When developing their strategy, finances, and risk management plans at the beginning of the year, what goes through a CEO's mind?
A CEO considers confidence in their plan to accomplish revenue goals and satisfy shareholders, with an emphasis on delivering outstanding service or care to generate revenue, since they do not need to worry about the revenue amount without high levels of customer happiness.
Tom Williams offers salespeople and vendors some tips on how to be taken seriously by procurement and not just treated as filler for his columns.
Tom Williams suggests that salesmen and vendors should be open to working with procurement, recognize their evolving role, and avoid having a negative attitude toward them. They should also become familiar with how procurement perceives them and their good or service in order to foresee negotiation strategies.
Can you talk us through the Kraljic matrix?
A procurement tool called the Kraljic matrix divides products and services into four quadrants based on two factors: supply risk and financial effect. Commodity items, which have low supply risk and little financial impact and are often obtained through contracts and blanket purchase orders, are shown in the lower left quadrant. Leverage products, which have a large financial impact and low supply risk and are often bought utilizing competitive bidding, reverse auctions, and RFPs, are represented in the upper left quadrant. Bottleneck items, which are often purchased with an emphasis on continuous value and have a high supply risk but little financial impact, are shown in the lower right quadrant. Strategic products, which have a high supply risk and a large financial impact and are essential to the success of the buyer's product, are located in the upper right quadrant. Instead of using a cost-based pricing strategy, these things need a value-based pricing strategy. To effectively negotiate and safeguard their margins, salespeople need to understand which quadrant their product fits into. The matrix can be used as a tool to help salespeople anticipate conversations by figuring out the objectives of their customers and pinpointing the areas in which they can add value.
What are the qualities that you would look for in the recruitment phase?
To sum up, in the hiring process, Tom Williams thinks it's critical to look for salespeople that possess the following traits:
1. Intellectual zeal to address customer issues and assist them in their solutions.
2. Understanding of the parameters by which procurement is being evaluated, as well as the capacity to satisfy internal customers.
3. Ability to hold the line on a pricing, walk away from a bad agreement, and make innovative trade-offs to widen the contract are all examples of negotiation abilities in a challenging setting.
4. The guts to reject a lousy bargain.
5. Thinking beyond the box to increase the deal by creating low-cost trade-offs, such as providing more services or longer-term contracts in exchange for maintaining the price.
Marcus Cauchi: Hello and welcome back to the Inquisitor Podcast with me, Marcus Cauchi. Today I'm delighted to have as my guest Tom Williams. He's an author, sales trainer and consultant, and he's chairman and founder of Strategic Dynamics Inc. Tom, welcome.
Tom Williams: Thank you, Marcus. It's a pleasure to be with you today.
Marcus Cauchi: Excellent. Some of you may be familiar with, uh, Tom's delsic tones because he was recently on an episode that I ran a round table with him, me and Jill Robbins on buyer centered selling.
And we're gonna build and deepen that theme today. And we're gonna look at three critical areas, risk, procurement, and consensus.
60 seconds on your background
Marcus Cauchi: Um, before we do, Tom, could you give 60 seconds on your background please?
Tom Williams: Sure. Thank you. Thanks, Marcus. Um, my background actually started in sales markets when I was about 10 years old.
You know, probably typical to to many of your listeners, I cut lawns, I shoveled snow. I born and [00:01:00] raised in the Midwest of the United States, uh, and I also had a lemonade stand. And then a couple of years later, when I was about 12 years old, I, I started and bought a couple of paper routes. And so I, uh, my job, my job in sales there was to walk through the neighborhood and if someone didn't take the pa the paper, the newspaper during the week, try to get them to do so, and if they didn't take it on the weekend, try to get 'em to do that.
Uh, if I kind of fast forward, you know, my sales career when I graduated from college, I actually went to work for a medical device manufacturer, uh, in a sales support role. And that really was, uh, kind of a life-changing moment because that really got me excited and interested in, uh, in the sales profession.
Uh, and then from there, you know, it just kind of, my, my career just kind of took off and I, and I grew. Actually, if I managed a sales and marketing for a medical device firm for several years, then I, uh, I actually went into operations and became a hospital CEO, and did a, a couple of stints there with a couple of [00:02:00] different organizations managing a specialty hospital for several years.
And then I went back to back, really back into a pure sales role. I started two different medical, uh, device companies, uh, as, and I started service companies and I sold one of those. The other one was part of a large corporation, was sold as well. And then following that, I, I started Strategic Dynamics, you know, and, uh, and I and my team, we sell every single day.
You know, we're a boutique, uh, consulting firm that helps organizations, you know, increase deal velocity and win rates. We've been in business almost 20 years and, uh, you know, most of our clients, uh, are repeat customers and, and, uh, obtain through referral.
Marcus Cauchi: You've seen it from all sides. You've seen it from the buy side, the sales side, from the executive leadership side.
What goes through a CEO's mind at the beginning of the year
Marcus Cauchi: So let's start with what goes through a CEO's mind at the beginning of the year when they're trying to map out their [00:03:00] strategy, their budgets, and let, let's deal with that question about managing risk.
Tom Williams: Yeah. I think
Marcus Cauchi: What went through your mind at the beginning of a year?
Tom Williams: Yeah, a couple things. I think what one is, is, um, you know, is confidence.
Do, you know confidence and can we make the number. Whatever that number is, whether it's a revenue number, you know, cost improvement number, you know, whatever that is. At the end of the day, you've gotta, you've gotta, you've gotta make an EBITDA that will keep you and your sh if you're privately owned or your shareholders, you know, happy.
Uh, and so it's all about, you know, confidence in the plan and then, you know, and typically, you know, um, in a service business like I was in. You know, you had, in order to, to, uh, to drive revenue, you had to provide excellent, you know, service. We had to provide excellent care for the patients that we, that we took care of.
And if we didn't have great, you know, satisfaction levels at that, at that stage with both our referral sources and with our actual patients and their families, you know, we didn't have to, [00:04:00] we didn't have to worry about a revenue number.
In terms of who had your ear, who did you listen to, who did you pay attention to?
Marcus Cauchi: Okay. So tell me this, in terms of who had your ear, who did you listen to, who did you pay attention to?
Tom Williams: Oh, wow. That's an interesting que uh, really interesting question because, you know what it, um, as CEO, you, uh, I'll take it as a CEO of a hospital. First off, my first boss was, uh, the corporate office right there was, I, I reported into the chief operating officer of the parent company. And so I, that was, that was certainly one, one, uh, stakeholder group that I had to keep, keep happy.
The second one was our board of directors, which was comprised of myself and, uh, a couple of members from the corporate office. The third one was the, uh, was the medical staff, you know, and, uh, and the leader of the medical staff. Another group was of course my direct reports. And then you have the, all your employees, and then you also have all the stakeholders.
Because we were a specialty hospital, we had, [00:05:00] patients were brought into our hospital primarily through a referral source with approval from their families. And so that was another, another source of, of people. So all of those had our, had my ear, and I would say the last one was be our top vendors, you know, our top suppliers that provided product and services to us.
They had my ear as well. So it's all about juggling your time accordingly, right?
Marcus Cauchi: So you are balancing all these different special interests. You were balancing the commercial drivers, the medical and clinical drivers, you were trying to satisfy shareholders, the board, your corporate head office, and you had a supply chain, and then you also had customers.
How much time did you have for salespeople who came to pitch product?
Marcus Cauchi: So how much time did you have for salespeople who came to pitch product?
Tom Williams: I had very little time. Most of the, most of the time that I saw salespeople, Marcus was, uh, was when I was walking the halls. And I would see, and I'd be out amongst the, the [00:06:00] troops, right? I'd be out talking to, to our caregivers and our phy, you know, that were both clinicians as well as physicians.
And I would run into, you know, a, uh, a sales rep there or if I happen to walk through the purchasing, you know, procurement department, I might see a vendor there. And, uh, it was a, you know, a 30 to 45 second, maybe a couple of minute dialogue and conversation.
What about those trusted suppliers who you considered to be partners?
Marcus Cauchi: What about those trusted suppliers who you considered to be partners?
Tom Williams: Well those folks we knew quite well. You know, and I would say there, we, we spent a little bit more time with those folks on a periodic basis, but it might be once a year, it might be twice a year depending upon on the vendor. But I really, you know, leaned heavily on my directors that managed those respon, that those prospective relationships and listened to what they had to say cuz they were on the fire in line.
They were the ones I was holding accountable for delivering their results.
Marcus Cauchi: Okay. So it's the beginning of the year. You've done your budget for the year, you're now putting your [00:07:00] plans into action and problems occur. Things don't quite go according to plan as the old military maxim goes. The plan never survives and you're trying to juggle all of these different competing interests.
You're trying to gain consensus where you can, you're managing and having to play the different special interest groups, um, and, uh, give them a sense that you are listening, uh, but still having to make decisions and prioritize.
When vendors failed to meet expectations, when they tried to bypass your process, what impact did that have?
Marcus Cauchi: When vendors failed to meet expectations, when they tried to bypass your process, what impact did that have?
Tom Williams: Well, you know, you immediately when they, when they tried to bypass, you know, like a, uh, like, like say the purchasing department get directly to me, the impact it had was I had an angry or, you know, disillusioned director, uh, that wasn't [00:08:00] happy that it occurred. And secondly, you know, question would come to me is from my admin is, what do you really wanna see this person?
Right? And, you know, the first thing I would say is, if you've been to procurement, have you been to purchasing whatever the department, you know, they were supposed to go to first, and if they hadn't been there, we, we just directed 'em there first.
Marcus Cauchi: Okay. Um, now you and I have had co a couple of conversations around this, but what we know is that if you've got a great relationship with procurement, you can be their partner, but often the relationship is adversarial between procurement and sales.
What advice would you give to salespeople and vendors about doing their research so that they are relevant and that procurement doesn't just see them as column fodder, they take them seriously?
Marcus Cauchi: What advice would you give to salespeople and vendors, uh, about doing their research so that they are relevant and that procurement doesn't just see them as column fodder, they take them seriously?
Tom Williams: You don't really need to have an adversarial relationship with, with procurement. I mean, procurement is there to do it, [00:09:00] to do a specific job, right?
And procurement today has a seat at the C-Suite table. In other words, what I mean by that is, is that every dollar that they save in cost savings drops straight through to the bottom line, regardless of whether you're managing a, you know, a manufacturing organization, a service organization, it doesn't matter.
It procurement has an important role to play and it's changing, you know, uh, you know, over a period of time it's changed dramatically and they become a lot more important. So, the first advice I would say to a sales rep is, look, if you are working with a specific, you know, stakeholder within the organization, that stakeholder says to you, I have the authority to make a purchase.
And all procurement will do is, is process the paperwork, then take the order. Right? That's the pathway of least resistance, you know, and that's what you should do. But increasingly, that's not the way it works. Increasingly, that stakeholder said, look, I'm gonna be the, I'm gonna pick you as a vendor of choice, but then I'm gonna, [00:10:00] you're gonna need to work with procurement and get set up as a vendor, and you're gonna, and they're probably gonna ask you for a lower price.
You know, and so you've gotta be prepared to deal with procurement. You know, and what's most salespeople don't understand is how does procurement look at the different vendors and suppliers? And in our book, you know, the, the seller's challenge, you know, we walk through a process. Uh, in a chapter we have on working with procurement called Kraljic Matrix, which is a four quadrant matrix that shows the seller exactly where, how procurement views them, their product and service, and then what tactics that are gonna be used against them, you know, in a negotiation.
Can you talk us through the Kraljic matrix?
Marcus Cauchi: Can you talk us through the Kraljic matrix, please?
Tom Williams: Yeah. So think of the q the, the, the matrix is this way. In other words, draw, uh, if for your listeners, just simply draw four, four squares, you know, uh, a four square quadrant, right? So [00:11:00] two squares in the top, two in the bottom, on the left hand side of the quadrant, put impact on financial results.
And at the bottom, put low and at the, in a, in an arrow going up to the top the goes and says high. On the horizontal axis, axis, do the same thing, but this one put in supply risk. As your name of your quad, your four, your below your quadrants, and again, put low to high. So what you end up with is there's four boxes.
You know, you're plotting impact on financial results versus supply risk. So if you're in that lower left-hand corner where you're, you're actually a low, low financial risk and a low supply risk, that's what we call a commodity item or a, or a routine item from a pro purchasing a procurement point of view.
So you can expect, and if you're in that, if you're viewed in that quadrant, you're gonna be, be, uh, you're gonna be commoditized and they're gonna beat you up on price terms and delivery. [00:12:00] That's where you'll typically see contracts, blanket purchase orders, those types of things. If you go right above that into a high supply, high financial risk, but yet a low supply risk, that's what we call a leverage item.
That's, so that's where the customer is looking at and saying, we've got really call it a buyer's paradise because there are so low, so many suppliers that their offerings are viewed as a commodity and the switching costs are perceived to be very low. So here's where you typically see competitive bidding, reverse auctions and RFPs, and I'll come back to RFPs here in a couple of minutes.
If you go then to the lower right hand corner, that's what we call a bottleneck item. And so there it's, it's, you have, you, the customer has a high supply risk. Meaning there are very few suppliers that provide your product or service or your component. [00:13:00] And so you've got some, you know, you've got some leverage there that you can get a little higher price as long as you can go and provide, you know, continuing continual value.
Where the real sweet spot for a manufacturer or seller is, is up in that upper right hand corner, you know, which is you have a high impact on financial results, and you have a, a customer has a high supply risk. This is where the items that you're providing to the seller, uh, to the buyer, you know, are critical for their product success.
So they're dependent upon you as a supplier in this quadrant. You really can negotiate well and you can sell value. Now, what's interesting about the four quadrants is if you look at the left side, two of the two quadrants on the left side where I, I talked about routine items. in leverage items, which are your RFPs, your competitive bidding in reverse auctions, that's really requires a [00:14:00] pricing strategy, right?
The right hand side is all about a value strategy. So you know, if you're on the left hand side, you've gotta talk about price, and you can still differentiate yourself, but it becomes much more difficult. On the right hand side, you really can talk value. So as a seller, you wanna understand where procurement is putting you into which area.
So you can negotiate, you know, from a position of strength. And that really requires you to be, you know, very, very well prepared before you walk into a negotiation. And that's an area where most sellers, you know, frankly, don't do very well because they don't negotiate very often. So let me give you an example.
One company I was VP of Sales and marketing for our typical sales rep might negotiate with somebody in procurement. Five or six times per month, the average procurement professional is negotiating five or six [00:15:00] times per day or more. Who do you think has the advantage? Yeah, you know, just from a pure point of view of how often they're doing something.
Now, if you take and combine that with a skill level that most procurement people have, you can see that right off the bat you, you have an extreme advantage. So how do most salespeople react? They discount, you know, they give away margin and uh, and that not only hurts the company, but it hurts them because the way, if you give away margin, you're giving away dollars.
And if you give away dollars in order to make your quota, you might have to do one or two more deals per year than you normally would. So your, your actually, your win rate has gotta go up.
Marcus Cauchi: It does happen an awful lot. I mean, I've spent most of my career looking at prick procurement with great suspicion.
And from what you're saying here, it's not entirely unjustified, but it can be mitigated through [00:16:00] preparation, planning, and strategy and rehearsal. But the problem that I see is that most salespeople, because they've got a weaker empty pipeline, they're generally behind their quota. We did some uh, research last year, and only 44% of individual reps hit their quota last year, and only 13% of teams, which means that management is probably pushing them to get a deal no matter what.
They have a culture. Where discounting is their default setting and they make unilateral, they make premature and they make unnecessary discounts, and they make their lives harder than they need to be.
What are the qualities that you would look for in the recruitment phase?
Marcus Cauchi: So what advice would you give in te let's start in the recruitment process. What are the qualities that make for, uh, a salesperson who has a steely spine and the organizational [00:17:00] capability and habits to succeed in this kind of environment where they will undoubtedly be up against procurement at some stage in their, uh, selling life cycle?
What are the qualities that you would look for in the recruitment phase?
Tom Williams: I think there's a, there's a, there's a bunch of em Marcus and I'm probably gonna miss a few of these cuz I just think about this ad lib. But, um, first and foremost I, you know, I want someone that's got a, you know, an intellectual curiosity to really solve customer problems and help them with their outcomes and keep focused on that.
I also want somebody that really understands if I'm dealing, if I, if I've gotta deal with procurement, I wanna understand what are the metrics by which procurement is being evaluated because, you know, it's easy just to drop price, but you know, you have to remember, procurement has internal customers as well that they've gotta solve.
They've gotta satisfy. I want somebody that has that, that ability to understand [00:18:00] them. I want somebody who's had to negotiate in a tough environment before and walk me through a process of how they've done it and to be successful. In other words, have they, have they held price? Have they walked away from a deal because it was a bad deal for the custom for, for their organization?
You know, have they had the, the backbone to say, you know, we can't do that. Uh, have they been able, have they, do they have a creative, uh, gene in their body where they can look at and, and hold price and maybe do trade offs that expand the deal? Right? In other words, what's, what I call expand the pie, make the deal bigger?
It could be that, you know, maybe we, instead of giving away margin, uh, and price, we give away some service training or something else that has a very, very low, uh, cost impact to us preserves our price. And in return we get a longer term contract, we get larger volume, we get something in return. Uh, so those are, those are a few of the things that come immediately to my mind.
Why is it that so few organizations invest anywhere near enough time in the planning, preparation, rehearsal, and debriefing processes?
Marcus Cauchi: [00:19:00] Those are all great. And what, what I'm curious about is, again, why is it that so few organizations invest anywhere near enough time in the planning, preparation, rehearsal, and debriefing processes? Because that, that seems to my mind to be the most obvious area that, um, they could improve with relatively little cost if only they'd slow down and do that.
Tom Williams: I think, I think a couple reasons. One is, is that, you know, everybody tracks revenue. It's an easy metric to track on a daily basis, but they don't really track on a daily basis. You know, gross margin, you know, that's typically done by the finance department. It's done after the fact, you know, when they roll up their monthly or quarterly numbers.
And so you don't, you don't really always see the impact of that discount. Uh, I think that's number one. I think number two is, is that people look at, [00:20:00] uh, often look at, uh, we just have to hit the revenue number and we're gonna automatically build in, you know, x amount of percent of discount, uh, because our industry demands it.
So we're, you know, we really are, we, it's okay to, to lose 10%, you know, a gross margin or 10% off the price because we, that's the way we've priced our product in other words, we priced our product at $10,000 hoping to get nine, right? And so it's an artificial, you know, artificial list price. I think that's another reason.
And I think, and I think another one is we just don't, we, most organizations don't, don't spend the time and the money to train their people to be good negotiators. You know, they'll teach 'em on sales process, they'll teach 'em, uh, things about, uh, prospecting skills, presentation skills. But for whatever reason, VPs of sales don't focus enough on, on the negotiation part of it.
And I would add part of that negotiation process is not only, uh, you know, uh, how you, you add value so you can have the confidence to hold [00:21:00] price. And the second thing is, is to understand how procurement actually operates. The difference between, you know, procurement and purchasing, for example, and, and what are their goals and, and how do you, if you understand the life of a procurement person becomes a lot easier to negotiate with them in good faith as well as to understand, you know, where they're gonna just attempt to drive you down in price.
So if you understand the four quadrants, and if you understand, and if you're subject to RFPs, understand the different types of RFPs. If I, now, if I couldn't Marc Marcus, maybe take a moment and just talk a little bit about the four, the four different RFPs. Because again, this is a, this is a subtle, a subtle, a subtlety, but again, it's something that, you know, comes across to many of your listeners.
There's four different types of RFPs and we outline these again, in, in, uh, in the seller's challenge. In the chapter we wrote on winning what I call these beauty contests, you know, or RFPs. And the first RFP is what we call the A fair RFP. And this is one where the [00:22:00] RFP is really identifies the specifications and the requirements that are essential for the customer to meet.
And so that's where everyone is on a fair ground. You know, it was a fair, it was written in a fair and equitable way for all suppliers. The favorite RFP is the second type. It's written in a way to favor one or more suppliers. And so typically this is where you or I might have had influence with that particular supplier in writing the actual RFP that they're gonna submit and put out the fake RFP is really, the customer is happy with you as a vendor, but you may have had great satisfaction and loyalty scores, but because of some governmental or, or regulatory or industry standard or a company standard, they've gotta send an RFP out for everyone.
And so we see that quite often. And the last one is what I'd call the forced RFP, and that is where the company, again is very happy and satisfied with you as a provider. , but procurement just simply uses a [00:23:00] tactic to say, well, look, let me, maybe I can put the fear of God in Tom or Marcus, you know, by issuing an RFP.
And instead of giving us a price increase, they'll actually give us a, a de a price decrease. And so when you get an RFP part of that process is to understand what type of R f RFP are you actually dealing with, and that gives you some direction as to how you want to go and handle that RFP going forward.
Can you give some insights into what they are measured on, what the risks they are trying to mitigate and given their seat at the table with the board, their strategic pressures?
Marcus Cauchi: Okay. So you've touched on understanding what drives procurement. Can you give some insights into what they are measured on, what the risks they are trying to mitigate and given their seat at the table with the board, their strategic pressures so that we've got a better understanding of where you need to prepare?
Kind of research you need to do and the runway, um, that's required in order to establish the relationship, uh, with procurement, um, [00:24:00] so that you're not just turning up on the day to, uh, be beaten up.
Tom Williams: Yeah. So let me, let me kind of say this in a couple of different ways, cuz there could be some procurement professionals listening to this as well.
And that is, you know, there's a difference between procurement or, you know, and, and, and, and strategic sourcing and purchasing, you know, and the higher up that you get, you know, purchasing typically is just process and paperwork, right? They're, they're issuing POs where you get a, you know, procurement and strategic sourcing.
It's much more strategic where they're actually looking at spend management, you know, they're looking at what their demand is, uh, for a quantity of product or service that they're gonna need to buy. And so they're taking a much more holistic approach and the higher up in that, that food chain that you go. They're dealing more strategic of how do I help the cust our, my company, actually deliver measurable financial results, right?
And so part of that strategy, when they look at, one of the things [00:25:00] you wanna look at is, well, a and ask is, well, how is procurement? What's your dashboard look like? How are you being evaluated, you know, on a day-to-day or, or, you know, a month to month basis? And typically, you know, the categories, you know, drop into, you know, a few different categories.
You know, one is cost metrics. So a good example of that is, is you know, how much spend is under management. In other words, you know, you or I as a department director have rogue spending that doesn't come under procurement, that you and I sign off on something and we, we allow a relationship with a vendor and they never get to purchase it.
We're seeing much more of that going away and more of it being consolidated under that procurement professional. So they'll look at spend management under spend, under management. They'll look at, you know, savings that have been realized. In other words, they've talked with you or I as a vendor and they've driven down some price.
You know, they'll look at quality metrics, you know, when one of the quality metrics is, is, is how do you perform as a supplier. But [00:26:00] they'll also measure, you know, internal client satisfaction, their constituents that they're providing, buying the product or service for. Are they satisfied with what you, you've given them?
They'll look for, you know, service metrics, you know, things like on time delivery, things like that. And they'll look at, you know, operational, you know, metrics, you know, and typically one of the operational require, uh, metrics will be what's the return on investment that procurement is actually providing to the organization.
So they can go to the C-suite and say, here's what we're doing for you. And so I think those are all different types of metrics that are commonly used, Marcus. And again, it comes down to, you know, the sales reps understanding more about who it is that they're dealing with, typically where you think about all the training that's done.
And most organizations, it's all around the training is, well, how do I get by a gatekeeper? How do I deal with the person who's going to use their supervise, the use of our product, you know, that user, [00:27:00] we don't spend enough time talking about procurement because you know, everybody wants to go around procurement.
And that's been kind of the strategy. I think for most sales professionals, whatever you do, don't go to procurement. Go around them and you know, and that strategy can work, you know, in a lot of situations. But if you're dealing with larger and and bigger organizations, people like Apple, Google, whatever,
you're gonna start with procurement or you're gonna end up with procurement and if you're not working with them in the right way.
Marcus Cauchi: Okay, so thi this is really about developing a strategy to become the vendor of choice or a vendor of choice. Very often they've got preferred supplier lists and certainly when I was in recruitment, we were frequently told we can't or we won't do business with you because you're not on our PSL.
Um, if you wanna get onto a preferred supplier list, how do you go [00:28:00] about doing that in a way that is efficient and effective? Doesn't end up falling foul of their internal policies and rules, but allows you to position yourself. Cuz I, I got on a few preferred supplier lists in my day. Um, but I remember back in those days I didn't know what I was doing and as a result, I got on at ludicrously low margins.
And that's not what any of our listeners want. So how, how do you make sure that when you are assessing the opportunity, it's, first of all, it's gonna deliver good business? And secondly, that if you've spent, and I, I remember, uh, working with a client, you'd spent over a hundred thousand pounds getting onto a preferred supply list, and she'd been on, on it for three years and never got a senate, uh, a penny.
How do you preclude that from happening and how do you assess whether it even makes any commercial sense to pursue getting onto a PSL?
Marcus Cauchi: So how do you pre, how do you preclude that from happening and how do you assess whether it even makes any commercial [00:29:00] sense to pursue getting onto a PSL?
Tom Williams: Yeah, that's a good question. You know, uh, oftentimes what I see in that situation you just described is what I call a hunting license, right? You were, you were given a hunting license to by, by virtue of the fact that you were put on an, as an approved vendor, right?
But that doesn't mean that, all that means is that you're an approved vendor. You still gotta go to those people that specify your product or, or service to be used and sell them on it, on the value. So step one is, you know, is become an approved vendor, but really the real selling is, is done as with those users that are gonna use or supervise, you know, your product or service and, and show them the value that you, you provide.
You know, and part of that, you know, it, it, it could be a niche strategy. You might have to, uh, to start small and get, try to get a, your foot in the door and get a, you know, and get a little bit of, of business and then what I call land and expand, you know, land with land within that account in some fit form or fashion.
And then expand like mad because you really [00:30:00] provide great quality service. You know, and value. And that comes down to, you know, asking a lot of questions. You know, what's the outcome they're desired that they're looking for, and, and what's the KPIs that they're measured against, and how do you impact those, right?
Showing them there's a better way.
Marcus Cauchi: Okay, so this therefore indicates that you need to put some thought into where they are as a bus, what they're trying to achieve, the direction that they're headed. You need to understand all the different moving parts within the organization. Who the key stakeholders are influencers, recommenders, specifies technical buyers, user buyers, financial buyers, decision makers, ultimate power.
You need to understand the dynamics that are going on in procurement. You need to understand the different collective shared pains that are going on within the organization. You need to understand the competitive landscape in which they operate, and you then need to be able to bring all this together.
[00:31:00] And have conversations with those key stakeholders along the way so that they recognize you as being a player, not somebody who's just coming along, peddling product, which pushes you down into that bottom lefthand, quad corner of the quadrant.
Tom Williams: Yeah, that's fair. If it's in, at the end of the day, there's really two aspects to sales, right?
One is, is you know, if you developed a strategy to win the business, and the second thing is, do you understand how your customers buy? You know, and a lot of focus is put on strategy development. Very little work is, is being put into understanding how customers buy. So it's all, you know. Well, a lot of what is taught, you know, in methodology is about strategy and a lot of the strategy is built around manipulation.
You know, and what we really need to be teaching salespeople is strategy's fine, but the strategy is all about you, right? And what you're gonna do to win the buyer's business. But you really have to be focused like a laser beam on as how do [00:32:00] customers buy, what are the steps that they go through in order to make an informed, intelligent decision?
And then how does your strategy overlay to that? Right? Because one of the things that, you know, we know that, that that buyers do is they, they, they, they, they really are averse to risk, right? Risk is difficult to them, right? It is difficult for them. And they see a change, making a change, a simple change from one vendor to another as a very risky pro, uh, risky proposal.
And so if you don't help them mitigate that, you lose.
Marcus Cauchi: It was interesting. I read or scan through Gartner's the future of selling that came out, uh, la or I sent it last week. And one of the really damning indictments of our profession is that 33% are bias. Wanted a seller free buying experience. Now, if [00:33:00] you and one of those people who's caused them to want that experience, then first of all, shame on you.
But it's really, really important, uh, that you understand that you, you're effectively redundant when that situation occurs. And I, I think what we, I've seen in many cases over the years is this push towards things like reverse auctions, where essentially there are 10, 20, 30 suppliers. For those of you who are not familiar with this and what they do, so for example, in media, um, what they'd do with the reverse auction is they would put up, uh, one opportunity and then everybody had to bid down and whoever ended up being the lowest price provider, Would, uh, then, uh, typically get the deal.
Now, interestingly enough, I worked with a printer client of mine [00:34:00] and this was quite funny. It was, it was more luck than judgment, if I'm being perfectly honest. His computer was playing up and he had to duck under the table and he didn't bid for about 10 minutes cuz he was trying to get this damn thing to work.
And he got this flurry of panicked emails from the procurement people saying, are you not gonna bid? Because he didn't reply. He got, are you sure you're not gonna bid? And then the next one, pl please bid. We want you to win this. And it turned out that the, the other vendors were Polish and Indian printers who were offering massively reduced price, but just by not bidding they ended up issuing it to him anyway because the work was so critically important to them. And another example was working with a very large media group, and we just decided the strategy was X, Y, Z company doesn't discount [00:35:00] off freight card. And that was their stock response because either they would win it or they wouldn't.
Spine of steel most salespeople don't have
Marcus Cauchi: And by doing that, interestingly enough, they still ended up winning the business. So you have to understand, if you've done your research and you know how valuable what you are doing is to the end customer, then you can plant your feet. And then you need that stein, uh, spine of steel. But most salespeople don't have one.
What they have is a jelly spine, uh, or a wishbone. They don't have a, a real spine. That, like you had something to say on that.
Tom Williams: Yeah. That, that gets I think what you, what you outline is a couple things. One is, is that you've gotta be willing to hold your price and recognize that you are providing true value to the customer, you know, and sell that value and not deviate from it and not let, uh, procurement drive you down.
And what that means is, is, is that if they, if all they're gonna do is just make the decision based on price and not see the value [00:36:00] provide with service, installation, training, whatever it happens to be, then, then they're not the, perhaps not the right customer for you. And you've gotta be willing to walk away from that business because again, if you go back to the different types of RFPs, it's procurement's job to ask you for a discount.
And if they don't do it, it's almost procurement mal practice. So you have to expect that going in and you have to have a backbone that you're gonna negotiate, you know, in good faith. But you know, you know, there's nothing wrong with saying, I've given you all my best price. And here's why I believe it's the, it's the gonna provide the value that you need and then just be quiet.
You know, use strategic silence, you know, and, uh, and let them think through, you know, their, their thoughts and make a decision. I think the, that's an important point for, uh, for salespeople to, you know, to do, and not just cave Avon price, because this procurement's job ask you for a price discount. I mean, that's how they get, many of them get compensated.[00:37:00]
The second thing is you've gotta understand from a strategy point of view, how is procurement gonna make a decision? It's not always just based on low price. They've got some type of scorecard that they use, especially for large capital purchases, you know, and they'll have a lot of different metrics in there as to how they'll grade different clients.
You know, it could be a number of years since you've been in business. It could be, uh, recognition, it could be ease of use of the product. You've gotta understand what's that criteria. And then how is that criteria weighted? Because price may only be, price may be a, a key criteria, but it may only be 10 or 20% of the total criteria.
So you can hold your price because you're very high in all the other categories. So part of that is, again, part of your negotiation training that's not done by most companies is, do you understand your end buyer? Do you understand the value you provide? And do you, have you sat down and prepared for that negotiation and looked at it through the buyer's eyes and how they're gonna, how they're [00:38:00] gonna judge your product or service?
How are they gonna make that decision? And if you don't ask those questions upfront, you're not being buyer centered. And that's one of the problems.
Marcus Cauchi: This is really key. I remember a good friend of mine, uh, was working with an engineering client of his, and they'd taken on this man manufacturing of this part.
But the part itself that they were responsible for manufacturing had been problematic from day one. And procurement hauled them in after four or five years of, uh, constantly battering them and, uh, you know, yelling over the table, you need to give us a 30% discount. Um, this is ludicrous. Um, this service needs to improve.
Anyway, long story short, their position at that point was, well, look, we're happy to give you the drawings and we recognize that this hasn't worked well, but we are gonna stop [00:39:00] manufacturing. At which point procurement goes into a meltdown of panic because this component was vital to the functioning of a unit that effectively kept their business afloat.
And you need to understand where your leverage is. If you don't understand your leverage, then frankly you are guilty of malpractice in your own business as a seller. You need to understand all the different moving parts and what it is that why they are buying your product or your service. If you don't understand that, then you, frankly, you have no business being in professional selling and no one wakes up in the morning saying that they want a carbungulator.
There's a reason that they've come to that conclusion that they want one, and why do they want this particular one? Why do they need it now? And if you haven't done your research, then again, shame on you because all you have to negotiate with [00:40:00] then is a discount, and that inevitably means that you're giving something away without getting something of equal or greater value back in return. And yeah, and that's not negotiating, that's just capitulating.
Tom Williams: Yeah, I agree. I agree. Whole Harley with you. Uh, you know, but again, I think one of the things is you have to know your value. You have to go and be willing to stand, stand up and walk away from a deal if you have to.
I'll give you a perfect example. About two years ago I was, I was given an oppor, I was given an opportunity through a VP of sales to do a keynote address as well as do some, uh, some sales training following day for his sales organization. We agreed on a price and uh, he said, we gotta get you sent up as a vendor.
So I'm gonna send you information over to per to procurement and they'll set you up as a vendor. and I got back, you know, I got this email that, uh, that just gave me a nine page document that to fill out. [00:41:00] And on top of the nine page document, most 83, about 95% of it didn't apply to us. Had things in there about sustainability, and had things in there about number of manufacturing locations we had, we're not a manufacturing location, you know, on and on and on.
All these, these different, these different items that had to be done. And then at the bottom of the email it said, you know, um, once you submit this, he said, I'll put you in contact with our category manager and we'll negotiate, you know, a, a much fairer and reduced price than what you submitted. So I looked at this, this, this document and said, I'm not, I'm not filling this thing out.
So I picked up the phone call, the procurement guy and the phone that had sent it to me, explained to him that we had already negotiated a price that we were coming in the nu 95% of this, uh, requirement didn't, it didn't apply to us, you know, and asked for dispensation and he was kind of rude and obnoxious on the phone with me and said, you know, it's a take it or leave it, you know, either do it or you're not gonna be provided with a vendor.
I said, no [00:42:00] problem. I'll, you know, I'll call the VP of sales and tell 'em to go find somebody else to do the work. And that's what I did. And within probably an hour I got a phone call back from the VP of sales saying, we want you, I'll take care of the procurement department. And the next thing I know I had, I, all I had was a one page document asking me who was our bank, you know, so they could do a direct deposit, you know, after the work was done and that was it.
So, you know, you have to be, but again, I had dis, I had determined my value upfront. I was negotiating with a VP of sales that had some backbone and, you know, and I was not gonna pro take, take and listen to what the procurement guy wanted. I understood what his job was as a former hospital CEO, uh, in on running a medical services business.
I understood where he was coming from. That's why I tried to explain to him that that document was for, for the contract that different types of people other than contractors, it did not apply to us. We'd be happy to [00:43:00] provide the required information, but, you know, all this other nonsense that they had on there just didn't apply.
Uh, and we didn't dispensation, but he, all he wanted do was follow policy and it just, we were at logger jabs. So again, you've gotta be willing to walk away from a deal. If it doesn't meet your, your near knees, you just can't. Capitulate that document probably would've taken me three hours to fill out if I'd have gone and done it, who's gonna pay for that?
Marcus Cauchi: Well, you've touched on something really important here, which is that if you don't understand what the value of your time is, then these pursuits can be incredibly expensive. Corporate visions have done some really interesting research. They analyzed the outcomes of every sales cycle in 300 different CRMs, so that's a shed load of data.
And what they found was that 60% of the buying cycles that were started ended up in the status quo. So the first [00:44:00] thing you need to do is establish, is this even a real opportunity? If it's not, then you need to bug out early. Of the remaining 40%, 29.6 went to the vendor that was able to de demonstrate significant value that justified making the change, moving away from the incumbent solution, able to create enough points of difference between them and everybody else, including the status quo. Was able to demonstrate the value of changed versus, uh, staying stuck and was able to mitigate against the anticipated regret and blame of the 10.4% that was left over. That results in a one in four win rate, which means that you have a 2.6% chance of winning. Now, on average, that means you've got somewhere between a one [00:45:00] in 25 to one in 38 and a half times sales cycles.
That will result in a win for you. Now, when you consider what the cost of pursuit is, win or lose, you better be prepared because if it was your money, I'm pretty sure you wouldn't be spending it particularly on, you know, where, where you have a one in 25 chance of being able to, uh, in fact it's, sorry. So a near a one in 30?
Yeah, it's one in 38 and a half chance of winning. So you better be prepared. You need to have done your research. You need to have done your planning. And my advice is this, start prospecting within an account about two years before, if you're going for these enterprise deals, start prospecting 18 months to two years before you intend to really engage in a sales conversation.
Make sure that you're building those relationships so that you're going deep and [00:46:00] wide within the organization. You've done your research so you understand why it is that they will be ready to buy at a particular point. Now, in the conversation that you and I had with, uh, Jill Robbins, something really interesting came from, uh, Jill as well, which was that the bulk of these problems that enterprises experience are being lobbed over the wall to procurement.
And they're the ones that are starting to see all these different patterns, but they may not necessarily recognize them in the same way that you as a specialist vendor will do because they're seeing all these point problems and everybody's just chucking stuff over the wall at them. And so the opportunity to partner with procurement by, first of all, understanding how they're measured, what their strategy is, what their priorities are, what the board is trying to have them achieve, but also [00:47:00] thinking way ahead.
And this is what the best vendors and the best enterprise salespeople are doing. Sat with their buyers for months and months and months, thinking about what's coming down the pipe, what the competition is doing, what the trends are in that marketplace, and they are building those relationships. So when they are ready to engage and they're ready to switch on the power, then everything is lined up.
And this again, requires a very different mentality from management and from leadership because you have to play the strategic long game. But again, so much, uh, nowadays seems to be driven by quarterly reporting, quarterly revenue targets that nobody spent invests that time in that long term approach.
Other point that I'd like to build into this is that you as sellers should be aligning yourself very closely with [00:48:00] your marketing team. And the two should be working hand in glove in total concert so that when you are engaging, you are having the right conversations with the right people about the right stuff at the right time in the right way, and you are coordinating.
Tom Williams: Yeah.
Your thoughts in terms of the misalignment within vendor organizations?
Marcus Cauchi: So your thoughts in terms of the misalignment, uh, within, uh, vendor organizations?
Tom Williams: Yeah, I, I think that there's, um, there's three things, three a couple things that we do to try to mitigate, you know what I call that, that misalignment within organization. One is, is have we determined upfront what is the cost of inaction, right?
In other words, the difference between the current state and the future state, where they wanna be in terms of outcomes. And we'd understood the root cause of why there's a problem, opportunity, or threat that they really need to address. And do we know the owner of that problem, opportunity or threat, you know?
And, [00:49:00] and that then leads into, okay, what's the organizational priority to do something different? And also who are all the different people that are involved, you know, in making a decision or that this can touch that, you know, this decision touches. Once you do that, the the next step that we try to do with our clients is develop what we call a collaboration plan or a mutual action plan.
And its basic function is, is, you know, is very simply that here's what I need to do to help you achieve the outcomes that you, you deliver, you want delivered, and here's what you need to do from an organizational point of view. So typically I'll give them, you know, kind of a straw man and say, here's six or eight major milestones for the couple of milestones underneath that, that, you know, and, and working with people like you in the past.
You know, because, because remember, many of your buyers have never bought your product or service before, and they're looking to mitigate risk and say, here's, here's what we, how we, we've helped other organizations, other people like [00:50:00] you buy this type of product or service. And regardless of whether you buy from me or not, would this template be useful for you?
And we can modify it to meet your. And so that all right, right there. What that does is that it lowers the, the risk, power, you know, tolerance for people. They say, wow, this is great. This is exactly what I need. I need kind of a template or roadmap of how to go and buy this in a, in a way that will help us to mitigate risk and to get consensus built within the organization.
So that's the fir, that's another step. The third thing is, is to help them understand, if you understand all the people that are involved in this decision and how it might impact them in their day-to-day job, then what you can do is then understand, begin to understand what's the perceived risk, right?
Because risk really, you know, it, it is very basic level. Is the chance that something go, go awry, right? Something go wrong. And so risk aversion is all about, you know, what action can I take based on their [00:51:00] perception of risk in order to mitigate it? And so again, if you can understand, if you understand that, and if you probe for that upfront, you can begin to understand what are the concerns that they have about risk, you know, and what are those risks?
And then look for ways to mitigate it. And lastly, you know, the other reason we have misalignment is, is cause people don't build consensus. And so one of the things that we teach our clients to do is, is not only how do you, we teach your sales rep how to build consensus, but we teach your sales rep how to work with that mobilizer, if you will, within the organization.
That individual who's trying to create change in a positive way for their organization that drive better results. How do we teach that person if we can't be the, be the, the individual to provide the con, kind of coach the consensus we coach him, him or her, so that they can build consensus. All of that builds alignment.
And if you stop and think about it, what it [00:52:00] does, you know, for all of us as sellers is it eliminates ghosting. Number one, where people, you know, just stop talking to you because wait a minute, you can sit back, I can go back to somebody and say, wait a minute, Marcus, in order to achieve the outcomes that you wanted, we agreed that, you know, these steps need to be done.
If we're gonna take about this much time, if we don't get this done in time, does that mean you want the the outcome to be delivered, you know, two weeks or a month later? Or do you think you're, because we make, we can't consolidate some of these steps. So it gets you, it gets, eliminates the ghosting, it gives, it promotes accountability between the two organizations.
The other thing it does, it does dramatically is it positions you as a seller in a much different way. It differentiates you by how you sell, not what you sell.
Marcus Cauchi: Absolutely. And that's really critical because end of the day, a widget's a widget. But like Tom was saying earlier on, it's really important to understand that there are other criteria than price.[00:53:00]
What I would suggest is I, I've written an article on something called PICOS, which everybody needs to be aware of. It stands for price improvement and cost optimization strategy, and it was developed by the guy who used to be Walmart's head meat buyer. So you can imagine the, the milk of human kindness flowing through his veins, dealing with abattoir owners.
And he went to General Motors after that where he developed this process. But it's really important to understand the games that people are likely to play with you, but also to mitigate against those by bringing massive controvertible value so that, uh, people recognize that you are something other than just a commodity provider.
If you behave and think and act like a commodity provider, you deserve to be treated like. If you act and behave and think like a professional, then you will get treated differently. And that also requires, you know, strong [00:54:00] spine and guts. No one pays us big bucks because it's easy. They pay us big bucks in sales because it's hard and it's important.
Sorry, go ahead.
Tom Williams: Yeah, yeah. You know, it's interesting, Marcus, you know, buying this, buying this change, you know, and everybody understands that there's more buyers involved, there's more information on the internet, et cetera. What's really deficient right now, in my opinion, with, with most of the methodology vendors is it's all, it's all about how to, you know, developing a strategy for how we sell.
You know, it's all seller centric as opposed to being buyer centric. Yeah. You know, we don't know. We, most sales organizations don't know enough about how customers buy. They really don't know. They don't know how to identify and mitigate risk. They don't know how to identify and quantify the cost of action and the ripple effect that it creates by understanding who owns that problem, what's the organizational priority to do something about it, who are the other people this [00:55:00] attaches? They don't know how to mitigate risk.
And they certainly don't teach and build consensus. And those are fundamental concepts today that are driving sales decisions. And what's interesting to me is, is why none of that's been done. Because when you look at status quo or that no decision rate, it's been a Hoover in any way, you know, depending upon which study you read, it's either pretty consistent around 22 to 24% or about 40% depending upon, you know, the source that you read.
So you sit there and you say, if that, you know, if we've done all this training and it's supposedly been all this effective for all these years, why aren't we moving the needle on no decision? Something needs to change. And I think what's happening is, is buyers are changing. And sellers just aren't adapting to that buyer's new environment in a holistic way.
And it starts with strategy and understanding. As I said earlier, now, you can't just develop a sales strategy. You've gotta understand how your customers buy.
Marcus Cauchi: I still think that we have to [00:56:00] engage this conversation at the leadership level. The training, the way people in leadership, in businesses and vendors perceive training is that it's, uh, more often than not, it's a one and done feed them from the war, the fire hose, it's not properly reinforced.
Managers are not doing anywhere near enough training on the job, training ride alongs or coaching, and they, too few people from the vendor organization are speaking to their customer. Marketing doesn't speak to the customer. Executives rarely speak to customers. Legal doesn't speak to legal marketing, doesn't speak to marketing.
Operations doesn't speak to operations except at the points where we're trying to take money outta their pocket or we're going back to take money outta their pocket again. And you, you see this sort of, uh, drive-by shooting mentality in many organizations. [00:57:00] And then I look at the top companies, the companies that are absolutely streets ahead of everybody else.
And you have the VPs and the CEOs and the CXOs. You have marketing engaging, all of these people, engaging with the customer. They have regular accountability. They not only create consensus, but they create a, a culture of partnership. Between them and the end customer, but also with their partners when they're selling through third parties.
And increasingly what I'm seeing, particularly as technology gets more sophisticated, is, uh, this push towards coopetition. Now you look at Microsoft Fuel screen tablet, they went to Google for the Android technology to, uh, build, uh, build it upon because they knew that actually their biggest competitor in the marketplace is better at this stuff and it delivers a better outcome for them [00:58:00] and the customer.
I think if one was cynical, one might also suggest that, uh, it's allowed both the organizations to collect and surveil their audience much more effectively. Because if you've got a, a tool that people cannot do without, like the mobile phone or a tablet, then you capture all this brilliant data. And if you share that information, then both of you grow.
But that would be the cynic in me. Uh, so I'm gonna put him to sleep for a while.
What advice would you give to your 23 year old idiot self?
Marcus Cauchi: Tom, we've come to the top of, uh, uh, the hour. What advice would you give to your 23 year old idiot self?
Tom Williams: Oh, believe in yourself. And don't be afraid to, uh, to take some risk, you know, uh, with your career.
What books would you recommend that people read?
Marcus Cauchi: Okay. What are you, what books would you recommend that people read?
Obviously you can, uh, you can plug your own if you like, cuz they're both very good.
Tom Williams: Oh, you're gonna, you're gonna get me in all kinds of trouble here, Marcus, because you know, all the, just about all the podcast, uh, good number of podcast [00:59:00] hosts and, uh, people writing blogs and, uh, doing videos and writing books are, are all personal friends of mine that, uh, and I've read just about everybody's book, and you're gonna get me in trouble here by pointing out a couple of them.
You know, I think there's, there's several luminaries out there that people ought to, to follow. Number one is if you're not following Mike Weinberg in his books, uh, you're doing yourself a a disservice.
Marcus Cauchi: Absolutely.
Tom Williams: I would, I would say Anthony Iannarino is another one. Jeb Blount and Mark Hunter. Those are four of my favorites, but I gotta tell you that, uh, you know, I love the book that James Muro has, has written and I can go on and on.
I don't mean to just, you know, only talk about those five cuz there's several, several other great books that, uh, as well as out there. But I'd say those are, those are a, a good starting point. And then if you get into the, into, uh, readers want specific recommendations on other areas, ask 'em to reach out to me and I'll be happy to provide, uh, [01:00:00] uh, some thoughts.
How can people get a hold of you?
Marcus Cauchi: Excellent. So, Tom, tell me this. How can people get a hold of you?
Tom Williams: A couple different ways. Uh, Marcus, I always love to con, you know, connect with people on LinkedIn and then hopefully, you know, end up having a conversation. And, uh, it's not about selling anybody anything. It's really about me expanding my learning, you know, and knowledge about how they're, uh, their selling environment and what they're doing, what their challenges are.
But, uh, twilliams@strategicdynamics with an S firm dot com is my email, twilliams@strategicdynamics firm dot net dot com. They can also, um, connect with me myself. My cell is 9 5 1 5 1 15 8 1 5 9. That's also on my LinkedIn profile and on our, and on our website.
Marcus Cauchi: Brilliant. Tom Williams. Thank you.
Tom Williams: Thank you very much, Marcus.
I enjoyed being on, being on your show. Best of luck to you.
Marcus Cauchi: Thank you. This is Marcus Cauchi signing off once again from the Inquisitor Podcast. If you found this useful and [01:01:00] insightful, then please like, comment, share, and subscribe. And if you think you'd be a good guest or you'd just like to get in touch, then please contact me either through LinkedIn or via my email firstname.lastname@example.org.
And in the meantime, stay safe and happy selling. Bye-bye.