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

The virtue of Fidelity is often associated with personal relationships, in particular, marriage.  However, I would like to propose that we consciously extend this virtue to all aspects of our lives, including the functions of sales and service.

Why?

Because fulfilling our obligations and keeping our promises are critical to attracting and especially retaining customers.  The way in which we keep our promises and fulfil our obligations (or not) has a dramatic impact on our reputation, brand, and ongoing viability as a business.

First let’s take a look at what ‘fidelity’ actually means (source www.dictionary.com):

• Fidelity: 1494, from M.Fr. fidélité, from L. fidelitatem (nom. fidelitas) “faithfulness, adherence,” from fidelis “faithful,” from fides “faith” (see faith).
• Fidelity implies the unfailing fulfilment of one’s duties and obligations and strict adherence to vows or promises: fidelity to one’s spouse.
• strict observance of promises, duties, etc.
• loyalty: fidelity to one’s country.
• conjugal faithfulness.
• adherence to fact or detail.
• accuracy; exactness: The speech was transcribed with great fidelity.
• Audio, Video: the degree of accuracy with which sound or images are recorded or reproduced.

When we read these definitions of fidelity we can see that they are very relevant to ethical business practices and are fundamental to any healthy relationship. While some may argue that fidelity should be a given with any buying experience, unfortunately it is not for many people.  This is why I am raising fidelity in sales and service as a topic of conversation for 2010.

There are too many stories about ‘bad’ customer experiences to dismiss this as an irrelevant topic of conversation.  I believe more and more we will be held to account for actions, especially after the sale has been made. This brings the practice of fidelity into stark reality as a core virtue for any business.

Many of us have had experiences where we were promised one thing by a sales person, customer service person, or business proprietor and received something different.  For instance the sales or service person could say something like:

• ‘If you have any problems you can all on me and I will take good care of you no matter what happens’ (Reality – you have an issue and they do not want to know about you or your problem and make it very difficult for you to get any help)
• ‘If there are any issues with this piece of equipment bring it back and we will fix it at no charge’ (Reality – you have a problem and they blame you for the equipment problem without first uncovering what happened and then they complain about having to fix it, all the time telling you that other places would charge you for this service)

These examples and others like them leave people feeling let down, duped, and somewhat stupid for having trusted a person and taken them at their word.

But why is it this way?

Why do some people make these promises and then complain when they have to fulfil them?  Are they scared to lose a sale so they say anything to get your money?  Or do they have the best intentions of fulfilling their promises, however say ‘yes’ too much, setting unrealistic expectations, and overloading themselves?

I am sure there are many reasons why these issues occur, however whatever the reasons, the consequences of not practicing fidelity in business are dire.

If you want to kick off the New Year with a conversation about sales fidelity, you may like to ask the following questions:

• How do we abide by our agreements and honour our commitments?
• How do we fulfil our promises?
• How do we create and maintain trustworthy relationships?
• How do we work out problems directly?
• Do we walk our talk?

The answers you get may give you vital information about what you need to stop doing, start doing, and keep doing to ensure viable, healthy business practices and success in 2010 and beyond.

Remember everybody lives by selling something.

PS.  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.

Author: Sue Barrett, Barrett

How to incentivise and reward sales people has long been a contentious topic.  Too many times I have seen businesses set up incentive programs that reward the wrong behaviours which can affect team morale, client relationships, sales, staff retention, and so on.

For instance, I recently met the managing director of a medium sized software business who asked me why would his sales people keep selling one version of their product when they had been instructed to also sell in a newer more comprehensive version of the product.

I asked him two questions:
1.    “How do your sales people get incentivised for each product sale?”
2.    “Do they earn most of their income from their commissions or from their base salary?”

It turned out that his sales people earned more commission by selling in the older version than the newer version of his product.  And the sales people made the bulk of their income from their commissions rather than from their salaries.

There you have it.  What makes perfect sense to the sales person – “If I make more money by selling in one type of product and the majority of my income comes from my commissions I would be stupid selling anything else.” does not always work for the organisation or the customer.

Lesson: If you want a different outcome (as did the aforementioned MD), you need to think about what behaviours you want to drive and reward in your people that don’t create competing motivations.

And here in lies the issue with certain aspects of the Financial Planning industry.

Much of what is being written about the Financial Planning industry in current and recent times is centering around the issue about competing motivations.

As I see it there are two different models in operation in the Financial Planning industry:

Fee for service model

• Is where you engage an independent Financial adviser to guide you and instruct you in your financial planning and wealth management strategies.  These people are in the business of selling their consulting services and their advice. They earn their  income purely off their hourly consulting time.  Service fees are applicable to the level of service provided.  Their focus is on advising on the three keys are of wealth management:  Creation, Consolidation and Distribution with no products commission attached to their advice.

Product sales model

• Is where you buy a specific product or suite of products to incorporate into your financial planning and wealth management strategies.  In this instance you know you are buying a product via a transactional product sale.  You can do this at a bank branch for instance.  Some people who run their own self-managed super funds work this way by purchasing only product.   Others may use a broker who sells a range of these products and can provide easy access to the right product you need.  Brokers usually make their money by getting a commission on the sale of these products.  Some brokers also make trail commissions for the life time of the sale which is where you are seeing an increase in complaints.  This model is basically the old Insurance Sales model.

There is nothing wrong with these models so long as they are open and transparent and do what they say they do.

Basically, people should know what they are getting i.e. independent advice for a specified fee or product for a specified fee/commission.  For instance there are customers who do not want to ‘pay fee for service’ and prefer the commission model so these two models offer choice which is only fair in an open market.

However the problems arising for the Financial Planning industry is when people using the ‘product sales model’ try to pass it off as the ‘independent financial adviser’ model.  All this does is create competing motivations like:

“Do I give my client what is best for them or best for me?”
“I need to sell more product to supplement my retirement pool not necessarily my clients.”

The issue as I see with this approach it is that we are more likely to get products that make the most money for the broker or planner not the best product or solution for us.  We are at risk of becoming a vehicle for them to make as much money as possible at our expense as is evidenced by some of the more spectacular business failures in recent times.

Financial Planners who are really only selling product with a commission structure attached as their main source of income cannot truly act in an independent  advisory or consulting role.

The competing motivation that can arise is that they can become more concerned with how they could get paid rather than how they can provide better advice for their clients.

This poses some important questions for the industry:

• Why have these competing motivations been allowed to manifest?
• In the industry trying to squeeze a product sales model into a consulting sales model?
• What is the industry doing about creating a client centric model where it’s all about the client and the client’s outcome?
• What relationships have been created with the product suppliers that may be leading to these competing motivations?

In my opinion the terms Financial Adviser or Financial Planner have been poorly defined and often misused by the industry potentially leading to misunderstandings, confusion, and in some cases distress and financial loss for some customers because they did not get what they paid for.

In my opinion, those who sell product should be called a Financial Product Specialist or Financial Products Broker.

And those who truly practice legitimate Fee for Service models can rightly call themselves a Financial Adviser or Financial Planner.

Clearly this issue will not go away until the industry finds the best way to legitimately define Financial Advising or Financial Planning and stop creating opportunities for competing motivations which only serve to devalue their industry and its potential for a truly professional model that works for all.  More work to be done here .

Remember everybody lives by selling something.

‘Does everyone live by selling something?’

My desire to seek answers to this question was ignited back in the late 1980’s when I came across the quote ‘Everyone lives by selling something’.  The quote was coined by Robert Louis Stevenson, Scottish novelist, poet, travel writer and author of ‘Treasure Island’, in the late 1880’s some 100 years earlier.

It is interesting to note that Robert Louis Stevenson (1850-1894) was a leading representative of Neo-romanticism in English literature. He was also greatly admired by many authors such as Ernest Hemingway, Rudyard Kipling, Vladimir Nabokov and others.  Most modernist writers dismissed him, however, because he was popular and did not write within their narrow definition of literature. It is only recently that critics have begun to look beyond Stevenson’s popularity and allow him a place in the canon.

Over the last 20 years I have sincerely come to believe that Robert Louis Stevenson is correct in his assumption that ‘Everyone lives by selling something’.  His ability to not be constrained by the prevailing views and paradigms of his time allowed him to see what many of us are coming to realise now.

Whether we call ourselves a salesperson or not, if we have an idea, product, service, skill, capability, talent, or opportunity by which we can make a living and others can benefit from, we need to be able to sell.

This means that whatever role we are in, we all need to put ourselves in a position to secure the ongoing custom of customers, members, patients, supporters, peers, students, sponsors, or clients to make a living.    Even internal service providers such as HR and Procurement professionals need to be able to sell and consult in order to fulfill their roles accordingly.

In this complex world, this means that we need to make sure our talents and capabilities are visible to those who need to know about us.  We need to proactively put ourselves in a position to work with others to earn what we are worth on any level, otherwise we at risk of being invisible and losing opportunity.  Good salespeople have always known this, consciously or not.

Yet many people are still confused by the words ‘sell’, ‘selling’, ‘salesperson’, or ‘sales’. In fact when these words are mentioned in polite company, you can see many people visibly recoil at the concept and some even go so far as to object to you even mentioning the concept of selling.

Why?

Because many so called ‘legitimate‘ sales practices we experience as customers are nothing more than manipulation and deceit, aggression and intimidation, or hard sell, pressure tactics.  No wonder so many people shy away from selling as a career or cringe at the thought.  Whether we are conscious of it or not most of us don’t like how selling is being sold to us.   I don’t blame you.

Despite the prevailing paradigms of 20th century ‘old school selling’ tactics and others’ self limiting beliefs, highly successful, effective, ethical sales people have always known the best way to sell is to proactively forging honest and open relationships (of any kind) based on trust, transparency, respect, and doing what they said they would do.  This is their competitive edge.  Their sales approach is more collaborative, integrated, holistic, and enlightened.   The potential for these life skills and attitudes is present intrinsically in almost all of us whether we know it or not.

Now I are not trying to convince people to love selling, or even like it.  However, we want people to recognise the vital role selling plays in our lives today. Without this capability our businesses wither and die.

Yet some people believe it is not their right to put themselves or their ideas forward instead relying on their good work to speak for themselves.  Some think they may be seen as too boastful or self absorbed if they do so.   Others are too frightened to sell and many have never been taught how to sell effectively with confidence, dignity, and grace.

That is why we still see too many good ideas and opportunities go to waste resulting in poor revenue results.  Too many people do not purposefully and proactively put themselves in a position to explore opportunities with others, bring their ideas to the table, create new possibilities or earning what they are worth in the process.

Whether we earn a living from what we do or not, if we hide our talents and capabilities from others and no one knows about us or what we are capable of then how can we be of service and earn what we are worth on any level?

It’s also about being genuine.
In this increasingly networked world we all have the opportunity to connect  with others all the time – in short we are selling ourselves.   However, the way each of us portrays ourselves, our companies, our values and our lives are at risk of being seen as superficial if we do not genuinely communicate, connect and create with others.

If we want to cultivate and sustain genuine, healthy, profitable and viable business relationships with our clients, partners, suppliers or peers where a fair exchange of value is achieved then we, our business and our people need to go out to the market place and put ourselves in a position to work proactively with people and help them and ourselves achieve our collective business goals.

This is why I believe Everyone lives by selling something.

Whether you are working as a sales professional, business development manager, lawyer, accountant, engineer, consultant, internal human resources manager, procurement  manager, business, manager, small business owner, team leader, psychologist, a jobseeker, or anyone in contact dependent career, we can all benefit from applying more enlightened, collaborative, worthy, natural sales practices in our daily lives.

I am interested in whether you believe Everyone lives by selling something.  If you would like to have your say we have set up a poll at www.barrett.com.au to take your response to the question ‘do you live by selling something’.

Happy and honourable selling to you all.

I was running a ‘train the sales trainer’ session with some experienced, professional Sales Managers the other day.  The session I ran is designed to equip these managers to run mini sales training modules of as part of our sales fitness programs.  Many manages are not trained facilitators and so we make sure we give them the information they need to set up an effective learning environment.   All was going well until we came across the content entitled “Creating the right learning environment” which is a practical guide about what you need to prepare and take into account when setting up your room environment.

I happened to mention (and wrongly assumed) that this was pretty straight forward and was familiar to most professional people and we could do a quick scan and move on.   However, one of the Sales Managers informed us that this was not always the case as the previous sales manager, whom he had recently taken over from, used to run some of his sales meetings and one-on-one performance reviews at a restaurant chain known for its scantily clad, big breasted waitresses.   And occasionally he decided to run these sessions at the local strip club as well.  Needless to say the sales manager in question did not last very long in his role.

I had thought (and hoped) we had progressed somewhat as professional business people, but clearly some people are still stuck in the 70’s and 80’s where similar stories were more common place.  I really didn’t think it happened today but clearly I was wrong.   I would be interested to know if this still goes in some industries today (I hope not but may find that it happens more than I had expected).

So rather than assume everyone knows how to set up the right environment I thought it might be prudent to remind us all of the key things we need to consider when setting up:

• A training session
• A coaching session
• A performance review
• A  sales meeting

For learning, feedback or a meeting to take place effectively you need to create a comfortable and safe environment. For this to occur you need to plan and arrange the environment and resources you will need for your session or meeting.

Whether you are training or coaching on-the-job or in a training room, giving feedback or holding a meeting, there are a number of things you should consider before you start (most, if not all, will be relevant):

• How many participants will be involved?
• Is the size of the location adequate?
• Is the location available?
• How will tables and chairs be arranged?
• Does the area have adequate lighting?
• Is the area quiet enough?
• Is the temperature comfortable? Is there adequate ventilation?
• Is the location accessible?
• Is the location private? (able to be closed to the outside world)
• Do you know where all the facilities are, for example, the toilets?
• Does the location have enough power points? Do you know where they are?
• Are training aids available?
• Are there any OH&S requirements you will need to consider?

As a sales manager, even if you are providing coaching advice to a salesperson in the car after a client meeting (which often happens) please consider the advice above.  For instance having the radio on while giving feedback or giving very specific feedback on a difficult area for development while the person in question is driving is probably not a good idea.

The manager, coach or trainer who is committed to accelerating the learning process of their people must attend to creating an optimal learning or meeting environment which also includes it being safe on all levels.
Sincerely, your advocate for selling the right way.