In the last few years,  I have several times been invited, as a prelude to training programmes, to address teams of Sales Managers on how to grow their business without simply sacrificing profitability.  This article is a blend of the content of those addresses.

Your Market Pie

For the sake of this discussion, the pie represents the sales market you compete in, i.e., the available new sales every month.

You get your share of the market, and in a well-developed, highly-saturated market it probably doesn’t vary too wildly.  If you averaged 10% of your market last year, you may go up or down a little this year, but it’s highly unlikely that you’ll get 20% or 5% this year.

The natural tendency, (admittedly often driven by manufacturers’ or business owners’ short term focus on sales targets)  is to try and cut a bigger slice.

Let’s say you normally average 10% of the market and you decide to go for 12%.  The fastest way to try and do this is to sell cheaper.  So you start discounting harder but this doesn’t just affect you – it affects your competitors as well, who may have to match or beat you on price.   It’s not uncommon for every business to have ‘loyal’ customers who will buy from their regular supplier, but will get a comparative price from another supplier, just to check.  As more businesses blindly pursue volume on price, our research shows that they don’t create many more customers, but they give even more money to the customers who were going to buy their product anyway.  Money for nothing!

Imagine that your market is a ‘money pie’ and, having made the first cut into the money pie each month, you are moving the knife into position to make the second cut that will define your slice of pie.   The further you move your knife, the thinner the pie becomes.  So by trying to simply cut yourself a bigger slice, you get less and less pie ‘filling’ and end up with empty pie crust.

The wider you cut, the flatter the pie gets – but not just for you – for all competitors in your market.   This is a compounding problem as you then educate your customers to expect bigger and bigger discounts.  You may even lose your astute customers who are suspicious of this sales desperation and are aware of what this activity does to things like service, attention to detail and (if applicable) resale value.

What to Do?

As a Sales Manager, there are broadly two approaches you can take to get a bigger slice of pie:

1.    Try to Cut Yourself a Bigger Slice as fast as possible

2.    Make the Pie Bigger

Let’s look at these two choices in more detail…..

1. Cutting Yourself a Bigger Slice

This is what you do when you get desperate for sales numbers or market share.  You just try to grab any deals you can.

Some activities associated with this choice include:

•    Taking a broad ‘shotgun’ approach to marketing.  Examples: Advertising on mass-marketing websites, deliberately marketing outside your Prime Market Area.

•    Giving prices other than RRP over the phone or publishing discounted prices on the internet.

•    Letting salespeople sell management instead of the customers.  Example: A customer starts discussions with the salesperson with price and within a minute or two the salesperson is standing in your office with a credit card and a ludicrous price offer, trying to ‘sell’ you on why you should sell at a significant loss.

•    Little or no sales training

1a.Effects of Cutting Yourself a Bigger Slice

•    Detrimental effect on customer service, customer satisfaction.

•    ‘Rewards’ the customer for shopping around, so encourages them to keep shopping around, not buying. Often confuses the customer and gets them to buy the wrong product for their needs.

•    Significantly reduces the profit for yourself and other businesses in your market.

•    Sets new discount benchmark for customers, making future profit even more challenging.

•    Reduced available sales opportunities because there is less profit to invest in creating new business.

•    Less profit to invest in facilities, staff, training, goodwill, stock.

•    Loss of profitable repeat and referral business.

•    Educates and rewards salespeople to be lazy, undisciplined and unprofessional.

•    Detrimental effect on resale values, if applicable to your market (deterioration of another sales advantage v. your competitors’ products)

•    Reduced ability to attract quality sales staff due to reduced remuneration.

•    The size of the pie (and your sales) are at the mercy of the market / economy.

•    If everyone’s trying to cut the pie thinner, but no one’s growing the pie or baking bigger pies, this has a shrinking effect on your potential market size.

2. Making the Pie Bigger

This is what you do when you stay committed to fulfilling the full array of customer needs, selling value over price, and aiming to retain a fair gross profit and build customer satisfaction.

Some activities associated with this choice include:

•    Targeted marketing:    to your existing client base and to your Prime Market Area.

•    Focus on providing personal service and maintaining enough gross profit to keep the business sustainable long-term.

•    Implementing systems and procedures to ensure customers receive professional, effective service and a better experience.

•    Regular training of your sales staff to develop a higher level of sales and customer service skills.

2a. Effects of Making the Pie Bigger

•    Improves customer satisfaction and customer loyalty levels.

•    Educates the customer that shopping around isn’t necessarily the best way to get true value for money.

•    Buoys the profit for yourself and other suppliers.

•   Doesn’t create future unsustainable price expectations in the customer’s mind.

•   Increases available sales opportunities because there is more profit to invest in creating new business.

•    More profit to invest in facilities, staff, training, goodwill, stock, etc.

•    Increase in profitable repeat and referral business from satisfied customers.

•    Educates salespeople to be more service-oriented (instead of price-oriented) and more disciplined.

•    Enhanced resale values (increases sales advantage v. your competitors’ products)

•    Better ability to attract quality sales staff due to better available remuneration.

•    The size of the pie (and your sales) become more insulated against the economy / market.

Some Suggested Actions (for making the Pie Bigger)

Marketing to your existing clients and your Prime Market Area is an extensive topic, so in the limited time we have available today, I’ve chosen some sales enhancement suggestions.

Furthermore, marketing has the potential to be a huge waste of money unless you have the systems and procedures in place to accurately track and convert the resulting enquiry into sales.   Here are some suggestions, or reminders on effective ways to make the pie bigger:

1. Measure the size of your discounts and over-allowances, not your retained gross.

By simply measuring gross, we can congratulate ourselves on the $50,000 gross profit we made for the month, perhaps from making 100 sales.  Instead of counting how much we kept, if we count how much we gave away and aim to minimise it, we are already taking a perspective that is conducive to better gross (having to then justify the price difference, encourages salespeople to professionally justify pricing, focused on the customers’ needs).

2. Test your salespeople’s knowledge of your USPs (Unique Selling Propositions)

Without warning, call your salespeople into your office one at a time. Ensure you won’t be interrupted.

Ask them what is their best selling product in your range (it may vary for different salespeople).

Then ask them what is the most common competitor they are up against on that model.

Then ask them what are the top 5 benefits of their top seller v. its No. 1 competitor.  If they don’t know, or give you fluffy answers like ‘styling’, ‘finish’ or ‘design’ then they are losing you tens of thousands of dollars.

Note: A salesperson knowing the answers to this is not even the ideal situation, as an effective sales professional will be far more advanced from this, but them not knowing is very damaging to your business.

3. Test your salespeople on BEST PRICE demands

Separately from the previous exercise, call your salespeople into your office one at a time.  Ensure you won’t be interrupted.

Tell them you are going to role play a customer and you want them to respond as they would to a customer.

Tell them you’ve just met them (as a customer), and then ask them: “What’s your best price for a (specific product that you sell).”

You can be as blunt as you like in answering any questions they may ask you, but observe their responses.

They get this Best Price question in different versions every day.  This is one of the most basic challenges your salespeople get.  A salesperson not being able to effectively handle best price request in the first five seconds is a bit like a professional boxer not knowing how to avoid being punched.

If they stammer and stutter, or say “aaaaaaaaaah, ummmmmm”, they are leaving thousands of dollars on the table.  They should be able to handle this confidently in their sleep, it is so fundamental to most businesses.

Salespeople who do poorly in this exercise may say that this is not a “real-world” situation and tell you all the reasons why they would do better with a “real” customer, but when put on the spot, salespeople don’t become wildly creative and imaginative.  They default to habit.

Do not ask them how they would handle it – they can probably know and describe what to do without necessarily doing it with a customer.  Make sure it’s a role-play.

As a guideline on how Best Price can be handled more effectively, ask about our ‘best price’ training courses.

4. Customer Needs before Negotiation

Our company offers over 20 negotiation strategies in training, but if you don’t know anything about your customer other than that he/she wants a particular product for a ridiculous price, then effective negotiation strategies (as opposed to rubbish like “let’s meet half way” and “if I could, would you?”) are rendered useless.

To negotiate effectively, we must have accurate information about the client’s needs.

Without information, we are neglecting our customer service duty and most salespeople in our industry put their business into these neglectful situations with customers every day.

Train your salespeople to get more relevant information and better information to get you the right customer focus for completing a sale.

Don’t let your salespeople walk into your office unless they have a list of the customer’s needs (including, but not limited to price).

5. Track your enquiry

Measure every enquiry, even the ‘tyre-kickers’.

At one business I work with in the first month of tracking, the Sales Manager had just accepted that one salesperson was having a particularly quiet month.

He finally analysed his tracking and found that the salesperson had spoken to 71 customers to make one sale, and had dismissed 70 ‘tyre-kickers’.

Focus on improving your closing ratios, not finding more people from other PMAs to talk to.

Certainty is the Antidote for an Overdose of Variety

The automotive market offers a phenomenal number of choices to vehicle buyers.  This choice includes the number of makes and models, as well as the number of dealerships to buy from, the financing options and choice of financiers.  Additionally, there are more secondary sellers (brokers) and vast amounts of Internet (mis)information and Internet advertising.

With so many varied choices, most customers simply don’t have time to properly investigate every choice.  They don’t even have time to thoroughly consider every choice that’s relevant to them. Such an excess of choice causes confusion for most customers.  The easiest way out of this confusing information overload is to make a ‘safe’ choice.  In these circumstances, most people tend to go with what gives them a sense of certainty.

Furthermore, as vehicles become so technologically complex as to be beyond the understanding of many customers (and salespeople), the unknown becomes a risk and customers look to reduce their risk.  Manufacturers and dealers could help reduce the risk in many ways, including better trained salespeople, but most defer to the easy short-term focus of reducing price.

An intriguing aspect of the challenge in this for the motor industry is that the definition of certainty is not the same for all customers.

How is the Motor Industry Trying to Deliver Certainty?

Most manufacturers and dealers try the easiest approach to give their customers a greater ‘certainty of value’ by dropping their price.  Ever since supply started exceeding demand, manufacturers have been creating ways to ‘bribe’ customers to buy their cars – discounts, rebates, subsidised finance offers, value-adds, cash-back incentives and others.  Almost every manufacturer engages in this lazy form of marketing.

The problem with this strategy is that now almost every brand is engaging in it, the customers are faced with even more information, causing even greater confusion.  Escalating price wars create more uncertainty, not more certainty, for most customers.  Many customers sensibly delay their buying decision to see how high the discounts and incentives will go.  When so many manufacturers are employing this strategy on such a large scale, it becomes counter-productive to it’s goal of getting customers to make an easy choice of one product.

The luxury vehicle market has not been exempt from this practice, which was historically a strategy in the higher volume, lower quality market segments.

When and How Can a Vehicle Distributor Deliver Certainty?

In terms of a customer’s buying cycle, a manufacturer/distributor can deliver or try to deliver certainty before the sale, during the sale and after the sale.  Some examples of these include:

i)    Before the sale:

• Maintaining or promoting the Company/Brand/Model image
• Advertising & Marketing ( including price, as above ) / PR
• Providing consistently high quality product

ii)    During the Sale:

• Availability of accurate consistent information, e.g., brochures, websites, stock availability
• Establish & Maintain dealer requirements for level of service to customers
• Providing consistently high quality product

iii)    After the Sale

• Providing consistently high quality product
• Timely and accurate provision of parts and service / information
• Established dealer requirements for level of service to customers

I was driving between appointments today and listening to music.  In my playlist was a song called “Hard Act to Follow” by Split Enz.  This song was a favourite of mine in the early 1980s and I started singing along.

As I drove and sang it occurred to me that I was singing some incorrect lyrics.

I stopped at the bank and while I was parked there, I Googled the lyrics on my phone.  I laughed at how much the correct lyrics varied from my version of the lyrics.

When I started singing along to this song back in 1981, a printed confirmation of the lyrics was not easy to obtain so I sang what I interpreted the lyrics to be and I had been singing the incorrect lyrics over and over, every time I heard the song.

Noting how much more sense the correct lyrics made, I resumed driving and resumed singing and I noticed something significant.

It was extremely difficult to stop singing the incorrect lyrics (which have been in my head for over thirty years)!

Even though I knew ‘my’ lyrics were wrong, when the song was playing it was incredibly difficult to sing what I now knew to be the correct lyrics.

I immediately phoned a sales trainer who I have been teaching and shared the story with him.

He had recently been frustrated with some of the sales teams he was working with and how they had been taught and shown the correct way to conduct certain sales behaviours and yet were slow to change.

I pointed out that my experience today with the Split Enz song was a graphic example of how hard it can be to change long-held behaviours, even if you readily admit that they are wrong.  I advised him that he had to remain focused on helping his sales teams change their behaviours without falling into the trap of making them bad and wrong.

I also highlighted that learning the lyrics to a song correctly if you wanted to learn it today was easier because the lyrics are usually available online, so you don’t have to guess the lyrics as I did back in 1981.  Similarly, it is often easier to teach a sales trainee to do the right thing, than to try and have an experienced salesperson ‘unlearn’ bad habits learned over many years.

In sales and song-lyrics, long-held habits are a hard act to follow!

Road to a Sale is a procedural guide for helping a client to buy a car.  Different versions of Road to a Sale have been around for decades and there have been an extraordinary number of different versions of Road to a Sale.  Some manufacturers and dealerships have their own versions of Road to a Sale.

In its simplest form, Road to a Sale may be condensed into four steps:

1. Opening ( meeting and greeting )
2. Needs analysis ( establishing the client’s needs )
3. Capability Demonstration ( showing that your product meets the client’s needs ) and…
4. Securing Agreement ( client agrees to proceed )

Opening covers meeting your clients in a professional and courteous way.

Needs analysis involves finding out what the customers needs are.  This may involve uncovering needs that the client isn’t necessarily aware of beforehand.

Capability Demonstration may involve a presentation and/or demonstration ( test drive ), as well as answering the client’s final questions to the client’s satisfaction.

Securing Agreement involves finalising the paperwork and financials to initiate supply of your product to the client.

Why Auto Pty Ltd’s Road to a Sale?

There are some fundamentals of customer service that are self-evident and are rightly common to all versions of Road to a Sale.  However we tailor Road to a Sale training to our clients’ needs, and their clients’ needs.

Furthermore, our Road to a Sale training focuses on two major areas that maximise sales success.  These two areas are ignored or minimised in all the other versions of Road to a Sale that we have seen, and the lack of them often caused salespeople and their managers incredible frustrations in trying to implement the rest of the Road to a Sale.

We design and deliver Road to a Sale training backed by decades of personal experience in sales and management, including implementing two versions of ‘Road to a Sale’ at Mercedes-Benz.  Typically, most of the ‘common’ Road to a Sale knowledge is only about 50% of our course content.  The majority is in specifically addressing client needs, and these two new topics which have had great impact with the people we’ve trained.

Difference 1: Customer Needs Techniques

Yes, most ‘Roads to a Sale’ give you some ideas on ‘Qualifying’ a customer, but few give it the importance it deserves.  Even fewer give you the background understanding and specific techniques to make this as effective as it should be.

As we acknowledge in our ‘Road to a Sale’, the greatest motivation that a customer has to do anything, including buy a car from us, is their needs.  If we do not accurately determine their needs, the remainder of our ‘Road to a Sale’ may be wasted, costly, or at least unnecessary hard work.

One of the flaws we’ve found with other ‘Roads to a Sale’ is classifying customer ‘needs’ and ‘wants’.  We will show you why this actually sabotages your success in determining what’s important to your customer.

We show you some techniques and give you some exact questions to establish and develop your customer’s needs more effectively.

Difference 2: Credibility

We provide specific ideas on how to establish and enhance your credibility with your clients, how to reduce their fear, and how to earn the customer’s trust now and in the future.

Perhaps unfairly, most salespeople are at least perceived to lack credibility before the customer even meets them.  Sometimes this lack of perceived credibility is heightened by the client receiving conflicting information from various sources about the same vehicle.  This only serves to confuse your client.  Confused clients tend not to take action ( Does “I need to go home and think about it ” sound familiar? ).  We’ll show you how to keep your customer from being dazed and confused, so that they can act confidently.

To find out more about Road to a Sale training, contact us.

In recent discussions with colleagues, we have talked about the importance of effective product knowledge in providing good customer service.

One example I gave was a concierge in a hotel, who may be extremely polite, considerate, enthusiastic and eager to help. However if he/she doesn’t know the hotel and its facilities, doesn’t know the local area, doesn’t know the right restaurants to recommend based on guests’ needs, doesn’t know what shows and movies are playing in town, then his/her ability to deliver customer service is extremely limited.

I’ve read on other motor industry websites that several manufacturers are engaging concierge trainers to train their salespeople in customer service. This is a great step in improving customer service skills as long as the salespeople have the product knowledge and associated skills to match.

An enthusiastically helpful service person or salesperson who doesn’t know his/her ‘product’ can be an infuriating waste of time for a customer.

The BLT with Gluten-Free Bread

My partner is coeliac. Like other coeliacs, her immune system reacts abnormally to gluten (a protein found in wheat, rye, barley and oats). So eating normal bread (which contains gluten) makes her sick for several days.

Having breakfast with friends in a cafe recently that had several gluten-free (GF) options on the menu, including gluten-free bread, my partner ordered the BLT with the Gluten Free bread.  Fifteen minutes later, the waitress brought out a BLT (made with normal bread) and a side order of Gluten-Free bread.  The service was prompt and friendly but the waitress (and, it seems, the chef) had no understanding of why they had gluten-free items on the menu and why customers would need gluten-free food.  Naturally , the BLT was sent back and the ignorant waitress seemed a bit put out.

My partner had to wait for a new sandwich to be made (correctly) and got the right sandwich, fifteen minutes after everyone else got their breakfast orders.

So the end result was a below-average customer service experience.

A Motor Industry Example of Poor Product Knowledge = Poor Customer Service

Relating this ignorant customer service experience to the motor industry, I recall the story of the buyer of a brand new 4WD, printed in an Australian motoring publication a few years ago.  The new 4WD buyer had recently upgraded his old four-wheel drive to a brand new model.  He seemed to assume, as did his salesperson, that he was already familiar with the brand and the model so little time was ‘wasted’ on product knowledge and a ‘deal’ was done.

What both of them missed was the fact that the very old model 4WD that the customer was trading in was old enough to not have Anti-lock Braking System (ABS).

Naturally, the new car did have ABS but the customer wasn’t aware of what it did (and didn’t) do and the salesperson simply supplied a car for a price.

On his first weekend drive in his new 4WD, the customer was driving along a gravel road. As he approached a bend in the road, he braked heavily. The ABS activated, but did not slow his vehicle as quickly as he’d expected with his old 4WD and he ploughed into a tree. He blamed the ABS and the vehicle for his misfortune.  His blame would be better placed with the salesperson.

I recall reading a survey of Australian motorists years ago and, among other things, it revealed that over 60% of the survey respondents who drive cars with ABS had no idea what ABS did. Around that time I was training a large group of salespeople with a prominent prestige brand, so we started training one morning with a product knowledge quiz including a multiple-choice question on the function of ABS.

Almost 90% of salespeople gave the wrong answer on the function of ABS!

We quickly amended subsequent training to focus more on this and other important product information.

Product Knowledge Must Solve a Customer’s Problem

In his book SPIN Selling, from a comprehensive study of 35,000 sales calls, Neil Rackham shows how effective product knowledge is in sales, as well as the most effective way to provide product knowledge to a customer.

Furthermore, Rackham identifies a vital focus of customer service: What customer problems does it solve? If it doesn’t solve a customer’s problem, your product and your product knowledge are of little value.