Reciprocity and Inbound Marketing

How can you get your message out in an insanely message-cluttered world?

Major media are re-organizing and/or in free-fall; new social media are emerging weekly. Should you blog, buy ads, buy an email list, publish a book (and if so, self-publish or not?), do podcasts, hire a publicist, jazz up your website, buy Google ad-clicks, devote resources to PR, hire an SEO specialist, collect 10,000 twitter followers?

It sounds clichéd, but it’s probably true: never have there been so many options for the would-be marketer. And never has it been so hard to evaluate the best solution.

Into this world comes a new solution—inbound marketing—which turns out to be based on some tried-and-true principles. How did we forget them in the first place?

The Challenge. There’s this thing called spam. And we have developed spam filters to fight back. Some of those filters exist at the email client level, others at the site or host level.

The concept of filtering, however, is not unique to email. We also have do-not-call lists, government-mandated ways of opting out of unwanted telemarketers pursuing us during the dinner hour. Caller-ID is a popular telecom feature for precisely the same reason—it gives the phone-answerer power over the phone-caller.

In the television world, the VCR allowed time-shifting and rudimentary editing—both ways of avoiding the advertising that funded the US model of television programming delivery. TIVO was an evolved technology for doing the same thing, forcing cable TV to respond in kind, carrying with its signal the means to avoid watching the commercial uses of that same signal. Podcasts do much the same for audio content.

The common theme is that media users—aka ‘consumers’—have increasingly gained the means of shutting out marketers. Marketers have upped the ante—sophisticated email blasts, product placement, infomercials—but consumers have arguably gained the upper hand.

What’s a poor marketer to do?

A New Answer: Inbound Marketing.

People are still buying—cars, iPads, restaurant meals, accounting services. The GDP may be slower-growth, but the decline in the power of media is not going to stop consumption itself. The question is: from where will people get their information and recommendations?

An increasingly common answer is Inbound Marketing. If that term is new to you, here is Wikipedia’s (as of March 2011) definition:

Inbound marketing is a marketing strategy that focuses on getting found by customers…related to relationship marketing and Seth Godin‘s idea of permission marketing.

Or, to put it more prosaically—we increasingly get our information and advice from those we trust. Or at least, from those we allow into our Facebook, LinkedIn, Twitter, no-spam email addresses, YouTube and Feedly lists. All else need not apply.

Inbound marketing means being invited in to the consumer’s living room, rather than continuing to knock loudly at the door as a stranger.

Sounds good, of course; but it begs the $64,000 Question: How Do You Get Them To Invite You In?

An Old Principle–Reciprocity. Why It Works.

The concept of Inbound Marketing is still evolving; one of the better discussions is by Hubspot Marketing, a highly successful practitioner of the approach. They tend to describe it in terms of recent technological innovation.

Third Tribe Marketing and Chris Brogan highlight something deeper: if you do things for other people, they tend to return the favor.

This is no random insight. Psychologist Robert Cialdini has for a couple of decades now been talking about reciprocity as the number one driver of influence among human beings. The generic form of reciprocity is:

If you do X for me, I will do Y for you.

This generic formula covers a multitude of human behaviors, from illegal monopolistic tie-ins and Mafia agreements to the rules of social etiquette. And despite a few decades of fixating on human behavior as solely driven by the rational pursuit of economic self-interest, the reciprocity principle is alive and well in business.

Reciprocity is simple: do good things for customers, and they’ll do good things for you. Samples-selling is one approach to it. Giving away a great diagnostic tool is another, the approach HubSpot takes. Complimenting and publicizing others has done wonders for Chris Brogan.

Reciprocity in inbound marketing is old wine in new bottles. That’s not a knock; good wine gets better with age. And reciprocity has a great lineage.

Dale Carnegie preached it; his number one to-do on the list of making people like you is—“become genuinely interested in them.” And the rest of the book is more of the same.

Zig Ziglar, the King of Cornpone and a great philosopher of success (and the best speaker I ever saw), puts it this way:

If you go looking for a friend, you’re going to find they’re very scarce. If you go out to be a friend, you’ll find them everywhere.

What Ziglar says precisely illustrates the paradoxical quality of trust: the best way to sell is to stop trying to sell; the best way to convince someone is to stop trying to convince them; the best way to make a profit is to let it be the byproduct of customer focus, rather than the ultimate objective.

These seeming paradoxes make perfect linear sense, if we think of them in terms of reciprocity. Do for others, and they’ll do for you. It won’t work every time; it shouldn’t—otherwise it’d just be a tool for manipulation and self-aggrandizement. What is given must be freely given. But it works on the whole, in the long run, in large part, for both parties.

Reciprocity is a major key to successful inbound marketing.

What You Can Do About It.

How can you use reciprocity to implement inbound marketing? Here’s a baker’s dozen of things you can do:

  1. Go comment on other people’s blog postings—without using them to advertise your own material;
  2. Give away free sample analyses or diagnostics, based on whatever it is that you do;
  3. Give away free samples of what you actually do or sell;
  4. Write a blog about the subject matter of your business—share your best thinking;
  5. Invite other writers in your subject area (sometimes known as competitors) to guest-post on your blog;
  6. Review books or interview authors of interest to your customers;
  7. Offer to do occasional free talks or speeches to industry or customer groups interested in what you do;
  8. Set up an occasional phone-in for free consultation “office hours” event—give free advice;
  9. Tweet about subject-matter and related experts of interest to your customer base—include links to their articles and blogposts in your tweets;
  10. Follow the Annual Rule of tweets—12 tweets about other people’s material to one tweet about your own;

11. Recommend people on LinkedIn without being asked;

12. Do all the preceding 11 items with good intentions—to improve the lot of your customers and others, rather than solely to make money for your business;

13. If item 12 is a problem for you, go back and read Dale Carnegie and Zig Ziglar. There’s very little new under the sun.

What Your Client Really Means By Price Objecting

Most of us know in our bones that if a client objects on price, the problem is not really price. Conventional wisdom says the problem isn’t price—it’s value.

But conventional wisdom is occasionally wrong; and price is often one of those cases. To test the truth of this, just check your own experience. How often have you tried to convince a price-objecting client that actually, really, the value is quite high, a bargain, under priced for the value you get, etc. I don’t know about you, but in my experience, that has rarely worked.

The reason is: both price and value are economic issues; but price objections are usually emotional.

Why Price is Like Dating

Remember (if you’re a guy) asking out the prettiest girl in school for Friday night? If she said, “Oh, I’m sorry, I’m busy Friday night,” did you get the hint? The hint was not that she was actually busy Friday night—she was telling you ‘no’ in a kind and socially acceptable way, allowing you to pretend it was a scheduling problem.

The truth was—she didn’t feel like going out with you. And you probably got the hint; you instinctively didn’t push for Saturday. You didn’t try to respond to what was really an emotional issue with a scheduling solution,

You knew that if she had wanted to go out with you, she’d have said, “I’d love to—I’ve got a previous commitment for Friday, but could we make it next Tuesday or Thursday?”

Price works the same way. If your client says to you, “Oh, I’d like to, but that’s really just too expensive for me,” they probably don’t mean it’s too expensive They mean they don’t feel like buying that insurance from you. If you respond by trying to argue value, it’s like trying to convince the “I’m busy Friday” girl to reconsider for Saturday—it’s just not going to happen. You don’t respond to emotional objections with economic arguments.

Respond to Emotional Objections with Emotion

Instead, meet emotional objections with emotional responses. Your client just told you that they’re not interested in dealing with you, at least not on this subject. That’s not a price problem, that’s a relationship problem. And that’s a big deal. You need to quickly show that you respect them, by showing them you respect their objection—even if it was an “I’m busy Friday” kind of objection.

First—stop pushing the sale. Don’t argue value—don’t argue at all. Show that you respect the client by respecting their wishes—drop the subject. If you suspect that price is masking an emotional reluctance, then you need to earn back the right to offer advice. You do that by empathetically listening to the client.

You might try something like this:

“Too expensive? Oh, OK. Sounds like maybe this might not be the right thing for you. I might have misunderstood your situation, sorry about that. Would you mind backing up and going over again with me how you see your needs in this area?”

Your objective here isn’t to see what you missed the first time; it’s to make sure that this time, the client feels really heard, really listened to. They may or may not change their mind—that’s not the point. The point is for you to leave them feeling that you care about them and their needs, and that you’re committed to helping them rather than selling them.

If you can do that, you’ve done a lot. The client will let you know if and when they’re willing to re-engage. If they do, they’ll suggest the equivalent of “how about next Tuesday or Thursday?” and you’ll know the difference.

Why Closing Is Hazardous to Your Sales Health

If you’re focused on closing sales–then you are most likely hurting your sales. You need to stop closing–so that you can start selling.

The Implication of Closing

You may have been trained in various kinds of ‘closes’—the assumptive close (“shall I start the credit check now?”), the either/or close (“would you like that in red or green?”), and many others. What all “closes” have in common is they are all ways to persuade the buyer to do what the seller wants.

And “persuade” is a nice word. There is a whiff of coercion, trickery, and manipulation about the term—at least from the buyer’s viewpoint. The simple truth is: closing is not buyer-centric–it’s seller-centric. And all of us as buyers know what it feels like to have another person try to force their will on us—and deny it’s happening even while they’re doing it.

Closing sends the wrong message–that you are getting your customers to do something you want them to do. This works with some people in the short run; but with very few people in the long run.

Here’s what you want your buyers to feel; what closing actually conveys; why we focus on closing; and 3 things you can do to stop closing, and start selling.

You Want to Convey Trustworthiness

Nothing—nothing at all—makes a buyer feel like buying more than the feeling that they can trust the seller. And the best way to be trusted is—to actually be trustworthy. That is not a vague concept: trustworthiness means four precise things.

1. Credibility. The credible salesperson conveys, “I am smart–and I will share my knowledge with you.” The effect is to create a confident buyer.

2. Reliability. The reliable salesperson is conveying, “You can depend on me to do what I say I’ll do; I’m a person of integrity.” The effect is to encourage reliance on the part of the buyer.

3. Intimacy. A salesperson who scores high on intimacy conveys, “You can share information, concerns and questions with me; there are no stupid questions, and I will never abuse your confidence.” The effect on the buyer is to genuinely share their concerns—all of them—with the seller.

4. Other-orientation. An other-oriented salesperson conveys, “I am genuinely interested in and curious about you; I’m in this for you.” The effect on the buyer is to think, “This person has my best interests at heart.”

If a customer feels all those things about you, they will trust you. And if you’re giving them honest advice that truly is for the best of them—they are very likely to buy.

Closing Says You Are Untrustworthy

Closing generally conveys the opposite of trustworthiness.

Credibility: Closing says, “I am smart–and so you should trust me when I tell you what to do.”

Reliability: Closing says, “You can depend on me to always come back around to asking for the sale.”

Intimacy: Closing says, “You are taking up my valuable time by asking unnecessary questions, to which I know all the answers—and I’ve already told you.”

Orientation: CIosing is not other-oriented, it is self-oriented. It says, “I am focused on my best interests–which are to get you to buy. Now are we ready to close yet?”

People who are ‘closed’ may or may not buy; but they won’t be happy about it, and they’re less likely to buy again. And they’ll tell their friends how they feel.

Why We Get Obsessed with Closing

We want to control our outcome, to increase our success. This is perfectly natural, and certainly common. But there are two problems with it:

1. Most people don’t like to be controlled (do you?)

2. Most of those who do get controlled will resent it and not re-buy

They’ll also tell others you’re not trustworthy. And nowadays, that means email, facebook, and twitter. Your reputation can degrade like wildfire.

Three Ways to Stop Closing, and Start Selling.

1. Stop being attached to the sale itself. Accept that you may not get every sale–including this one. Instead—focus on doing the right thing for the customer, whatever that may be. Learn to trust that doing so will gain you at least as many initial sales, more repeat sales, and far more referrals. Not to mention a reputation of trustworthiness.

2. Understand where the customer is coming from. Don’t answer questions or “handle objections” until the customer really feels you understand their concern. Focus less on the answers—more on empathy and understanding.

3. Don’t say your favorite closing phrase. Instead, just ask: “What do you want to do now?” Then do what they say.

You’ll like the feeling of being trusted. And it sells.

When to Ditch the Elevator Speech and Take the Escalator or the Stairs

You know the “Elevator Speech.” It is the hypothetical answer you would give if you were alone in a high-rise building elevator with the CEO of a potential client. Presumably the CEO says, “Tell me about your company,” or “Tell me why we should work with you.” Your presumed answer—sometimes called “the elevator pitch”—turns out to be a good solution in search of the right problem.

There are situations where a 30- to 60-second answer to those questions is exactly what’s called for. But there are other situations—far more, in fact—where different approaches are called for—let’s call them the Escalator Speech and the Stairs Speech.

The Standard Elevator Speech

Try searching “elevator speech.” Depending on whom you read your elevator speech should last 30 seconds—or maybe 120. It should answer the question, “What do you do?” or maybe it should just make an impression. It should—or shouldn’t—be a sales pitch. It is applicable to a job hunter, as well as to an entrepreneur in search of venture capital.

One size does not fit all, of course. But there is one simple question to help you craft your response speech, and it is this: What does the other person really want from you?

There are three possible answers, each requiring a different “speech”:

  1. Do I want to be involved with these people?
  2. What can these people do for me?
  3. Who are these people, and do I care?

Let’s examine each.

Do I Want to Be Involved with These People? The True Elevator Speech

If you’re an entrepreneur pitching a venture capitalist, there is a definite frame of reference established simply by naming those two roles. A venture capitalist’s key question is, “Shall I invest more time, and ultimately more money, in developing an investor relationship with these people?”

Answering that question is part of what venture capitalists do. They deal in business models, competitive analyses, concept descriptions, and corporate story lines. A snappy 60-second comprehensive, high-talk, low-listen pitch is very right—if you’re an entrepreneur in an elevator with a venture capitalist.

What Can These People Do For Me? The Escalator Speech

That question rarely comes up in other corporate roles. A line executive doesn’t spend much of his time interviewing consulting firms or deciding on systems or communications vendors. Even an HR executive doesn’t spend a lot of time interviewing candidates.

If such clients are approached by someone in a captive audience situation and forced to endure a 60-second speech—no matter how insightful or clever—their reaction is likely to be one of resentment. They didn’t ask to be informed about the benefits of a relationship. If anything, it feels presumptuous if a consultant or vendor starts to talk about one. If they’re with you on a trip to the 46th floor, this is when they hit the 26th floor button and say, “Oh, I just remembered, I have to…”

And yet consultants and vendors are often encouraged to think about the “elevator speech” concept—to emulate the entrepreneur—and begin telling their “life story” to a stranger who hasn’t invited a relationship conversation.

Meanwhile, the client is stuck back at something like, “Relationship? Slow down—I don’t even know what you can do for me. Let’s not put the cart ahead of the horse.”

This is the question more commonly being asked in a happenstance business encounter. The client is not interested in an investment relationship, but they might be interested in a simple services relationship. It depends on what we can do for them. So, answer that question. Do it with what I’ll call the “Escalator Speech.”

The Escalator Speech should be limited to about 20 seconds and culminate in a question. The rest of the time is entirely up to the client—who can, after all, choose to invite you to continue the conversation on whatever building floor they choose.

Your “speech” needs to sound something like this:

Mr. Jones, I’m James Smith from XYZ Associates. We’ve worked with a customer of yours, ABC, and I’m acquainted with Janice Johnson of your firm. We work to improve trust levels in our clients’ sales processes. It’s always seemed to me there’s untapped potential for improved customer relationships in your insurance business by changing the way benefits payments are transmitted. Do you see it that way too? Why isn’t there more personal contact at that critical point in the industry’s business process models?

Then shut up and listen for the rest of the escalator ride. There are two possible outcomes to this conversation, and both are good:

  1. The client says, “You’re right, it’s a constant source of amazement to me that we don’t do a better job on that. Let’s talk some more about how you’ve gotten organizations to do that.” Good conversation ensues.
  2. The client says, “Ah, that’s what many people think, and it sounds right at first, but there’s a hidden reason it doesn’t happen this way, and I’ll let you in on it. The reason is….” Even better conversation ensues, because you learned something, and the client had the pleasant experience of giving a smart person an even better education. They get to look smart—always a fun thing. Your original insight doesn’t have to be right; it just has to be intelligent and thoughtful.

The Escalator Speech starts off by giving the bare minimum of information required for social comfort, then it offers a piece of free insight to the client, ending with a genuine question. This gives the client total control over whether to take the conversation further.

Do I Care Who They Are? The Stairs Speech

Both the elevator and escalator speeches happen in a business context—a semi-random event within a non-random environment. But other situations arise as well. You sit next to someone on an airplane who turns out to be a potential client. You go to a neighborhood cocktail party and run into someone who works at a potential client organization.

In such a situation, even an escalator speech is presumptive because the occasion is largely social. The impression you make here is based first on obeying the social roles that govern the situation. And rule number one is you don’t get deeply into business.

In this situation, if someone says, “What do you do?” they’re not inviting you to assess their business, much less pitch your own. And remember, they probably don’t care much about your answer. Their question was a social nicety; they didn’t come to this event looking for business contacts.

Here, you need to say something like this:

“I spent 12 years in consulting. I then joined a small healthcare client company as their CEO. Last year, I started my own consulting firm focused on the health industry. And you—what do you do?”

The rules of this dialogue are that it’s back and forth, and you shouldn’t spend more than 30 to 60 seconds on your side before tossing the conversational ball back to the other side. Your only business objective here is to give the client enough information to know if they care who you are. If they do care, then further discussions can be held later—exchange business cards or email addresses, and look for signs that the other party prefers to start talking about football. Follow their lead.

Let’s call this the Stairs Speech—so named because you take it one step at a time.

The next time someone says to you, “So, tell me—what is it that you do?” ask yourself what that questioner really wants to know.

  • Are they just being polite? Give the Stairs Speech.
  • Are they interested in what you might do for them? Use the Escalator Speech to escalate from monologue to dialogue.
  • Are they interested in investing serious time and money in you? Use the Elevator Speech to show you’re on top of your business and respectful of their time.

There are several ways to get up in a building, and only one involves an elevator.

Is Capitalism 2.0 a Mirage?

When Lou Gerstner took over IBM at a time of corporate crisis, he was asked if he would chart a radically new direction for the firm. His memorable response was, “The last thing IBM needs right now is a vision.”

For the past several decades, business has had a vision; one so dogmatically defined that we might even call it an ideology—the ideology of Capitalism 1.0. Now that vision has turned toxic. Many agree with Michael Porter that business is now facing a crisis of social legitimacy.

The question is–what to do about it? Does capitalism need a fundamental reframing? Or is the issue more one of execution, about getting along in broader society?

In this two-part blogpost, I’ll examine the case for radical reframing–let’s call it the search for Capitalism 2.0. Part 1 provides background and two approaches to Capitalism 2.0. Part 2 evaluates the results.

Re-framing Capitalism

One answer to the problem of business legitimacy is to re-frame Capitalism. Re-thinking capitalism is as tempting to capitalist ideologues as rethinking Marxism was to generations of socialist ideologues. ‘If “shareholder value maximization” isn’t working, then let’s come up with another encompassing business theory that is even broader than the old one, but that works. Let’s call it Capitalism 2.0.’

Two of our leading thinkers—Michael Porter, with Mark Kramer, and new kid on the block Umair Haque—are attempting an intellectual rebooting of the capitalist operating system. Porter’s concept, contained most recently in an HBR article, is Shared Value. Haque’s new book is called The Capitalist Manifesto.

Can capitalism truly be re-visioned from within? Or is it a closed system whose solutions must come from without? If anyone can square the circle, these authors can. Let’s start by understanding what they’re reacting to.

Capitalism 1.0

The full name of Harvard Business School used to be “The Harvard Graduate School of Business Administration.” In the 1950s, that name was apt. Adam Smith was rarely mentioned—Schumpeter and Hayek, even less.

It was pragmatic, non-ideological. Peter Drucker had just begun to conceive of management as distinct from administration; ‘strategy’ was an occasional term, borrowed loosely from military theorists.

In the 70s and 80s strategy went quantitative, bringing us portfolio management theory, the growth/share matrix and log-scale experience curves.

MBA consultants flooded boardrooms with models in lieu of gray hair. Consulting firms seized thought leadership from the business schools. An ideology was being born.

Capitalism 1.0, circa 1980

Around 1980, the core business ideology saw business as a corporate competitive struggle for dominance and survival. All players—producers, their customers, their suppliers, government and regulators—competed. Winning was defined financially, driven by market share, in turn driven by competitive strategy.

Economists and financial theorists joined the mix in the 1980s. One result was greater emphasis on debt, which led to junk bonds, LBOs, private equity and the S&L crisis. Another was the reign of Alan Greenspan and the Chicago School of Economics, whose contribution to dogma was the idea that markets are largely self-correcting.

As tech boomed, the public caught the bug as well. Wall Street created day trading, hedge funds and IPOs, and the public bought it.

Capitalism 1.5

By around 2006 capitalism’s dogma had become more sharply stated—something like:

Business is the value-creating engine of all society. It works best when left alone. Through creative destruction and the Darwinian efficiency of self-correcting markets, it creates value and wealth for all. All business transactions can and should be expressed in present value cash flows terms. The social purpose of a corporation is to earn a profit, and its proper goal is the maximization of shareholder value.

The dogma had held despite Michael Milken, Marc Rich, the S&L and Long-Term Capital crises, Enron and WorldCom. But then came the financial crisis of 2008.

Several items are striking. Alan Greenspan recanted his belief in Capitalism 1.X. Nearly every Chicago economist (notably excepting Eugene Fama) shifted back in the direction of Keynesian economics; Paul Samuelson says Milton Friedman himself would have done so.

The MBA Oath was created at Harvard in 2008. One of the group’s faculty advisors, Nitin Nohria, became the next Dean of HBS. He believes business needs to be more socially attuned–away from shareholder value maximization, toward broader social responsibilities.

In other words, Capitalism 1.X is under attack as a belief system. What will take its place?

The Search for Capitalism 2.0

Business strategists and economists love elegantly simple models. Many past successes have come via idea home runs—redefining paradigms, thinking outside boxes, changing game rules. Porter and Haque have made powerful attempts to do so, as follows:

Shared Value and the Capitalist Manifesto

Both approaches describe Capitalism 1.X’s failures sweepingly. They indict zero-sum thinking, short-termism run amok, and a systemic inability to link corporate benefits to social costs. If anyone needs a comprehensive statement of what’s wrong, look no further than these two works.

Each work also describes a better end-state; longer time horizons, broader collaboration, comprehensive calculations. Yet the solution, both Porter and Haque seem clearly to say, lies in ideology: in re-framing the tenets of capitalism.

Here is Haque’s version:

The industrial age’s dilemma is unsolvable if we’re still confined to thinking in yesterday’s terms…Escaping the capitalists’ dilemma requires a paradigm shift.

The outlines of an updated economic paradigm…include two fundamental axioms:

…first…through the act of exchange, an organization cannot, by action or inaction, allow people, communities, society, the natural world, or future generations to come to economic harm. [Italics are Haque’s]

Porter is equally didactic:

The purpose of the corporation must be redefined as creating shared value, not just profit per se.

The concept of shared value resets the boundaries of capitalism.

Not all profit is equal—an idea that has been lost in the narrow, short-term focus of financial markets and in much management thinking. Profits involving a social purpose represent a higher form of capitalism—one that will enable society to advance more rapidly while allowing companies to grow even more.

We need a more sophisticated form of capitalism, one imbued with a social purpose. But that purpose should arise not out of charity but out of a deeper understanding of competition and economic value creation…It is not philanthropy but self-interested behavior to create economic value by creating social value.

This all begs some pretty big questions: what exactly do we get with a new definition, a new paradigm, an axiom? Do the authors mean that the single biggest, most critical issue is to fix our thinking? Is it really necessary to have a new paradigm in order to get on with matters?

And even if it is necessary to re-think capitalism–is the re-thinking a sufficient condition for getting the job done? For that matter—can it even be done at all? Can we really stretch “capitalism” so far as to equate social good with corporate self-interest? Or is Capitalism 2.0 really a mirage, a distraction from more mundane but critical ways of changing business?

Beware of Closed Systems

Haque wants an axiom. Unfortunately for Haque, I don’t know of any organization for whom it is axiomatic that they cannot do any of the things he lists. Calling something “axiomatic” simply doesn’t make it so.

Porter and Kramer, in their treatment of Shared Value, use the word ‘must’ in a similar way (“The purpose of the corporation must be redefined as creating shared value, not just profit per se”). But the result is the same. Nobody ‘must’ do anything, as the human race perversely insists on proving time and again.

Karl Marx, in the Communist Manifesto, declared communism inevitable. Capitalism 1.5 had the same flavor. Haque’s ironic use of “Manifesto” and the language of ‘axioms’ suggest the same pull of logical necessity. But axioms are abstract, not empirical–they don’t drive action, unless someone chooses to act on them. And Porter’s ‘must’ has no causal force; it is exhortation dressed up in the words of logical necessity.

There is a beauty in such simple, powerful idea systems, a beauty well-loved by economists, mathematicians, physicists and strategists. The problem is–they are closed systems. That’s OK for math and physics. But for most other fields, once you get outside a closed system, things eventually degrade.

Inevitability Isn’t

Marx was wrong about communism’s inevitability. Greenspan was wrong about large companies’ inclination to self-regulate based on reputation. Friedman was wrong about the gyroscopic capabilities of the Invisible Hand.

If Porter and Haque believe that they have discovered an ideology as attractive, powerful and self-sustaining as those were, then we’re probably just looking at another shiny-object, perpetual-motion, too-good-to-be-true closed system.

In fact, it was our unquestioned belief in the closed-system aspect of Capitalism 1.X that helped cause Capitalism 1.X to fail. It all sounded so good that we wanted to believe it–until long after the writing was on the wall. Not for the first time, the charm of dogma blinded us to facts on the ground until it became not just overwhelming, but undeniable. We’re left thinking, “What were we thinking?” and the answer is, we weren’t. We were just believing.

The search for another compelling but unrealistic logic is likely to be equally misguided.

Both Porter-Kramer and Haque argue that systemic adoption of Capitalism 2.0 will lead to higher systemic profitability. This is certainly true. But the heart of the matter is not a systemic issue—it is whether individual companies will make decisions that are not profitable to themselves in the short term. And this is where ideology gets in the way:

What should, and will, a company do if an initiative is profitable in Capitalism 2.0 terms–but not profitable in Capitalism 1.X terms? Not every business problem is simply a failure of imagination, even if many–even if most–are. The problem of the commons remains unsolved.

I’m not optimistic that Porter can find a profit that is “imbued with a social purpose…that arises…out of a deeper understanding of competition and economic value creation.” I think that’s a circle that can’t be squared.

But it is also not necessary. The answer lies in sober thinking about how social change happens; not in a new Idea System.

Haque is most productive not when he’s offering ringing phrases, but when he’s offering examples of new business opportunities that are not only holistically profitable, but profitable as well in today’s simple quarterly income statement terms–examples like Threadless and Nike’s Considered Design.

Porter is today more famous for his early Five Forces model than for his value chain model, but the latter has probably had more impact. Similarly, his solid thinking today on clusters and the proper role of regulation may end up having more impact than his heroic effort to cognitively re-conceive competition.

There is richness in both works, worthy of a lot of thoughtful reading.

The Other Solution: Dial Back the Dogma

Ironically, it was Marx who said, “The point is not to understand the world, but to transform it.” Ideologues and dogmatists insist on the primacy of theory. Change agents are more pragmatic.

Parts of our society are addicted to dogma and ideology. Business, under Capitalism 1.X, is one; others are politics, academia and particularly economics. But it’s not the norm.

The legal profession isn’t dogmatic, apart from a general belief in advocacy. Education has many sub-currents but not one unifying theory. The practice of medicine, other than the Hippocratic Oath, is more practical than ideological.

If ideology is ultimately empty calories, then what is to be done? How else can we get to the alternate vision of business that both Porter and Haque so clearly, and rightly, envision?

First, we need to give up our addiction to ideology. What’s needed is not another intellectual home run, but a dogged effort to get better at getting along—on all social dimensions, not just those of business.

What can you do? Here are a few examples:

1. People with visible responsibility can start talking about civic and moral virtues, instead of the virtues of an abstract system which magically does the heavy lifting for us.

2. Porter, Kramer and Haque as writers–and all of us as readers–can use the rich and stimulating examples they have uncovered as a challenge to our imaginations, and a spur to creative thinking. The power of what they’ve written lies more in their examples and simple models than in the attempt at a Unifying Theory.

3. Measurements are powerful in business; many managers believe that management requires it. We can all support global attempts at Integrated Reporting accounting, combining traditional financial accounting with other socially-relevant measures. New vocabularies seriously drive new dialogues.

4. Trade associations can shift emphasis from narrow sectarian lobbying to offering education and perspective on increasing the long-term viability of their industries.

5. Business strategists and economists can look to outside functional arenas; negotiation and bargaining experts know how to integrate zero-sum oppositional positions with shared interests;

6. Politicians can rediscover bi-partisanship and compromise, rather than scorched-earth zero-sum competitive games; citizens can hold them accountable by re-discovering the same.

7. Elections and legislation are heavily controlled by corporate interests in the United States today. This is not long-term healthy even for business. Business organizations can collaborate with other groups to pursue campaign finance reform, thus putting stakeholder collaboration into serious practice.

8. Business education, mainly MBAs, can start emphasizing long-term sustainable collaboration, rather than Capitalism 1.X. Ethics courses are no good if they’re contradicted by 1.X courses in competitive strategy down the hall.

9. News media can try to stay sober, serious, thoughtful and responsible, not giving in to pure entertainment; business can play a role along with consumers in helping media resist the pull in that direction.

There is no unifying ideology; if Santa Claus can’t pull it off, why should we expect strategists and economists to do so?

But there are still guidelines.

“Be the change you want in the world.”
“The best way to make someone trustworthy is to trust them.”
“Ask not what your country can do for you, ask what you can do for your country.”
“Don’t argue over who gets the slice of the pie, focus on making the pie bigger.”
Maybe even, “Do unto others as you’d have them do unto you.”

When Gerstner took over IBM he said, “The last thing IBM needs is a vision.” The last thing capitalism needs right now is a new ideology. Business needs simply to take its seat among other social and political institutions, and to play nicely in the sandbox alongside them.

The Dirty Truth About Price

This article was first published in Entrepreneur.com

If you think you lost your last sale on price, you’re probably wrong. If you think you’ll win your next sale by lowering your price, you’re probably wrong. And even if your customer told you that you lost the last deal on price, and hinted that you could win the next sale on price, you’ll probably still be wrong if you think it’s about price.

The simple truth is price is overrated. It’s not irrelevant—you do have to be competitive. And it’s not trivial—your price does send lots of signals. But it’s overrated. Let me explain how and why that’s true, and what it means for you.

Why Price Is Overrated

If you grew up in a western economy, you’ve been bombarded with consumer messages about price your entire life. As you got older and more educated, you heard economists talk about supply, demand and price.

If you’re in a B2B business, or even a complex B2C business, price is what your customer talks about. You hear your competitors are undercutting you; you won’t get this new account unless you drop prices, and you have to address cost-cutting pressures. The talk is all about price.

The behavior, however, is not.

Customers Don’t Walk the Price Talk

In many of my training sessions, I ask attendees to envision their most recent competitive loss and tell me how often the customer said they lost on price. The answers range from 25 percent to 60 percent.

I then ask them to envision their most recent competitive win and tell me how often they won on price. The answers range from 0 percent to 10 percent—and it’s usually 0.

Think about what that means. It means that what customers tell you they do is not what they really do. It’s not that they’re lying; they don’t intend to mislead. No, what’s going on is about the relationship—or the absence of a relationship.

Price and Relationships

Put yourself in the position of a buyer. You ask for bids on widgets from Seller A and Seller B. You need good widget quality; if you have problems, you want prompt, responsive service.

Both sellers have a good product, but you feel better about Seller A—you get along with them, they seem sincerely interested in you, they’re responsive to your questions, they seem to get who you are and what your business is. Seller A is also priced 4 percent higher than Seller B.

It’s probably an easy decision to go with Seller A. The 4 percent price premium is worth it to you to sleep well at night. You might bargain them down, but you’d be willing to live with the 4 percent.

Now what do you tell Seller B? You don’t want to offend them—they’ve done nothing wrong. You want them around to bid again in the future. At the same time, you have no intention of getting into a fluffy discussion about organizational “fit” or chemistry with a losing bidder you don’t know well. What do you do?

You tell them their price was too high. It’s true enough; if their price had been 20 percent lower, you might have gone with them. And they can’t ask for data, because it would be illegal or unethical to share it. So you’re safe blaming price.

And that’s what happens. Price is the socially acceptable way of saying no. It’s the business equivalent of “It’s not you; it’s me.” It’s what you tell your suppliers the problem is. And if they don’t understand the real issue, that’s their problem.

The final proof: If the customer really did want you, but your price was too high, what would they do? They’d come back to you and say they want you, but that you have to lower your price.

Price does many things. It’s a cost to the customer, it’s a competitive signal and it’s your profit. But it’s also a signal about your relationship.

If your customer says you lost on price, odds are you have no relationship. Go work on that, not on your price. If you have a good relationship, you’ll at least get an honest discussion on price, not an excuse.

Sales Efficiency Can Hurt Your Marketing

It seems like an irrefutable truth—improve your sales efficiency, and you’ll get more sales for less cost and you’ll squeeze more results out of the same number of hours in the day. What could possibly be wrong with that?

Believe it or not, quite a bit; that’s because efficiency savings rarely come out of nowhere. Like pushing on an inflated balloon or playing a game of Whac-A-Mole, what you save in efficiency can cost you in effectiveness. Put another way, what you think you save in sales may actually cost you in marketing.

There are two main ways this can happen: One is by looking for cheaper lead generation, and the other is by looking for sharper lead qualification.

Cutting Your Cost per Lead

You can always reduce your cost per lead; just find a medium that offers lower cost exposure. Ah, but it’s not that simple. There’s a reason Mercedes dealers don’t advertise on Craigslist, and it’s not just cost per lead—it also has to do with marketing and the messages you want to send.

Buyers of a Mercedes (or any other high-end product) view themselves as very particular people. Their sense of self is reflected in a thousand ways, ranging from the restaurants they frequent to the shoes they wear—and most certainly their buying habits.

Your average Mercedes buyer may use Craigslist—just not to buy a Mercedes. How you sell is a big part of marketing who you are. You wouldn’t wear a pair of faded jeans on a sales call to a bank; it sends the wrong marketing message. Using the wrong kind of lead generation does the same thing; it sends the wrong marketing message.

Cutting Your Sales Cost Through Better Lead Qualification

Most of us get why not to wear jeans on a corporate sales call. Not nearly as many of us get how tighter lead qualification can actually hurt marketing. After all, what could be wrong with saving time, focusing on high-quality leads and quickly eliminating wasted sales effort?

Well, remember Julia Roberts’ famous shopping scenes in the 1991 movie Pretty Woman? At first, she’s snubbed by the salesladies in the fancy Rodeo Drive stores; later, of course, she returns in triumph. Those salesladies were simply doing lead qualification, screening out a low-probability sale.

You might say “What are the odds of a customer returning in a week with millions to spend?” Well, the odds are vastly greater than they were in 1991. Not every snubbed buyer will be worth a fortune, but everyone has friends—and they all have Facebook pages and Twitter handles—and they talk. A lot.

Every time you screen someone out—especially if it’s in a way that can feel hurtful—you’re poisoning your own well, taking away your own brand equity and personal reputation.

Suppose you visit a financial planner only to be politely but clearly told you don’t have sufficient assets to qualify for their advice. What would you tell your friends about that planner? Don’t make your customers feel that way.

Suppose you go to a jeweler to buy something special for a loved one, and the jeweler makes you feel cheap for not wanting to look at something far more expensive than you can afford. Would you refer your friends to that jeweler?

The truth is, great lead qualification can actually improve your marketing as well as cut sales costs. When you screen someone out, take a few minutes to explain clearly why the fit is not right (if you can’t explain why, you have a bigger problem). Offer them some free advice on where else to look, if you can. Do something to make them feel glad they came to you, even if it didn’t work out as they planned.

It costs you but a few minutes, and the impact can be huge. That’s not bad selling; that’s great marketing.

How Social Media Are Ruining Your Lead Qualification Strategy

This article was first published in Customer Collective

You may have noticed it already, or it may be lurking in background. You’ll see it soon enough.

Your traditional lead qualification methods are under attack from new social media. And that is not a bad thing: it’s a good thing. As long as you recognize it.

Traditional Lead Qualification

Traditional lead qualification strategies are based on two implicit assumptions. Firstly, that there is an unlimited number of leads. Secondly, that those leads are largely independent of each other.

The combination of those assumptions leads most businesses to think of lead qualification as an exercise in efficiency. Here’s a sample quote from one lead-qualification vendor’s website:

…your selling assets can spend their valuable time “selling” to prospects that have the need, the budgets and the necessary decision making ability to purchase. No longer will your sales arm have to waste time flailing around trying to find the gold nuggets within an inquiry pool.

In other words: the goal of most approaches to lead qualification is to get rid of those least likely to buy, in the least costly manner possible. And as long as the two implicit beliefs hold true—there is an unlimited number of leads, and they are all independent of each other—no problem.

How Social Media Changes the Game

Enter new social media. Suddenly assumption number one looks naive. It always was naive; we all knew in the back of our minds it was naive, but we could afford to ignore it. But now that you can slice and dice data about potential customers in infinite ways, the finite nature of that number appears much more clearly.

Yet the real killer is assumption two. The whole point of all social media is that they are, in fact, social. Your customers do in fact talk to each other. In a nutshell, that’s the revolution.

As I heard SAP put it a few months ago, CRM systems used to capture all the dialogue—between seller and customer. Only now, they’ve realized that was only 5% of the real dialogue. The other 95% of the real dialogue happens between customers.

What Social Media Does to Lead Qualification

Now we can see the impending collision. If your attempts at lead qualification are based solely on sellers’ efficiencies, then they are likely to be fast, impersonal, machine- and bureaucratic-driven, and low on customer sensitivity. Phone sales reps will be incented to get you off the phone ASAP, impersonal website forms are designed to shunt you off to another machine as soon as possible. Massive efficiency-driven lead qualification programs are practically designed from the outset to cut relationships off as soon as possible, keeping just a few high-potential opportunities.

But now customers—and potential customers—and and do talk to each other. And the more they talk, they more they build impressions. In the old days, the rule of thumb was that a good experience would be relayed to 5 people, a bad experience to maybe 20. In the days of social media, you can add several zeros to those numbers. And the elapsed time can be days, even hours.

Suddenly, efficiency-driven seller-centric lead qualification programs can be seen as brand-name destroyers; marketing-killers; and a fast route to downgrading the company’s reputation.

Suddenly, the old approach to lead qualification is destroying marketing effectiveness.

The New Lead Qualification

The implication is that no longer can we separate lead qualification from marketing. The way you handle potential customers is intimately bound up with the creation of the company’s image—every bit as much as customer service, or existing marketing programs.

From here on, lead qualification has to take its cue from the inbound marketing movement. How you treat people affects how they treat you—and word gets around. Lead qualification now has to be viewed in a longer time context, and as part of an integrated approach to branding, image enhancement, and demand creation.

In simpler terms: take 10-20% more time to help your leads, offer them value, make a positive impression, create future demand—call it what you will. Just don’t treat them as unlimited, unconnected, blank faces to be harvested; how you treat them is how the world will treat you.

Objections Are Not Your Enemy

This article was first published in Entrepreneur.com

One of the many disturbing scenes in the 2000 movie “Boiler Room” is the alpha-salesman-speak of Ben Affleck’s character, who concludes:

There is no such thing as a ‘no sale’ call. A sale is made on every call you make. You either sell the client some stock or he sells you a reason he can’t. Either way it’s a sale. The question is, who’s gonna close, you or him?

If you’ve taken sales training courses, or read books on improving selling skills chances are you’ve heard lots about “handling” objections. Usually with objections represented as obstacles to your ability to close a sale.

At the risk of appearing arrogant or even heretical, let me offer a radical suggestion to you; the whole idea of objections is misguided—you need to re-think most of what you’ve learned.

To start, what are you really thinking when you talk about handling objections?

Most internal monologues fall into one of two categories:

  1. “All right, I’m getting close to closing the sale; I saw the buyer, I’ve got them to agree on the problem. I’ve got them hooked on some features and I can see light at the end of the tunnel. All that’s left is to jujitsu flip a few objections, and we’re home free. Bring it on, let’s see what you’ve got—I can handle your objections!”
  2. The other version probably sounds like this: “Omigosh, it’s gone well so far, knock on wood. I hope they don’t throw me some curve ball, this is the part I hate. I really want to close this one, if I can just get past the objections.”

You may notice the first version sounds optimistic and positive while the second sounds fearful, even defeatist. But what people don’t usually notice is how much alike those two versions are.

Both versions envision a battle between buyer and seller—one of whom shall “win” by subduing the other. Think of all the metaphors salespeople use when talking about this situation: Can you hit the curveball? Can you get it back over the net? It’s third and goal, can you get the first down? Are you tough enough to go the last round?

This combative way of thinking is baked into most approaches to sales. That’s because nearly every sales model is a model of a transaction, not a relationship. Other than the occasional arrow that says “go back to Step B and repeat,” the models are the equivalent of a business one-night stand. If closing the deal is all you’re looking for, you won’t get much customer loyalty or repeat business. Where is it written that you should be your customer’s enemy?

Here’s the other, better, way to think.

An objection means the buyer cares enough about you and the sale to want to explore it with you. They’re telling you about a concern they have, in the hopes you’ll help them resolve it. Your enemy is not the customer; your enemy is disengagement. And an objection demonstrates that the customer is very much engaged.

When you get an objection, recognize it as an opportunity. If you and your customer can resolve it, great, you’ll get a sale. And if you can’t resolves it, well it’s almost certainly because it’s just not the right thing for your customer just now.

Amazingly, you get even more credit if you back out gracefully when your offer isn’t right. Your customer will be surprised, and appreciative. And you’ll increase the odds of getting the next sale, and the one after that.

Anyway, people vastly prefer to buy what they need from people they trust. So help them resolve their objections and be secure in knowing you’ve improved the long-term relationship—and your long-term sales.