OBJECTION!
Late last year I was working with a client on a plan to address their 2024 targets. The client runs a team selling complex services comprising core activity and a range of value adding optional services. We were focusing on one team member. I’ll call him “Bob”.
Bob’s performance was in line with the rest of his team in terms of close rates and deal volume, but his revenue numbers were below average. He was doing as many deals as anyone else but doing them less profitably.
As I compared Bob’s deals from the preceding two years with those of his peers one issue quickly became evident. Bob was achieving comparable profitability on core services, but his numbers on value added services were by far the worst in his cohort. He seemed to be bundling value-adding services for free or with very large discounts where the top performers in his team were selling those services without the heavy discounts. However those top performers were also outliers; averaged across the team there was a clear pattern of value-adding services being discounted heavily which was negatively affecting profitability.
I spoke to the project sponsor about what I thought was happening and, after she had one of her team dig deeper into the numbers, we formed a more detailed view of the problem cause and its effect. Over the previous two years, looking at the value-add services the team were including in their deals, they were recovering less than 47% of the potential revenue. Most of the bundled services were very high in margin so the heavy discounting wasn’t making the deals unprofitable (which would have raised red flags sooner), but they were making the deals less profitable. The sponsor believed that the clients would have bought the services with little or no discount and this seemed to be supported by the results of the top performers. We concluded that there was a large opportunity to improve the overall performance of the team by addressing the issue.
The deep dive also validated the cause of the issue; the team were giving up value to try to close sales. They thought they were “Objection handling” when in fact they were just being exploited. They needed to learn to differentiate objection management from negotiation.
Objection management is a critical capability in sales. However good your value proposition is, when you ask your buyer for their commitment, there’s a high likelihood they will say “No”. Any sale represents a change, and most people are naturally resistant to change. So the job of a sales person is to identify the legitimate sources of resistance and help their buyer become comfortable enough to change from their previous state (not buying from you) to the new one. If you’re looking for a great resource on the subject of managing objections I can highly recommend reading Jeb Blount’s “Objections” but for this post I’m going to talk about what happens when objection handling is done badly, as was the case with “Bob” and many of his colleagues.
What was happening was this; Buyers were saying “No” to Bob’s proposals and telling him to “…sharpen his pencil”. This is a classic objection and in many ways it is positive. They were not saying, “You have totally misunderstood our needs” or “There’s simply no way I can imagine your solution working for us”; they were saying “I wish I could get this for less money”. If managed correctly this is a positive step towards closing a profitable deal. But Bob and his colleagues were not handling the objection correctly. Instead, they were panicking.
Faced with this rejection, they were falling into the trap of trying to solve the client’s problem with the price by making it cheaper. Appropriately reluctant to discount the core offering, instead they were treating the high margin value-add services as an “easy” give. They were responding to objections like “You need to sharpen your pencil” with proposals like “Well, let’s see….. You’ve opted for the Gold support package which is normally priced at £4,000 a quarter….. what if I could drop that to £2,000? Would that work for you?”
I could write four or five blog posts on all the problems Bob just created for himself (and his company) with that response but I’m going to focus on one here; as a long-standing procurement pro myself, my response to a proposal to discount the support package by 50% would probably be “That is still not enough Bob. What else have you got?” and I would keep responding that way until Bob ran out of stuff to give me. Buyers don’t do this because the price still isn’t right, they do it because they are being rewarded for doing it. If you give someone a biscuit every time they say “No” to you, they’ll keep saying “No” until they see you shaking the crumbs out of the empty packet (which also means there are no biscuits left for you).
The plan for resolving the issue comprises three steps;
The first step was to conduct the analysis to diagnose the issue. We quantified the effect using metrics that mattered to the client and used that data to target an improvement for 2024 and agree how it would be delivered and measured.
Next we will equip Bob and his colleagues to deliver that improvement. This involves training them to negotiate properly and installing processes in the team to support them in doing so, but also improving their understanding of core sales processes including correct objection management. Post training, we will run kick off sessions together with a project sponsor to show the team how to apply the tools and techniques from the training in the field, using the measures agreed in the first step.
Finally we’ll work with this client through 2024 to measure progress, celebrate successes, troubleshoot issues and course-correct throughout the year to make sure that the investment the entire organisation makes in time, work and money to develop their skills and processes really pays off when it counts; in the numbers at year end.
Don’t fall into the trap of confusing bad negotiation with objection management. You won’t make your buyer “happy”, but you could destroy your profitability and devalue every aspect of your value proposition for the long term.