well as take the time to chat to know each other better. The goals and any progress are summarized in a simple feedback form.)
  2. Peer recognition. Each month, I solicit open nominations for Slingshot SEO’s Outstanding Team Member of the Month. Each employee with at least 60 seconds to spare can e-mail me with their recommendations. Although just two are publicly honored at each monthly meeting, many others are encouraged by this program: I always forward the e-mails of the remarkable kudos to all the nominees along with a few comments of my own.
  3. Team highlights. Insist on your department heads sharing stories from their departments and highlighting the achievements of team members at the monthly All-Company Meeting. Lively presentations that include photographs, videos and client comments make this one even better!
  4. Yearly awards ceremony. Hold an Annual Award Event for your organization. (We award a Rookie of the Year, Most Improved, Innovator of the Year and Employee of the Year, plus we invite our Customer of the Year and Partner of the Year to make the event memorable.)
  5. Spontaneous kudos. Insist that every supervisor works hard to catch a team member doing something right or special as they wander around or peruse communications. When they do, have them point it out in front of the person’s peers or via departmental e-mail. (The more often the better, but beware… large smiles might take over your office.)

Be bold and give one or all of these a try, then please let me know if any of these suggestions are making a difference at your organization.

4 Rewards That Are More Powerful Than Money

This post is from Inc. Magazine.  For the entire article go to: http://www.inc.com/jeff-haden/4-employee-rewards-that-are-more-powerful-than-money.html?utm_source=innovation&utm_medium=email&utm_campaign=incid40449week06&nav=su

They reinforce positive behaviors, boost motivation, and build employees’ self-esteem. Bonus: They won’t cost you anything.

By Jeff Haden

Formal employee recognition programs can be effective, but many formal programs only pay lip service to recognizing employee performance.

Real praise should reward effort and accomplishment, reinforce positive behaviors, build self-esteem and confidence, and boost motivation and enthusiasm.

Do your formal recognition programs accomplish all that?

I’m guessing no.

Here are four informal and powerful ways to praise your employees:

Ask for ideas. Don’t just ask, “Do you have any ideas for how we can help you do your job better?” (Certainly ask that, but sometimes go farther.) Build off skills or insights they possess to use them in other ways.

Say a warehouse employee is incredibly organized. Say, “I am always impressed by how organized you are. I wish there was a way to clone you.” Then ask if she has thoughts about how to streamline order processing, or ways to reduce the flow of paperwork, or how another department could more efficiently collect data.

Not only will you get great ideas, but you also recognize skill and ability in powerful way.

Ask for help. Asking another person for help is one of the sincerest ways to recognize their abilities and value. Ask employees for help and you show you respect their skills and you extend a measure of trust.

The key is to ask for help partly or totally unrelated to their function, and to make the assistance relatively personal to you. I once went to a meeting to talk about layoffs; by the time I got back to the plant word had already spread that cuts were coming. One of my employees said, “So, layoffs, huh?” I didn’t have to confirm it; he knew. I said, “I have no idea what to tell our employees. What would you say?”

He thought and said, “Just tell everyone you tried. Then talk about where we go from here.”

Simple? Sure, but powerful too. He later told me how much it meant to him that I had asked for his opinion and taken his advice.

Create informal leadership roles. Putting an employee in a short-term informal leadership role can make a major impact. Think how you would feel if you had a boss and she said, “We have a huge problem with a customer. If we don’t take care of it we may lose them. Can you grab a few people and handle it for me?”

Informal leadership roles show you trust an employee’s skills and judgment. The more important the task, the higher the implied praise and the greater the boost to their self esteem.

Team up. You and your employees are on unequal footing since you’re the boss. A great way to recognize an employee’s value—especially to you—is to take on a task together.

What you choose to do together doesn’t have to be outside work, of course. The key is to do something as relative equals, not as boss and employee. Unequal separates, while equal elevates.

Years ago my boss said, “I’m thinking of joining Toastmasters to improve my presentation skills. Would you be interested in joining with me? It might be good for both of us, since someday you’ll be making lots of presentations.” I was flattered he asked and flattered he saw me as someone who would someday be in a position to speak to groups of people.

Verbal praise is great, but at times implied praise can be even more powerful. Ask for help or ideas, put an employee in charge, drop hierarchical roles, and work together. Each is a powerful way to recognize the true value of your employees—and to show you trust them, which is the highest praise of all.

The Fremont Group provides Success Partners–former small business owners dedicated to the achievement of your goals.  Become a member and take advantage of your Annual Business Physical!

How to Sell on Value Rather Than Price

Don’t want to compromise on price? Experts explain how to stay competitive based on the value of your product or service to consumers.

By Tim Donnelly | Jul 20, 2011

In a famous video clip from Penn and Teller’s Showtime hidden camera show, diners are lured to an upscale restaurant branded as the world’s first boutique vendor of bottled water. A water steward presents each table with a menu discussing the finer qualities of water purportedly shipped in from mountains and streams all over the world, some of which cost as much as $8 a bottle.

Of course, the joke is on the customers because all the water actually came from the garden hose out back, but the message was clear: People are willing to pay more for a product if they think it gives them a truly special or significant value—and if you present it to them in just the right way.

Your company is probably selling a stuff that’s a lot more valuable than fancied-up hose water. Selling on value, not price, involves a balance of confidence, personal rapport, and doing your homework, and it’s become more difficult as technology gives consumers greater access to price information and competitors. We’ve talked with veterans of selling their value, and they share some tips on how to make your products stand out in a low-cost world.

Choose Your Targets Wisely

New companies often make one fatal mistake that forces them to compromise on price, says Barry Farber, a business consultant who has worked with American Airlines, AT&T and BMW, and author of more than 11 books on sales. Companies don’t narrow their target market, and don’t understand their products likely aren’t for everyone.

Farber says to do this by researching the potential client to see if they are a good candidate to meet your price needs. This saves you from wasting time talking to people who only want the cheapest deal.

“Some sales people, they just make sure the prospect is breathing and then they dump all this info on them,” he says. “That’s not a good return on your investment of your time. Sales reps that don’t have that kind of aggressive focus, if they lose [the deal], their month is dead, their year is dead.”

Nat Kausik, CEO of Trubates, an online marketplace for adjustable local deals, says his company knows that many consumers are familiar with the nature of value-based pricing, especially after dealing with fluctuating airplane fares. The right customers will be receptive to hearing why they should pay more for a certain product over another: That’s why his site lets users review an offer after they redeem it, and makes the review available to other users.

“Consumers, they’re very sophisticated,” he says. “They understand how to explore price for value.”

About one-third of consumers are purely hung up on price, while the other two-thirds are open to at least hearing your argument, says Tom Reilly, an author and value-based shopping expert. Innovators and early adopters are more likely to shell out the extra money, he says.

“Be crystal clear whom the market segment is that you’re designing for,” he says.

Leverage Your Strengths and Experience

Once you’re in the sales meeting with a potential client, you had better be ready to stiffen your backbone and wield the full weight of your company’s strengths. This comes largely from sales skills, but you can prepare your team by educating them on how your company stands out.

“It’s almost embarrassing at times the way people don’t understand all the ways they bring value,” Reilly says.

You should also be telling the potential client or customers about the history of the company, which helps build confidence in the product. Build up your success stories by documenting testimonials from past successes and showing them off to future opportunities.

“Be able to successfully use your customers as your sales people,” Farber says.

Orwak, a company that supplies waste compactors, baling systems, and other recycling equipment, emphasizes its value thanks to its trans-continental reach. Based in Europe, the company has seen recycling grow leaps and bounds ahead of the United States over the past 40 years. Its sales team pitches its products as a way to help companies stay ahead of the recycling curve.

“We try to sell it as, ‘Hey we’ve been there, done that. Let’s look at Europe, that’s the future of America,'” says Mark Lanning, Orwak’s national sales manager. “We’re going to give you a little peek at the future from our experience.”

Know That Confidence is Key

When you’re highlighting the value of a product over cheaper competitors, you shouldn’t be vacillating on price or negotiating. Reilly says to avoid words and phrases that suggest flexibility, things like saying “generally, we charge” or “your price.”

“The time not to show a lack of conviction is when you’re asking people for money,” he says.

Drop the price without hesitation and without getting defensive, he says.

It is the time, however, to mention the advantages you bring to market: global sourcing, logistic support programs and other things that go beyond the features of a single product or service, Reilly says.

You can be confident without dragging your competitors through the dirt, Farber says. Highlight why your product’s value is worth their consideration over lower-price options.

“The most critical thing an entrepreneur needs more than anything else is confidence,” he says. “If that’s missing, I don’t care if you have a plan and all that stuff, you’re dead in the water. You can lose your edge right away, and selling value becomes 10 times more difficult.”

Emphasize Your Customer Service

The toughest job selling value to customers is getting them to picture the full depth and breadth of everything your company has to offer.

Lanning says his company likes to talk about more than just the product, as comparing balers can feel like just comparing one hunk of steel to another. Customers now expect a quick response time, an ease of use and the feeling that you care about them.

“It’s easier to paint the picture about service than a hard object,” he says.

Farber advises people to foucs on personal touches and developing a rapport with the client by getting to know their needs and business background.

“I’m a big believer of handwritten thank you notes,” he says.

Often the customers who are obsessed with finding the lowest price turn into the biggest headaches, he says. But the customers that see your value understand you’ll be there to provide customer service.

Make sure to keep providing good service throughout the lifespan of the customer, which will let you pile up those customer testimonials you can use to show future clients why you provide the right value.

“Value is always long term,” Reilly says. “Price is short term.”

Reprinted from INC MAGAZINE

Changing 2011 – Sales

Contributed from an email received from Inc Magazine—full link: http://www.inc.com/articles/201101/are-you-a-schmoozer-or-a-closer.html?partner=newsletter_Sales

Are You a Schmoozer or a Closer?

To bring in big business, you need two distinct types of personalities. Part of the trick is figuring out which one you are.

By John Warrillow@JohnWarrillow | Jan 26, 2011

I’m guessing you generate the lion’s share of the revenue for your company. But have you ever stopped to think about your selling style? I have found that company owners tend to be either schmoozers or closers. Being a good schmoozer can undermine your closing ability, so knowing which one you are can reveal who your next hire should be.

The schmoozer

A schmoozer is a front person for a company. Usually thought leaders, schmoozers are good at glad-handing customers, making people feel loved. They remember customers by name and ask them about their lives. They are both door openers and door warmers.

The closer

To be effective, a schmoozer needs to hand opportunities to a closer. The closer, understanding a customer’s needs in detail, exposes a problem—often to the point of discomfort for the prospect—and proposes a solution. Closers may be friendly but rarely become friends with customers, keeping their distance to retain their bargaining position in a negotiation.

A good schmoozer needs to remain everybody’s friend—keeping things light and informal, smoothing over the rough edges of a commercial relationship. A good closer, on the other hand, needs to know how to ratchet up the pressure in a negotiation, applying just the right amount of leverage to get a customer to decide without turning them off. If a schmoozer is the grease, the closer is the crowbar.

I don’t think a founder can be—or should be—both a schmoozer and a closer. You have to decide your role and hire for the other. For example, Don Tapscott, co-author of Paradigm Shift, Wikinomics and the 2010 bestseller, Macrowikinomics, built his former company, New Paradigm, with the help of Joan Bigham, his second-in-command, who is a pure salesperson.

“(A salesperson) is an amazing kind of person actually,” he says. “They view ‘no’ as information, and they never take it personally. Someone says, ‘I have no interest in what you’re doing,’ and she says, ‘Great—now we’re engaged in a conversation.’ Most people are not really salespeople. They take stuff too personally. (They think), ‘You don’t like me, you don’t like my company, I’m a failure.’ A consummate salesperson thinks very dispassionately and strategically about the selling process.”

Tapscott, the schmoozer, explains the interplay between his role and that of his closer: “I make rain at a very high level. I need someone to use that to help the garden grow – to plant the seeds, to nourish them and fertilize them and get real value. It’s one thing for someone to say, ‘Gee, what Tapscott does is really interesting, and I think it could be important to our company,’ and it’s another thing for them to sign on the line to spend a few hundred thousand dollars per year to get some good insights.”

Tapscott was able to sell New Paradigm three years ago in part because he had segregated the role of schmoozer and closer so well. He agreed to continue to be a rainmaker for New Paradigm, now called Moxie Insight, for five years. Today, Tapscott’s books and speeches continue to unearth leads, but he’s not closing; he’s schmoozing.

So are you the schmoozer or the closer?