Why is ‘cheap’ a false economy?

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Why is ‘cheap’ a false economy?

March 3, 2010 in Attitudes & Behaviours, Ethics & Values, Negotiation, Procurement, Sales Culture, Strategy

Understandably everyone wants to save money, especially in these times, however we need to be aware of falling victim to false economy. False Economy is an expression that refers to an action which saves money at the beginning but which, over a longer period of time, results in more money being wasted than being saved.

For instance, I have never understood why some people will drive half an hour across town to get their petrol two cents a litre cheaper, all the while using up what they may save by driving across town, notwithstanding the time it took to travel there and back in the first place. In almost all cases this action delivers a net loss.

The following excerpt from Wikipedia on a False Economy provides some good examples:

A notable practitioner of false economy was King Frederick William I of Prussia, who was said by Thomas Macaulay to have saved five or six dollars a year feeding his family unwholesome cabbages even though the poor diet sickened his children and the resulting medical care cost him many times what he saved.[1]

The concept of a false economy is similar to planned obsolescence, whereby the lower initial cost of a false economy attracts buyers mostly on the basis of low cost, who may later be at a disadvantage.

Motivating factors on the part of the party engaging in false economies may be linked to the long term involvement of this party. For example, a real estate developer who builds a condominium may turn the finished structure over to the ensuing condominium corporation which is run by its members once the last unit is sold and the building has passed a final inspection. Longevity of the components of the structure beyond the final turnover of the facility may not be a major motivating factor for the developer, meaning that the result of the application of false economies may be more detrimental to the end user, as opposed to the developer.

A false economy affects businesses and consumers on many levels. The quality of decision making is the factor here. The cause and effect of our decisions may be creating a false economy in our businesses or our personal lives. Anyone in the procurement profession (purchasing) who still holds onto ‘cheapest’ being their only option for purchasing from suppliers may be setting their companies up for failure or disaster.

For instance, many SME businesses may be tempted by the cheap telco service offering or cheaper equipment. On the surface, these cheaper offerings could appear to be great deals, but before one buys anything they should do some analysis beyond the obvious price on offer. Just because something is cheap does not mean it is good for you or your business. A cheap phone or communications system could mean unreliable phone or poor internet connection, poor equipment performance resulting in frustrated or lost customers who cannot communicate with you or your business, a poor reputation, or poor staff retention. The so called ‘cheaper’ service just cost you a whole lot more than you intended to pay.

The expression ‘buyer beware’ also springs to mind. It is not just the sales person’s job to convince us to buy it. Our job as the buyer is to do the math and to look at the genuine ROI (return on investment) of our purchase. Any self respecting sales person is well equipped to look at the consequences and ROI of each purchase, and would help you make a sound decision based on facts. We need to work together to ensure we do not enter into a false economy for all our sakes.

So what are we really purchasing? Thinking beyond the immediate outlay of money, we can view every purchase in our personal or business life as an investment. I have just had a salient lesson in false economy courtesy of my eldest son and his friend when they purchased some remote control products online. They found some great planes on a website whereby they could purchase them at a considerably cheaper price than elsewhere. Seeing as they were paying for them with their hard earned pocket money, the price looked great to them.

You can see what’s coming can’t you? 8+ hours of my time attempting to communicate with the US online company to get our order processed involving numerous attempts to get what we ordered fully shipped. This was a classic case of false economy. Even though my son and his friend went through feelings of devastation at the thought of losing their collective $740, feelings of disappointment when their order was not fully filled and the shipping costs were out of proportion, and resignation that not everyone fulfills their promises, the lessons for all of us were invaluable.

They learnt about checking out the reputation and credibility of a company first, the cause and effect of buying and selling ‘cheap’, that trying to fix problems can take a lot of time and cost money, and that plenty of people have lost a lot more than they did. So we were able to put it into perspective, albeit that $740 to an 11 and 13 year old is a lot of money. They also discovered the value of thinking before you act, the consequences of actions, and how to process a range of emotions that we feel when things go wrong. Perhaps most importantly, they learnt how to respond with patience and reasoned analysis to get what you want rectified, instead of threats.
All in all it was a great lesson, learnt early in life with limited consequences, and hopefully one they will carry with them into the future to help them on their way.

So if using a cheaper alternative costs you even one sale, is it worth it? While in some cases the answer may be yes, in many other cases the more expensive option may be the one that provides the greatest return for you. As you’ve just read, ‘costs’ can involve a lot more than just dollar value.

Special thanks go to my son Josh and his friend Nick for the inspiration for this article.

Remember everybody lives by selling something.

Author: Sue Barrett, www.barrett.com.au

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Why ‘everybody lives by selling something’ is key to your success

February 17, 2010 in Sales Culture, Success

‘Everybody lives by selling something’ was the trend, in our 12 Sales Trends for 2010, voted as second most important for businesses in 2010. It is a very significant trend on many levels as it involves everyone, not just the people who are labelled as ‘sales’.

‘Everybody lives by selling something’ has had a profound impact on our business at Barrett. Since we introduced this as our core philosophy and principle behind our work it has been amazing how many people feel open to discuss the topic of selling and sales, especially those people who have been most reluctant to the concept of selling including professions such as Teaching, Law, Accounting, IT, HR, and Engineering.

At first, it seemed that this statement may narrow us to being seen as just ‘sales’ focused but in fact the opposite has occurred. While ‘everybody lives by selling something’ has focused our attention on what we do well, it has also broadened our horizons in terms of who we work with. This statement, coined back in the late 1800’s by Robert Louis Stevenson, has shifted the conversation to a broader landscape. Beside sales teams, we now engage with, train and coach teachers, accountants, lawyers, engineers, and others who would never had considered selling as part of their professional repertoire.

‘Everybody lives by selling something’ seems to have allowed people to discuss an area that is fundamental to human relationships and communication, the principle of exchange. In our lives we are all exchanging things of value. Whether what we exchange is of value to others should be determined through effective communication, open dialogue, and trust.

Taken to an organisation wide level, everybody in a company has an impact on how the business communicates with and engages in the principle of exchange with its customers, suppliers, the broader community, and each other.

The legacy of silos in organisations, where departments distance themselves from each other, pitting their agenda against others to gain an upper hand, is the opposite of the principle ‘everybody lives by selling something’. It flies in the face of being a fit, viable business, yet this still happens and businesses, staff, customers, and the broader community suffer as a result. All the bluster about being ‘world’s best practice’ or ‘best of breed’ comes undone in an instant when people forget that ‘everybody lives by selling something’. The energy wasted, emotions expended, and distress caused because people think they were more important than the greater good of their company, their customers, and the community is very sad.

It reminds me of a simulation exercise we run with teams where people form groups (‘companies’) and then have to create their own departments. The dynamics of this particular simulation test people’s ability to choose between the greater good for their ‘company’ or the self-interest of their own department, thereby tests their ability to engage in the principle of exchange. Although each group is a company in itself, they are also competing for points against the other groups (‘companies’) in the simulation. It is amazing how many people compete with people within their ‘company’ and end up losing out to a competing ‘company’. Their focus falls internally and they miss the point entirely.

The irony is that while we say that we are focused on trying to stay ahead of our competitors with better products and services and snappy marketing, it is often the internal competitions (politicking, one-upmanship, disassociation from customers and sales) in our own organisations that is undermining our efforts to be effective, sales fit, and successful.

Everybody in our organisations needs to be an ambassador for our business, our message, and our brand. There needs to be recognition that we are in one of two roles 1) actively involved in selling or 2) supporting someone who is.

How well people and organisations embrace and practice this philosophy will be the test in 2010. We encourage you to have open discussions about ‘everybody lives by selling something’ in your business and see what happens.

Enlightened sales people and leaders already recognise that ‘product’ is only part of the sales process and that selling is actually a ‘value exchange’, underpinned by real relationships. Those companies that support and train all their people in a culture of proactive client engagement, transparent selling and proactive positive communication practices aligned with their strategy, will gain a significant competitive advantage in 2010.

So we would like to ask you, do you live by selling something?

Remember everybody lives by selling something.

Author: Sue Barrett, www.barrett.com.au

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Lead the way

January 27, 2010 in Communication, Sales Culture, Sales Leadership

In December 2009 we published The 12 Sales Trends of 2010 and invited readers to vote on what they thought are the most important trends in sales. Thank you to everyone who shared their views and voted. Each month we will explore one of the trends in more detail, starting with the trend voted as most important, Lead the Way. As voted by you, here are the sales trends for 2010 in order of importance:

1.   Lead the Way
2.   Everybody lives by selling something
3.   Back to Basics
4.   Social Sales
5.   Noise Reduction
6.   Culture Fit
7.   The New Competition
8.   Through the Looking Glass
9.   Weathering the Storm
10.   Sustainable Selling
11.   A Sales Community
12.   Hot Bath Turns Cold

Lead the Way was the trend voted as most important by you, our readers. As we discussed in The 12 Sales Trends of 2010 sales needs to be led from the top. In 2010, sales will be on the agenda of the ‘C’ suite and this will mean from the CEO down, including the CFO, COO, and CIO. Even if the ‘C’ suite never has contact with an external customer (which I strongly advise against) they need to know how to lead, sell in, and support the sales effort.

Why?

Despite millions, if not billions, of dollars being invested in sales training, CRM systems and the like, many leaders are realising that their frontend processes, backend systems, culture (including those staff who have not traditionally seen themselves involved in sales), and sales methodologies are not aligned with their customers. In many cases theses processes and systems are also not connected internally causing, amongst other things, duplication of effort, mixed messages, confusion, and lost sales opportunities.

Sadly, too many businesses still consider customers the sole responsibility of sales and marketing. This is just asking for trouble. For too long there has been a disconnect, if not a gulf, between those in ‘sales’ and those not in ‘sales’, often with the latter looking down their collective noses with disdain at anyone in a sales role. This has got to change, if nothing else, for purely commercial reasons. This is an issue for leaders.

Enlightened leaders will no longer tolerate or condone the domain of selling being isolated to the sales and marketing teams. A truly customer centric, value added, highly profitable, integrated business can only flourish under clear and decisive leadership that puts forward a compelling business case for change, everyone in the business understands and can put into real and accountable action.

Those leaders who make it clear to their business that, without everyone performing their roles in a spirit of collaboration and cooperation with the customer at the heart, there will be no business. This is sure to get their peoples’ attention. Those leaders will also place their key clients on their assets register, to ensure a conscious and actual value is accounted for by all.

Moving down the corporate ladder, businesses will make the most significant difference to sales through enlisting the support of all of their managers. By educating them in the values and thinking frameworks, skills, structures, and processes needed to run a sales centric business. In particular, by focusing their efforts on their Sales Managers they will also see better returns. As a profession, Sales Managers receive the least formal training, often leaving people to work it out by themselves, even though formally trained Sales Managers show the highest positive correlation between training and results. Time and time again, sales teams achieved higher performance and results when their Sales Managers were frequently and effectively trained and coached. Word of caution: training and coaching without proper, integrated support structures in place won’t be nearly as effective.

In addition, we propose that Sales Managers should be the ambassadors for sales culture transformation. Besides the obvious connection between leading and managing a sales team (which many Sales Managers would benefit from more training in), Sales Managers have a crucial leadership role to play within any business. By acting as a critical link between all departments and customers via their sales teams, Sales Managers can communicate key information and initiatives to the market, as well as reporting back key findings to the leadership teams. This role ensures any adjustments, actions, or communication can be made in a timely manner. Effective Sales Managers don’t get stuck behind a desk, they are out in-the-field reporting on marketing efforts and their effect, and they hear the real voices of customers firsthand and see the impact, good and bad, of initiatives. They are a real connection between the business and customers. They can, and should, be given a company-wide voice. Enlightened leaders will make sure their Sales Managers are not relegated to being glorified administrators endlessly reporting and attending meetings and free them up to do what they do best, be the conduit between customers, sales people, and the business.

Sales Managers are a key communication life line. How well does your business and leaders communicate with their teams and markets? What messages are you sending? How are they being received? Who is listening anyway? Who is taking action? How are you communicating? What are you hearing?

Communication is the key here. As Charlie Magee, author of the Imagination age states:

“Evolution equals survival of the fittest communicators. (One might protest and say that economics is more basic than communication because one must survive in order to communicate, i.e. an ancient hunter of 40,000 years ago, alone in the grasslands, had to eat before he could communicate. Consider this, however: to this hunter, the wind, by carrying smells, communicates the direction of prey. The sun, by its position in the sky, communicates which animals are at the water hole. The hunter’s stomach, by growling, communicates a sense of urgency. Communication happens first. Then the hunter can eat.)

It took the universe 10 billion years to create a species that could speak. It took that species 3 million years to create a communication tool called writing. Then just 12,000 years to create the printing press.
500 years to create the computer. Put these figures on a chart: billions, millions, thousands, hundreds, then … decades? We’re looking at exponential change. There are clues in the pattern of communication evolution.

The most successful groups throughout human history have had one thing in common: when compared to their competition they had the best system of communication. The fittest communicators-whether tribe, citystate, kingdom, corporation, nation-had (1) a larger percentage of people with (2) access to (3) higher quality information, (4) a greater ability to transform that information into knowledge and action, (5) and more freedom to communicate that new knowledge to the other members of their group.”

Those leaders and businesses who can integrate their frontend processes, backend systems, culture, people, sales methodologies, and communication strategies (including social media et al), underpinned with clear vision and values, and communicate their intentions clearly will lead the sales revolution.

Investing in properly training, educating, and supporting leaders and managers, especially Sales Managers, to be those crucial communication links will see significant lifts for businesses in 2010 and beyond. Many of these areas cannot be taken lightly; they take considered thinking, reflection, time, and courage to enact. If you cannot do a company-wide makeover in 2010 then at least invest in your Sales Managers so they can help you Lead the Way.

Remember everybody lives by selling something.

Author: Sue Barrett, www.barrett.com.au

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Do you have the sales force your strategy needs in 2010?

December 21, 2009 in Sales Culture, Sales Driven Organisations, Sales Excellence Acadamy, Sales Leadership, Sales Management, Sales Strategy, Strategy

The other week I ran a webinar for SmartCompany.com.au on ‘How to clearly manage and measure your sales team’. During the webinar I was asked many questions, one of which came from a senior sales leader, “With some time to reflect over the Christmas break, what is the one thing I should focus on getting right for my business?”

Given that business as usual is not ‘usual’ anymore, I suggested the following:

1. Review your business and sales strategy

Do you have the right strategy in place?
What has changed over the last 12 months
How has your client mix changed? i.e. are your key accounts still key? What emerging markets have come into play that you need to be in?
Does your tactical marketing plan still support your sales and business strategy?

2. Do you have the right sales team structure in place?

Is your current sales team ‘fit’ enough to deliver your strategy?
If not, can you get them to the standard where they will be competitive?
If the answer is ‘No’, then what types of sales force do you need?
Do you need more reps in the field, more people on the phones, or do you need a different type of sales force?
In an ideal world what would your sales force look like? How would it function if it were to deliver effectively on your sales strategy?

By asking yourself these questions and reflecting on the current state of play in your market and business you can imagine what it could be like. The market and how you intend to apply your strategy will dictate the kind of sales force you need.

Do you have the sales force your strategy needs for 2010?

Not sure? Then I recommend you read these previous posts Success is a moving platform- How do I keep my sales team on it and Create your ideal sales force blueprint for more insight and guidance.

On a final note for the year end, I would like to thank the my team at Barrett and for the opportunity to write to an ever growing readership; I have been writing since February 2007 and the feedback I receive has been fantastic.

And don’t forget to complete the Barrett poll on The 12 Sales Trends of 2010. We want to know what you think will be the number one sales trend in 2010.

We will publish the results of the most important Sales Trends for 2010 in January. Make sure you are subscribed to our blog to receive in depth articles on The 12 Sales Trends of 2010, starting in January with the No. 1 trend as voted by you our readers.

On that note I wish everyone associated with Barrett, our team, our clients, our suppliers, our supporters and our families all the very best for 2010 and look forward to contributing more articles on the wonderful world of selling.

Remember, Everybody lives by selling something.

See you in 2010.

Cheers
Sue

Author: Sue Barrett is Founder & Managing Director of BARRETT

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Sales is a team effort

November 11, 2009 in Communication, Customer Service, Sales Culture, Sales Driven Organisations, Sales Excellence Acadamy, Sales Skills, Teamwork

Sales numbers and sales processes should be understood and owned by everybody in your organisation. In today’s world if you are not directly in sales you are supporting someone who is. This is why sales really is a team effort.

Rather than being just about a feel good factor and great staff alignment, this has practical applications as well. For instance with the ability for customers (or anyone) to find and connect with anyone in your organisation through many difference channels (i.e. social networks, Google, etc.) the whole business needs to be sales fit.

With anyone being able to contact anyone anywhere anytime it is critical that all your staff understand:

What your company stands for (in language they and the customers understand)
What your company sells and how it supports your customers
How they need to sell and service customers
That everyone in the business either sells directly or supports someone who sells

If not problems may arise that cause more issues than they are worth. For example imagine a customer, unhappy with a software product they have purchased, finds the name and number of the lead person who developed or designed the software and calls them directly to complain.

What happens here? One of several things could happen. Here are some examples:

1)   The Software designer/ developer actively listens to the issues of the customer, empathises with and understands their issues completely, helps the customer resolve their issues in the most effective manner possible, the customer feels heard, understood and able to work in collaboration with the person and the business. In addition the software engineer may take on board the new suggestions and consider them for future upgrades.
or
2)   The Software designer/ developer is stunned by the out-of-the-blue call and doesn’t know how to deal with the customer so after some mutterings hangs up on the customer.
or
3)   The Software designer/ developer tells the customer they don’t know what they are talking about and gets into an argument with the customer resulting in either the customer or software engineer hanging up.
or
4)   The Software designer/ developer tries to help the customer but gets too technical using jargon the customer doesn’t understand leaving the customer feeling more confused and perhaps frustrated or even angry.

This issue and others like it are becoming more common place leading to more customers voicing their disquiet in all sorts of public ways – just think Twitter for example. Customer complaints are no longer residing in the domain of the customer service department anyone can read about them these days – thus leaving businesses brand and reputation exposed to ridicule rightly or wrongly.

How we handle difficult customer situations says a lot about us and our companies.

So how many of the key people in your organisation (read CFO, CEO, Operations Manager, Product Mangers, Distribution Manager, Sales Manager etc.) are skillful at communicating and handling customer enquiries, complaints, and feedback?

How many of them have been specifically trained in communication, customer service and selling skills?

How many of them can model these skills for the rest of your team?

The communications skills training most senior managers would receive is in how to handle the media but I think they would be better served if they were trained in contemporary customer service and selling skills first.

Not handling customer issues, feedback or requests well leads to many of these media issues in the first place, so why not address it at the core? Let’s train everyone in contemporary customer service and selling skills and processes and make sure we all understand how our actions can enhance or detract our company.

We all need to make sure that we have the sales and customer service processes in place that people can follow and apply effectively. All our people need to be trained in the necessary sales and customer service skills so they are in the best position to handle and manage customers calls and ensure that our organisations are well placed to best serve our customers. Even if the customer is wrong about something it’s all in how we handle it that means the difference between a positive and negative experience.

I was taught a valuable lesson early on in my career when I was working in recruitment. The lesson was this: I was told you are going to tell more people they did not get the job than you will tell those who did so make sure that every contact you have with anyone is always done in a constructive and positive manner. Try to be of help no matter what and ensure the person knows you did you best even if the best meant delivering bad news. People will appreciate your honesty and the effort you took to be of service to them.

I would highly recommend that core sales and service competencies be defined and included in everyone’s job and person descriptions and be made a conscious part of all our roles through effective, relevant training and on-the-job coaching support so they become a way of life not just a fad.

So, next time you decide to train your sales staff in selling skills and processes, make sure they are the right selling processes and skills suitable for your business environment and do yourself, your team and your customers a favour by also including all your other staff in the same training. The rewards are great in terms of teamwork, customer satisfaction, staff alignment, customer retention and, of course, better sales results and brand currency.

Remember everybody lives by selling something.

Sue Barrett is Managing Director of BARRETT

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