The great shift in power
Updated: Dec 31, 2021
It’s all about the customer!
In this ever faster changing and increasingly complex world the need to adapt is crucial. There are several ongoing global super trends, elegantly described in a newly published book by the research company ProSales. These super trends are affecting the way we conduct business. Failure to understand and act on these trends might lead us in the wrong direction and cause us to make the wrong decisions, or worse, not making decisions, which might prove to be fatal for our companies. In this article, I am reflecting over the first five of 50 super trends described in the book, with my own conclusions and comments.
Polarization of Sales Logics
For the better part of the last century, the focus was on developing great products that basically sold themselves. Sales organizations, in the case they existed and depending on the product, were focused on meeting as many prospect customers as possible and highlighting unique product features and superiority compared to the competition.
In those days the product knowledge of the sales representatives was crucial for the buyers in order to educate themselves prior to making objective buying decisions. The role of the salespeople was to provide relevant information to the potential customers about the product, close the deal, and then move on to the next prospect. The more they did it the better they became in the art of conveying unique selling points in a convincing way. Now add some social skills to the mix and it is almost a guaranteed success. You might think that I am describing the current way of selling, and you would be right, to a certain extent.
With the arrival of the Internet, however, this old sales logic, also called "Traditional Sales Logic", has slowly been disrupted, and today we can clearly see that it is being overtaken by two other sales logics with their own respective success factors. What is causing this change?
Today, a vast majority of the B2B buyers have already done much of the research on the Internet, before even contacting a vendor. Almost all purchases start with a search on the Internet today, and the buyers have the upper hand in the sales meetings. The relevance of the traditional salesperson as an information provider is decreasing.
A polarization of Sales Logics is taken place, which changes the way we do business. Depending on the customer’s buying complexity (The customer’s perception of risks and efforts in relation to the purchase), vendors have to adhere to either a more Transactional Sales Logic, or a more Complex Sales Logic. Let me explain.
For products and services with low buying complexity, there is no longer a need for salespeople. Thanks to the digital revolution, we can now buy millions of things online without expensive human intervention. From the vendor perspective, the cost of sales is decreasing and far more prospects can be reached than before. It makes perfect business sense.
On the other hand, when the risks and efforts of the buying organization are perceived to be high, or a customized solution is required, there is usually a need for a thorough analysis of potential risks and consequences by several stakeholders in the company, making the whole buying process more complex. From a sales perspective, industry knowledge, customer business understanding, and a consultative approach throughout the sales process, are crucial aspects of the Complex Sales Logic.
The traditional way of selling from the past does no longer create value for the customer. To continue with the Traditional Sales Logic is a dead-end going forward. The choice of which Sales Logic to adopt has huge implications on the strategy, organization, leadership, and performance management. Companies need to choose between these polarized Sales Logics, or clearly separate them when designing the sales organization.
The benefits of doing this are clearly shown in ProSales’ research and lead to an important increase in profitability. Sadly, many companies are still applying leadership styles, KPIs and remuneration models belonging to the Traditional Sales Logic of the past, even though their businesses have evolved to a more Complex Sales Logic. This has been proven to be counterproductive, and leads to unwanted behaviours, which in turn result in less business and lower profitability.
Organizational development has evolved to become more efficient and collaborative than in the past. Different departments in companies used to work more in silos, where departments such as product development, sales, marketing, and delivery didn’t have to communicate much with each other, and were more focused on creating efficiencies within their own areas.
With digital transformation, systems, tools, and processes are now interlinked to a larger extent and different parts of organizations are becoming much more customer-centric, with common goals. Companies take a more holistic approach to organizational development, become lean, and eliminate waste in the workflows. The consequence of this is that more interdependencies are created in the companies and there is a greater need for cross-functional communication, and to make joint decisions on matters that now affect several areas.
This results in that the customer decision process takes more time, since the complexity increases in the buying process. The buying criteria were before limited to involving one or two areas, but now need to take more factors into consideration. This has increased duration of the buying cycle with approximately 25% on average, and more persons representing different areas of the company are involved in the analysis and the buying decision.
From a sales perspective, it is no longer enough to be an expert in the product, or even on the benefit that the product has for the customer’s business. It is now necessary to have the ability to advise and guide the customer in a consultative way throughout the buying process, and together with the customer identify dependencies and consequences of introducing the product, or service. Much deeper relationships are needed between the buying and selling organizations.
Customer value Orientation
With increased competition, easily accessible information about products, services, and supplier choices including reviews and rankings, the customers are much more educated than in the past. Sales methodologies focusing on uncovering pain and needs, and come up with a solution based on a product or a service, are no longer enough.
Values beyond the products and services have to be created. This could be in the form of a consultative relationship, which supports the customers’ image, future strategy, and evolving operational needs. To have a relevant product with future proof features, high productivity, competitive price, and a good Total Cost of Ownership, only gives you the right to compete. They are mere “hygiene factors”.
To win the business, and create a long-term relationship with the customer, the company needs true Customer Value Orientation with full focus on making the customer successful. Not only today, but with the promise that you can deliver future business values, and a vision of continuous development and support.
As the evolution of digitalization is becoming more and more sophisticated, B2C has been changed forever. We leave our digital footprints everywhere and it doesn’t matter if you are on Facebook, Netflix, Google, or LinkedIn. Information and customized offerings are delivered to you like magic. Suggestions for which movies to watch, or products to buy based on your earlier searches or articles that you have read. It is very convenient, but also a bit scary. The “Big brother” is watching you and knows exactly who you are, what you are doing, your preferences, and habits.
This trend does not stop here, however. In B2B, segmentation of relevant customers based on previous behaviours and choices, customized marketing targeting specific decision-makers within a company based on the digital marks they have left behind, is becoming more common. The question is, will this be the new normal, or will it be regulated somehow, due to integrity conflicts? Time will tell.
The competitive advantages of leading companies are constantly under threat and do not last as long as in the past. The average life span of fortune 500 companies today is approximately 30% of what it used to be 50 years ago. Today’s global leaders in areas such as taxi, hotels, retail, movies, media, and advertisement did not even exist 25 years ago. You probably know which ones I am referring to, right? New companies who completely disrupt established business models are popping up all the time. No company can relax and feel secure on the top. If I am not mistaken, it was Bill Gates who once said: ”Microsoft is always two, or three years away from failure”. Another quote from Bill Gates: “Success is a lousy teacher. It seduces smart people into thinking they can't lose.”
The North European countries and North America, who traditionally were the innovation leaders, are now challenged by countries like China, India, Japan, and South Korea. And soon other countries who are still focusing on low-cost production will be added to the mix. It is also more common that what appears to be niche companies, are now moving into and competing in new areas. Companies constantly reinvent themselves at an increased speed, and many of them moves up in the value chain and absorb the business of their traditional customers.
Please comment if you believe that these topics are interesting.
I recommend you all to purchase the book, which is describing these topics in more detail, soon available in English.
The reference to this book is:
ISBN 9879163995408 (Swedish)
ISBN 9789151926629 (English)