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The Dirty Little Secret about Subject Matter Expertise in Sales

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It may be the dirtiest little secret in professional sales. The lie we all love to tell ourselves. The truth we just hate to face up to. What secret/lie/truth is that?

The myth of the subject matter expert as key to sales success.

Sources of Mythology about Subject Matter Experts

There is no shortage of prognosticators about the increasing importance of subject matter expertise. You’ve probably seen a lot of it:

  • You may have heard from The Challenger Sale folks that if you’re not coming up with new insights about your customers’ business, then you’re a relationship wimp.
  • You may have seen the article Top Ten Trends in Sales and Business Development, which lists the rise of the subject matter expert as number one on the list.
  • You may have read the Canadian Professional Sales Association article The Rise of the Subject Matter Expert, which says B2B organizations are increasingly turning to subject matter experts.

What all of those pieces have in common is an underlying view of the buying decision as rational, calculating, value-based, and economically driven. And that’s Just. Not. True. That’s the dirty little secret.

To be precise, it’s not that buyers are irrational. Nor are economics or rational thought irrelevant. But the role we ascribe to such thinking is profoundly mislabeled by an awful lot of sales “experts.”

So, let’s get it right.

There are two types of thinking, there are two stages in B2B buying (which largely correspond to those types), and there are two logical roles in the buying process (necessity and sufficiency). When we get it right, those all drop into place, including the role of subject matter expertise.

Two Types of Thinking

Daniel Kahneman, in his book Thinking Fast and Slow, outlines two types of cognition. The first, System 1, is fast, is intuitive, and jumps to instinctive reactions or conclusions. System 2 is the slower, logically deduced, careful check. His book (and his life’s work) consists of showing over and over how much our lives are controlled by System 1, contrary to popular belief.

A similar point is made by Jonathan Haidt in his brilliant book The Righteous Mind: Why Good People Are Divided by Religion and Politics. He uses the metaphor of the elephant and the elephant driver. The latter thinks he is in charge, but in fact the elephant pretty much does what the elephant wants.

If you prefer the same idea in a far more accessible and practical manner, read Josh Waitzkin’s The Art of Learning, in which he explains how he became a junior globally ranked chess champion and then a world champion in the martial art Tai Chi Chuan.

How’d he do it? He learned the link between thinking fast and slow thinking; he learned when and how to use the elephant and when to use the elephant driver. He drilled over and over the most minute movements, strategies, and counters until they became subconscious and he could trust them with “fast thinking”—thereby reserving his “slow thinking” to focus on that one, single differentiating move.

The point is not that one is right and the other wrong. They are both necessary to human functioning, but they play different roles.

Two Stages in B2B Buying

David Maister originally observed that most B2B buying processes proceed in two stages: screening and selection. In the screening process, staff people typically “round up the usual suspects,” putting criteria on spreadsheets and evaluating who should be in the “final four.” That is a prototypical rational process—think spreadsheets, analysis, and quantitative tools—which is why it’s delegated to junior staff.

Then there’s selection. Selection is heavily instinctive, intuitive, and non-rational. Selection is done by senior people who are experienced, have confidence in their judgment, and have the track record to back it up. But of course they don’t claim clairvoyance or rely on gut feeling. No, they rationalize their instincts. To put it prosaically, people decide with their hearts, then rationalize the decision with their brains.

Two Logical Roles: Necessity and Sufficiency

Some things you must have in order to get other things. On the other hand, some things are all you need. Writing a term paper may be necessary to get an A in the course, but writing a paper alone isn’t sufficient to get that A. We often mistake necessity for sufficiency. And subject matter mastery is a classic example.

In B2B sales, it is pretty much necessary to have and demonstrate subject matter expertise. In fact, such expertise is specifically looked for in the screening process assigned to junior staff. The absence of subject matter expertise is often justification for being removed from the final list of firms invited to present.

But subject matter expertise is far from sufficient (the same is true of low price). You’ve seen plenty of cases where neither the lowest price nor the highest technical ability got the job. Instead, the job frequently goes to the seller who is “good enough” on technical (and price) terms, but who clearly has a better trusting relationship with the client.

Interestingly, often this is not stated. In fact, it’s even denied. Selection decisions, which are made with the intuitive, “fast thinking” mind are often rationalized by referring back to the “slow thinking” rational criteria that were employed during the screening phase.

Putting It Together: Revealing the Dirty Little Secret

The dirty little secret is that subject matter expertise plays two important, but precise and limited roles. The first is to screen out uncompetitive offerings up front, so that time is not wasted on providers that are least likely to win. This role is finished once the finalists are selected.

The second role is to rationalize the decisions that are made by the “fast thinking” mind, the “elephant” mind, the subconsciously competent mind that has absorbed experience and can trust its own intuition. Here the rational mind is the handmaiden of instinct and experience.

The buyer may tell you and everyone else that you won the job because of your expertise and credentials and that competitor B lost it because they weren’t as brilliant as you. But don’t you believe it.

You won because you were good enough on the expertise side of things and the client loved you. That means they felt you had integrity, they could get along with you, they could be honest with you, you’d be straight with them, and that if there were problems, they could work them out with you—and not with those other folks.

The dirty little secret is the same thing that popular girl told you in high school when you invited her out and she said, “Oh, I’m so sorry, I’m busy Friday night.” She wasn’t busy; she just didn’t want to go out with you. “Busy” was the socially acceptable excuse of high school dating. “Expertise” is the socially acceptable excuse of B2B buyers.

You gotta have it, but don’t kid yourself that it’s enough.

 

This post first appeared on RainToday.com 

How Effective Was that Sales Training?

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If you’ve ever received a personal performance evaluation at work, there’s a decent chance you left the meeting thinking, “Well, it would’ve been good to know that about four months ago!” In other words, advice—even if valuable—has to be timely to add value. And, of course, an evaluation that doesn’t offer any recommendations at all feels even less valuable.

In the realm of personal evaluations, we all “get” the need to add value, and to do so on a timely basis. But what about when it comes to evaluating training programs, particularly sales training programs? How does your firm go about evaluating its training offerings? Would you say it adds value? And if so, how fast does that value accrue?

I also want to suggest a simple, but basic, change in how we evaluate such programs: by shifting from metrics to communications. But first, let’s explore how evaluation usually works.

Rounding Up the Usual Suspects

Does this sound familiar? Your firm hires an outside vendor to develop an addition to your portfolio of sales training programs. Your Learning and Development team works hard with the vendor to ensure the program is customized. You do a pilot, you redesign, and you finally release it.

Your firm rolls out several deliveries before the fiscal year-end. A detailed online eight-page evaluation form has been developed, and it is filled out by over half of the participants within a week after each delivery.

Thus at year’s end, the training organization can submit a lengthy data-based analysis of the extent to which each of program’s objectives were met. In consultation with the vendor, changes are made to the program, and the cycle of delivery and evaluation begins anew.

Only one question remains: how much did sales increase because of the program? And isn’t that the only question that really matters?

Of course, there are myriad reasons why it’s a hard question to answer: GDP growth declined in the same quarter, a competitor made an acquisition, you raised prices, the leadership team changed, etc. Those are perfectly valid reasons, yet the only relevant questions remain: Did the training increase sales or not? By how much? And how did it do so?

If those questions can’t be answered, then all your complicated evaluation did was to evaluate. It didn’t add any value. And, just as with your unsatisfying personal evaluation, it leaves a hollow feeling.

The Problem with Evaluations

To over-simplify, the problem with programmatic evaluations is metrics. Not the wrong metrics, but simply the metrics. Business in general overrates metrics, but this is a particularly egregious case. We are easily seduced into thinking that if some data is better than no data, then more data is always better than less.

And that’s not the only mistake. There is also the cognitive trap: believing that if we can “understand” something, we have done the hard work of change. Not when it comes to selling, we haven’t.

Finally, there’s a subtle trap unique to training: the mistaken belief that tweaking the program will directly and causally result in the desired sales behavior changes. In fact, this is largely a leap of faith.

To sum up, the metrics don’t measure what matters (sales). The metrics give a false sense of accuracy, and there’s a leap of faith between the recommended changes and the hoped-for actual results.

The Answer

Many of these problems can be solved through one relatively simple change: replacing metrics-based evaluation with a post-training program of communication between participants. Here’s how it works.

A simple platform and protocol is developed for participants to share stories with one another about their successes in applying the lessons of the training program. Some serious social engineering is required to make it very simple. We have found an online document-sharing approach with an occasional conference call works best, with some admin support to encourage and tease out stories to be effective.

This simple approach does three things:

  • It provides timely feedback—no more waiting until period-end.
  • It provides specific Example: “I ran into a prospect at the airport, and I remembered to talk about her family first rather than diving into business. It resulted in a meeting the following week.”
  • It gives very specific guidance to future training designs about what does, and doesn’t, work.

Also—and maybe the most important thing—it directly addresses the top line. Sales can be identified through the story lines and augmented by a request to participants to periodically identify particular sales and the proportion attributable to the training.

Insist that your evaluation process doesn’t just evaluate. Make sure it adds value. Do so by substituting human-to-human direct communication about what works in place of quantitative and abstract metrics. It’s a human solution to a still-human profession—sales.

This post first appeared on RainToday.com 

Discounting, Price, Value and Psychology

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Back in 2008, RainToday.com published Fees and Pricing Benchmark Report: Consulting Industry in which they analyzed a ton of data from 645 consultants. There were six price-related topics. One in particular has stuck with me over the years: the analysis on discounting.

As the authors point out, discounting is Ground Zero for hypocrisy in pricing. Everyone decries it – yet everyone (actually, 65%) does it. It reminds me of dieting – “I know I shouldn’t, but this one little brownie won’t hurt. And I’ll get back on the wagon again tomorrow.”

Couched this way, the problem of discounting is one of willpower – we all know we should stick to standards and principles, yet we are morally weak at the moment of truth.

I don’t think that discounting is a moral problem, however. Instead, it is one of bad thinking. And it centers around two false beliefs:

  1. the belief that certain customers are inherently “price buyers”
  2. the belief that feeding the price beast will make it go away.

The truth is that price is a proxy for several different fundamental buyer concerns. It has no meaning inherently. Price per se is a clearing factor, the point at which money exchanged balances with the various benefits received. And this balancing point is not just “value” as most firms mean that term; it is very much tied up with the psychology of the buyer.

What Clients Mean By Price Objections

It seems obvious.  A client expresses an objection to a price. They say they want a lower price. Clearly – they are concerned about money, value and price. Right? So the only question is, shall we discount, and by how much. Right?

No, and no. Here are four distinct things that buyers are saying when they say they want a lower price. And not one is really about price.

  • Mismatch with competitors. Frequently clients faced with competitive bid situations will say, “Company X is cheaper than you by 25%—you need to discount to stay in the game.” Let’s assume the claim is true on the face of it.  There are two reasons for one firm pricing 20% below another; one is intentionally buying the business, with the intent to raise price later.  The other—and most common—is that the client is comparing apples to oranges.
    • The solution to the first is easy: explain to the client why your competitor’s cost structure is virtually identical to yours, and why a 25% discount is inherently unsustainable—therefore the client is facing a relationship vs. transaction issue.  If they choose transaction, then be glad your competitor just trashed their bottom line to buy a price-shopping client.  They’ll eventually be back.
    • The solution to the second is to have the client carefully compare features of your bid with features of competitor’s bid. You know where costs get built up and where they don’t; have the courage to give your client the data to do the comparison.Competitive mismatches aren’t really price objections; they are fundamentally rooted in a misunderstanding of either industry economics or project design economics. The answer is not discounting, but education.
  • Mismatch with budget. Sometimes buyers just have a limited budget. They feel trapped, and often a little embarrassed that they have asked you to quote into a situation in which they under-budgeted—or over which they have no real control. Their natural reaction is to push back, in hopes that you can solve their problem without their having to confess their embarrassing ignorance, or go back to their boss for more money.This too is best not seen as an “objection;” it is a simple constraint of the world—budget vs. cost. Again, discounting just confuses the matter, and reinforces the idea that the client can afford to not be open and transparent with you.
  • Mismatch with expectations. Only experienced buyers do a good job of guesstimating price quotes from professional services firms. They tend to focus on a basic mental model of time vs. rate, and naturally under-estimate each.  (Recall your own shock at first finding out your billing rate as a newcomer; and the shock of industry hires when they first see time estimates for what they thought was just a request for a data-dump from an expert).This “objection” isn’t an objection at all—it’s just the natural human expression of surprise and dismay when we find out our expectations didn’t match reality.  Discounting just confuses them more, and rewards their delusions for the future.
  • Mismatch with motivation. Professional services firms suffer disproportionately from the delusion that clients make decisions on purely rational, monetary, statistical criteria. Clients, like everyone (including ourselves) make our decisions with the heart, and justify (rationalize) them with the brain.A basic human need is to make sure we didn’t get a “bad deal.”  You can give all the “value” data you want, but unless a client feels you are being straight with them and/or they’re getting the best possible “deal,” they will remain suspicious.
    • When suspicious, our innate tendency is to bargain, to determine some subtle psychological resistance point, just as we would at a bazaar or yard sale.This behavior has nothing to do with price per se, and everything to do with transparency of your economics and the prices others have gotten from you.Not paying attention to motivations leads to discounting, which has the perverse effect of convincing buyers that—aha!—you really were holding out on them! Which leads them not only to haggle again the next time, but to fundamentally mistrust you because you quoted them a price that was an attempt to “get by.”

What to Do About Price Objections

So what’s to be done? We all know the answer – don’t discount – but we think it’s a moral weakness, a failure of principles. It’s not– it’s a failure of understanding the reason for price objections.

Armed with the truth—that it’s not about price, and it never is about price – we can do the right thing; be curious, probe and sensitively get one level deeper when presented with price objections.

Back to RainToday’s survey. Why do 65% of consulting firms discount, even when, as the authors point out, the average 11% reductions could go straight to the bottom line?

It is simple fear – fear of losing the deal, particularly—which drives us inward rather than outward.  Rather than asking curiously, “Please, help me know what’s behind that?” we fearfully back off in the face of the aggression in the client’s tone – and start discounting.

The only two good reasons to discount are:

a. to reflect real cost differences due to volume purchases (which is great – you pass on some lower cost of sales, everyone’s happy), or

b. to buy your way into a strategically new piece of business. But be careful when you do so, because only certain clients buy that way.

The most tragic result of inappropriate discounting is not even the lost profit; it is that we confirm the client’s suspicion that we are untrustworthy.  It leaves the client thinking, like Sir Winston Churchill’s apocryphal line, “we have now established what you are, we are merely haggling about the price.”

Giving Prospects the Confidence to Hire You

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When it comes to selling – many of us focus on our fears.

“Will they buy?”

“Are my services priced right?”

“What are they looking for?”

“Will they go with me?”

These questions inevitably lead to a dance that involves both buyer and seller, a delicate tip-toeing around the heart of the matter. We try to talk about needs, solutions, benefits, values.

But a buyer is not looking for those things alone. Above all else, a buyer is looking to feel confident that they made the right decision; that their business or needs are in the right hands.

Are you giving your prospects the CONFIDENCE to hire you?

——–

A western journalist visiting the old Soviet Union, so the story goes, asked a worker if he was being paid well. The worker said, “It’s all pretend. We pretend to work and they pretend to pay us.”

Do you sell consulting? IT services? Accounting? Financial planning? Legal services? Then you too play a game of pretend – with your would-be clients. They pretend to care about your qualifications. You pretend to listen to their questions. You pretend to write a unique proposal. They pretend to read it. You pretend to sell. They pretend to buy.

All the while, behind the game of pretending, an unspoken and important vetting process is taking place.

For example, a company about to spend big on a CRM system, or make an investment in leadership training, or change its sales approach, will ask about the benefits of what’s being sold. The prospect will want to know the answer and they will pretend it matters most.

But what they really want to know is – will we have the confidence to sleep well at night given the choice we make?

And yet, this search for confidence – the thing that matters most – isn’t what’s actually discussed during the sales process.

Instead, prospective clients have been seduced by the trappings of “hard business.” They think “if you can’t measure it, you can’t manage it,” and they try to reduce decisions to metrics. That’s how we end up with clients wanting to know all about our qualifications – despite the fact that our qualifications were what already got us in the room in the first place.

And so, we all pretend that buying and selling is about talking. About words and numbers. About qualifications.

But it’s not. The fact is, clients make huge, complex, intangible decisions very much on the basis of gut, emotion, feeling, opinion, Kentucky windage, call it what you will.

As sales guru Jeffrey Gitomer says, people buy with the heart, and justify with the brain. It’s not about rational decisions, but about decisions rationalized.

The truth is this: people vastly prefer to buy what they need from people they feel good about. People they trust. People who they believe have their clients’ interests at heart, not just their own. People who make an effort to honestly listen to their clients. People who actually seem to care.

This goes beyond “people buy from people they like,” or “people buy from people similar to themselves.” It’s way more than schmoozing and finding out common interests.

It gets to the guts of the matter:

  • Do you actually seem to give a damn about me?
  • Do you act like you care about me?
  • Are you working your own agenda, or will you actually listen to mine?

Sales process designs won’t get you there. Metrics and CRM systems won’t get you there. Motivational speeches won’t get you there.

But two things will.

1. Genuine, Honest-to-Goodness Listening

That’s listening for real. Listening not to find out data, but to find out about the client. Listening not to make or confirm a hypothesis, but to understand another human being. Listening not to find out client needs, but to find out what makes a business and a person tick. Listening not so you get answers, but listening so that at the end of it, the other fellow feels heard. Listening not to provide great answers, but listening to earn the right to offer those answers later.

I’ve heard this called yellow-pad listening; no proposal or talking points in front of you, just a blank pad ready to take notes if necessary as issues come up. Whatever you call it, remember another old truism that is still true: People don’t care what you know until they know that you care.

2. Sample Selling

People don’t buy ice cream from verbal descriptions; they buy it from taste. Referrals may get people in the door, but samples sell them. We don’t use samples selling nearly enough when it comes to selling the intangible.

Give people a taste of what you do. Assume you’ve got the job, and start working it in the early stages. Don’t say how good you are at tax planning, grab hold of some business issues and show them how you do it — on their data.

If a voice in the back of your mind (or your boss in the front) says, “don’t give it away,” recognize that they are wrong. There is an inexhaustible supply of problems in this world. Giving away a few solutions doesn’t diminish your value — it earns you the right to solve more of those problems.

If a client shows a pattern of stealing ideas from you, quietly drop them. After all, that’s the kind of client you’d prefer your competitors to have. Place your focus instead on those clients who want relationships of mutual benefit.

* * *

Listening and sample selling. These are actions, not thoughts. Deeds, not qualifications. Results, not process designs. Most of all, they demonstrate your devotion to your client.

After all, would you rather buy from someone who says, “Trust me”? Or, from someone who shows you why you should?

This post first appeared on RainToday.com

The Purpose Of Sales

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Do you hate selling? Do you distrust salespeople? Do you find the whole concept, premise and purpose of sales to be somehow distasteful?

You are far from alone. Even the dictionary is loaded with secondary and tertiary meanings of “sales” that suggest selling is considered manipulative, conniving, even morally offensive.

This revulsion toward sales isn’t limited to our lives as retail consumers. In business, many buyers of goods and services are deeply suspicious of those whose job it is to sell. But the issue can be even more acute for the sellers than it is for the buyers.

Consider the case of complex professional and intangible services. The people who sell such services are highly intelligent, and even more highly educated. They have invested enormously in their technical education, and are justifiably proud of their proficiency and expertise. But they are even more proud of their objectivity, devotion to quality, and service to their clients.

The last thing they want is to be seen as “salespeople.”

And so they struggle. They strike the word “sales” from their vocabulary, talking instead about “business development” (note: even the grammar is instructive – the use of the passive voice, rather than the direct verb ‘to develop business’).

They abhor talking about price, and are apologetic about it when it can’t be avoided. They are proud of their qualifications, and believe (hope?) that their resumes will suffice to do the job of selling for them.

And yet it never seems enough for the feckless professionals. They are stuck with the undeniable proposition that they are being held accountable for getting their clients to fork over filthy lucre in return for the timesheet they hand in. They are confounded by the inability to distinguish themselves from the used car salesman, both in the minds of their clients, and – perhaps worst of all – in their own innermost thoughts.

What’s a poor professional to do?

The answer – amazingly – is at once simple, profound, and easily accessed. It lies in fundamentally redefining the purpose of sales – beginning in our own minds.  Let’s start by trying to understand the purpose of sales.

The Purpose of Sales

You may think the purpose or goal of sales is obvious – to get the buyer to buy, to get the sale, to get the buyer to hand over the money. Indeed, that’s what most people believe – and it’s precisely the source of the problem. It all starts there, and heads downhill fast.  Here’s why.

If you believe the purpose of selling is to get the sale, then you have made three key assumptions. First, that the ‘purpose’ of selling is one-sided – all about the seller. Second, that value to the buyer is per se irrelevant, as long as it’s enough to result in a sale. And third, that selling is essentially competitive – that you fail if you don’t get the sale, whether the loss is to a competitor or to the ubiquitous DND (Did Not Decide).

Those assumptions just fuel buyers’ paranoia. They enforce the notion that sellers do not have their buyers’ best interests at heart, that ‘the deal’ is all that matters, and that you can’t trust anything sellers say. It’s the kind of attitude that fuels sales ‘wisdom’ like “buyers are liars,” and “there are no be-backs.”

And those are just the key assumptions. There is a host of secondary implications which also follow from believing the purpose of selling is to get the sale. For example, it suggests that sales efficiency is key – that salespeople should work to qualify their leads so they don’t waste unproductive time. For example, it suggests that you should be very careful about giving away ‘free samples.’ And especially it suggests that you should never, ever refer a competitor to a client.

All of these are equally pernicious beliefs. It’s easy to characterize them as just traits of used car salesmen, but those beliefs are equally held by serious B2B salespeople, and taught in many ways by well respected sales training programs. Of course, that doesn’t make them better. They are still the source of all the negativity held by so many, including by salespeople themselves.

So – what is the alternative?

The Striking Alternative

Instead, try this simple statement on for size.

     The purpose of selling is to improve the buyer’s business. 

If that doesn’t sound radical, consider the implications. It means, for example, that if the product doesn’t improve things for the buyer – if the buyer is kidding themselves, in other words – then you shouldn’t sell it to them. That’s a little bit radical.

Much more radically, it means that if a competitor truly has a superior solution for a given client, you as the salesperson should actually recommend the competitor.  (Rest assured that the willingness to do so endears you so strongly to the buyer that you’ll virtually guarantee future sales).

But the radical implications aren’t the point. It is the day to day matters, the little things, that truly make the difference.  If your purpose is to improve the buyer’s business, then you’ll forsake that absurd acronym, Always Be Closing. Instead, you will Always Be Exploring, to make sure you help your client find a solution. This means the end of artificially-driven period-ending sales contests and forced attempts to close deals; instead, you focus on good decisions, in the appropriate timeframe – the client’s timeframe, not yours.

If your purpose is to improve the buyer’s business, then you won’t shut down the minute it appears your lead is not going to buy. Instead, you’ll spend another five minutes to help them look elsewhere for solutions from other businesses or different providers (and you’ll be amazed by the marketing payoff of that so-called inefficiently-spent sales time).

If your purpose is to improve the buyer’s business, then you won’t have problems with cross-selling. Instead, you’ll pursue it with a good conscience because you know what you’re seeking is in the client’s best interest.

You won’t have problems with pricing, because you’re not trying to put something over on someone – your goal is pure, and your firm needs a fair price to continue doing that truly good-for-client work.

You won’t have a problem with transparency regarding pricing, contracting or service policies, because those policies will likewise be truly aimed the betterment of the client’s business. And if they’re not aimed that way, then you’ve got a strong argument to make internally that sales shouldn’t bear the brunt of customer resentment – the problem lies elsewhere, and sales can be a force for client-focus good.

The Bottom Line of the Alternative

When you see the purpose of selling is to improve the client’s business, things change fundamentally. Your goals are no longer in conflict with the client – they are precisely and profoundly aligned. Your clients have every reason to trust you – and no longer to distrust you.

Selling is no longer about competition – with your clients, competitors, or your partners. It is about collaboration, in ways that can unify your sales organization. The sale itself becomes not the goal, but a byproduct.

And here’s the ultimate paradox. If you re-conceive the purpose of selling in this way, your clients will recognize it very quickly – even instantly, in some cases. Think about it from your own perspective as a buyer. How would you react if you ran into a seller who behaved in ways such that:

  • you can believe what they tell you
  • you can depend on their promises
  • you can confidently share confidences with them, and
  • you can be sure they have your best interests at heart?

The answer is clear: this is someone you would buy from.  And so, this approach to selling is paradoxical. By your very willingness to forego the sale (by making it no longer the object of your sales activity), you actually increase the likelihood of buyers buying from you.

But there is a catch. You can’t work the paradox against itself. You actually have to be willing to forego “getting the sale” as your objective in order for it to come true. After all, you can’t fake trust. But then – why should you even try?

The Prisoner’s Dilemma: Trust & Selling

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What is it about selling?

It can sometimes leave a bitter aftertaste the mouth – whether you’re the seller or the buyer. Why is that? I think it comes down to a few things – but mainly how we approach the sale and what we bring to the relationship between buyer and seller.

You may know “The Prisoner’s Dilemma.” In game theory, it’s a classic conundrum. As Wikipedia states, it “demonstrates why two people might not cooperate even if it is in both their best interests to do so.”

It turns out that the solution to The Prisoner’s Dilemma is also the solution to a great many sales problems—those in which your customer doesn’t trust you. Are you living in the Dilemma? Or are you living in the solution?

The Dilemma of the Prisoner

Here is a classic version of The Prisoner’s Dilemma:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction and, having separated the prisoners, visit each of them to offer the same deal:

  • If one testifies for the prosecution against the other (defects) and the other remains silent (cooperates), the defector goes free and the silent accomplice receives the full 10-year sentence.
  • If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
  • If each betrays the other, each receives a five-year sentence.

Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

What’s a poor prisoner to do?

If you analyze the situation rationally (the way a game theorist or economist defines that term), your odds are a lot worse if you remain silent—either you get 10 years or six months. But if you rat on your partner, you either get out free or—at worst—five years.

So, reasons the economist, Option A’s average “value” is five years and three months in prison. Option B’s average is two and a half years. “Ah ha,” says the economist’s rational player, “I’ll go for Option B.”

Of course, the other player does the same math and comes to the same conclusion. As a result, each gets five years in prison—a total of 10 prison-years between them.

If only the prisoners had cooperated with each other; they could have each gotten out with just six months in prison—a total of one prison-year between them.

The question is: why don’t they cooperate?

At least, that’s the economists’ question. In the real world, cooperation is quite common.

So the real question is: why do so many people listen to economists?

The Dilemma of the Salesperson

Before answering the Prisoner’s Dilemma, let’s note the similarity with The Salesperson’s Dilemma.

The salesperson has a similar series of trade-offs. For example:

“I could take some extra time to study up on tomorrow’s sales call, getting to know more about the prospect. That would improve the odds of my getting a sale tomorrow.”

“On the other hand, I could make another cold call with the time saved if I don’t spend it studying up for tomorrow’s call.”

Or, another example:

“I could tell them we have very little experience in this area, which would increase their sense of my honesty, which would help me in the long run.”

“On the other hand, experience might be the key in getting this job, and I’d better make the best case I can and fudge the rest.”

Still another:

“I could share a lot of my knowledge with them, which would really impress them and make them grateful to me.”

“On the other hand, if I give it all away in the sales call, they’ll just steal my knowledge and not pay me for it—I’d better wait until after we have a signed contract.”

And one more:

“I could go out on a limb and make some really far-sighted observations that would help them—it would go way beyond what they asked for.”

“On the other hand, we don’t have much trust built up yet. They might see that as presumptuous or unprofessional; I’ll just answer the questions they asked.”

Just like with The Prisoner’s Dilemma, if the salespersons continually choose Option B, they will sub-optimize. They will do cold calls, leading with no relationship, taking no risks, treating the customer like a competitive enemy, and offering no great help.

In other words, they’ll lose. Just like the prisoners.

In theory, the prisoners are identical, whereas the salesperson and the customer are distinct. But that’s theory. In the real world, sellers somehow tend to find buyers who are similar to them. Sellers who are fear-driven and guarded somehow often find buyers who justify their worst fears.

Both seller and buyer often operate from the Prisoner’s script. And the result is just as sub-optimal.

The Prisoner’s Solution

As postulated by economists and game theorists, The Prisoner’s Dilemma is usually presented with two key assumptions:

  1. The game is played only once
  2. The players do not know each other

The solution lies in changing each of those assumptions. If you tell the players the game will be played 10 times, cooperative patterns begin to emerge. If it’s played 100 times, cooperative strategies take over.

If the players are given information about each other, they become less abstract to each other. If the information is personal, then the relationship changes tone as well.

These two dimensions—time and relationship—are critical. Without a sense of continuity over time, and without a sense of personal relationship, those playing the game will opt to “rat out” each other—even knowing that the result, system-wide, is negative for them on average. But given time and relationships—the optimal solution emerges. Everyone is better off.

In other words, the solution to behaving stupidly is to develop personal relationships over time. Now let’s see how that insight applies to selling.

The Sales Solution

The sales solution should look pretty obvious now. Suboptimal behavior is the result of short timeframes and shallow relationships. In a Prisoner’s Dilemma world, both buyer and seller fear each other, suspect the worst, don’t have relationships beyond the transaction, and are interested primarily in their own self-aggrandizement, without regard to cost to the other party.

If that sounds familiar, just look at this quick list of sales topics that are hot these days: sales automation, lead screening, CRM, social media lead generation, multi-channel messaging. Think about the last step in nearly every sales process model you’ve seen—closing. Think about some of the trends in procurement: online, blind auctions, and RFPs.

What all these subjects have in common is a view of selling that is a) transactional and b) impersonal. In other words, they have short timeframes and weak relationships—two things sure to hurt sales.

Selling benefits from longer timeframes and better personal relationships. If you can stop thinking like an economist and work to eliminate the fear you and your buyers have, you’ll benefit from the long-lasting trustworthy relationships that develop as a result.

This post first appeared on RainToday.com

Fear and Loathing in Sales

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Why is it that, when it comes to sales within a service-based industry, the very thought of selling seems to leave a bad taste in one’s mouth? Below, we dive into why the fear of sales creeps up on those of us “rewarded” with the extra task of “business development.”

Let’s dig a little deeper into the root cause of the fear and loathing that so often seems to accompany sales.

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Some people seem born to sell. They enjoy the challenge, the meritocracy of the numbers, the feeling of controlling their destiny, and the social interaction that comes with sales. They like selling, and they are good at it.

But that isn’t true if you’re a professional who sells services. If you’re a management consultant, accountant, lawyer, human resources professional, financial planner, or technology consultant, let me ask you a question: did you set out early in your career with the goal of being a salesperson? No? That’s what I thought.

Fear and Loathing in the Professional Services Sales Business

The biggest difference between professional services salespeople and other salespeople is the former’s general distaste for selling. Fear and loathing is often not too strong a phrase. A professional is generally hired, trained, rewarded, and promoted for subject matter mastery.

Up to a point, that is. At some point, like a cruel joke, they are “rewarded” with the additional responsibility of selling. Little wonder, then, that the word “sell” is a four-letter word in the professions; most firms prefer the euphemism “business development,” conveniently phrased in the passive voice. After all, they reason, clients buy from us because of the quality of our work. Our sales strategy is to aggressively wait for the phone to ring.

Fear of sales runs deep, yet few professionals can really succeed without confronting and overcoming their apprehension. And so people who thought they had chosen cold hard data and logic as their career end up having to self-psychologize to remain effective—yet another distasteful venture for a content lover.

The Source of Our Fears

Most professionals were attracted by the intellectual aspects of their career. They were bright, with good minds, and the professions worship intellectual achievement. Since clients are often from the same profession, both buyers and sellers share the same delusion—people buy solely through a process of rational decision making. No self-respecting in-house counsel or vice president of strategy would admit to hiring an external advisor based on vague criteria like trust or chemistry.

And so both parties contribute to the myth that services them both: clients buy value propositions, packages that deliver positive net present value, and providers who make the best business case. If one firm loses, they can feel secure that it was probably not their fault—it was just price. And price is the easiest reason for the client to give to the also-rans. The delusion continues.

To contemplate that things don’t work this way is a threatening idea to professionals. It suggests clients aren’t buying their expertise, but their personalities—which feels unfair and rather scary. Since the seller is often the deliverer, it suggests that rejection is far more personal than it is for the seller of a widget. Finally, to lose is the ultimate failure. It means your expertise, the thing you have prized all your life, just wasn’t good enough. And by extension, neither were you.

No wonder professionals loathe the need to sell.

Overcoming Fear and Loathing

Unfortunately, the sales world is all too full of salespeople willing to teach professionals how to sell. They and their professional clients buy into yet another myth: the idea that sales is sales and best practices cut across all industries. And so sales programs that teach closing techniques to manufacturer reps and clothing suppliers founder when they try to close chief financial officers.

What’s true of closing is also true of sales cycles, CRM systems, pipeline analyses, and sales efficiency programs. What works in “regular” businesses falls flat in professional services, and it accentuates the already bad taste in the mouth for selling.

This deep psychological aversion to selling cannot be overcome by behaviors, tips, techniques, processes, and tools alone. It must be addressed at the mindset level. While you can partly act your way into right thinking, in the fog-sculpting world of professional services, you must also think your way into right acting. It starts with re-conceiving the very purpose of selling.

The Purpose of Selling Is…

In most businesses, that is a simple sentence to finish. The purpose of selling is to get buyers to buy the seller’s products. Both buyer and seller know this, and they easily accept the rules of the “game.”

In the professions, we need a very different purpose—that of client service. By this view, the purpose of selling is to make the client better. The sale is not the goal; the sale is a byproduct of successfully helping the client improve. The sale is an indicator, not an objective.

Taking this definition seriously has serious implications. It means transactional selling is all wrong—transactions are just points along the way of a relationship. It means we don’t compete with our clients—we collaborate with them. It means our timeframe must be long, not short.

Most of all, it means we don’t sell by selling. We sell by successfully helping the client to see new possibilities and trusting that the clients we help will, with predictable regularity, prefer to do business with us. It means detaching from the outcome of the transaction and trusting in a broader pattern of human behavior.

If that sounds like selling based on trust, that’s exactly right. It’s the same powerful dynamic recognized in concepts such as customer loyalty. The economics of trust are compelling.

Perhaps best of all, though, is the message this viewpoint offers the professional. Rightly conceived, the only difference between selling and delivering is getting paid. When we think of sales that way, the fear and loathing can slip away—we are all comfortable with client service as a model for delivery. Selling is the same: the right way to sell professional services is to aggressively do good, and then, at the right time, ask to be (well) paid for doing so.

That view of selling isn’t to be feared. It’s a view we can feel good about, while generating a powerful business model at the same time.

The Limits of Value Propositions

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In B2B sales, having a clearly developed and clearly stated value proposition is unquestionably important. This is especially true for large, complex, or intangible offerings.

In fact, some experts go so far as to suggest a value proposition is the key component of successful sales. And most would say that a value proposition is at least a necessary condition for success, if not a sufficient one.

But this is certainly to overstate the value of value propositions. Not only are they not sufficient – sometimes they’re not even necessary. They are frequently less important than classic issues of needs and wants. And discussing value propositions without overtly addressing client confidence in the capability of the seller is not useful.

Value propositions are unquestionably powerful. But if you think nailing down a clear value proposition is going to solve your sales issues, you need to think again.

Thinking about Value

First, some definitions. I’m using “value” in a simple, narrow way to mean economic value. For example, I might offer a client a value proposition that says, “By using a distinctive approach to account development, I can improve top-line revenue by 10% within six months at virtually no cost to margins.” The “value” in that example is “10% of full-margin top-line revenue,” and the total statement includes reference to how I’m going to achieve it and in what realm of the client’s business.

But usually that’s not how clients start out thinking. In my experience, clients go rather quickly from “we’ve got a revenue problem” to “the biggest reason for our revenue problem is sales force turnover,” from whence it’s a quick hop to “we need a salesforce recruiting solution.” In which case, my highly articulated value proposition about the account development process, even if it’s correct and relevant, doesn’t even get invited to the party.

Their problem (“10% top-line revenue gap”) may rhyme with your value offering (10% top-line revenue growth”), but if the buyer is fixated on sales force turnover, game over. You could argue you need to present your value proposition earlier in the buying cycle, but that’s a problem outside the value proposition per se. Call that the “misaligned diagnosis” problem.

Another problem is relative lack of urgency. A 10% increase in top-line growth, while it sounds great, may produce yawns in organizations that are transfixed by products going off patent, or by R&D rejuvenation, or by M&A activity, or by the urgency of a cost-cutting drive.

A value proposition can work its magic only if the client a) agrees on the issue at hand, b) feels a need to address the issue, and c) wants to use the particular value proposition to address the need.

That is not a radical statement. (The value of a glass of water in the desert is greater than when lakeside.) And yet it is violated all the time. Salespeople keen on articulating value propositions to clients risk making the world look like a nail to match their value proposition hammer. We know better than to sell product vs. solution, but it’s so tempting when the “product” is disguised as a total value proposition.

Note: this can work in sellers’ favor. Over half my clients already see what they want in my offerings by the time they contact me. They articulate my value proposition for themselves. And unless they’ve gotten it quite wrong (not very common), there’s little point in forcing them to tweak it. At that point, the imperative to add value as the opportunity presents itself becomes the key task.

Selling Value and Buying Value

Suppose you haven’t productized the value proposition. You’re engaged in a constructive dialogue with an interested client. You’ve articulated your value proposition, they comprehend it, and it meets their needs. However, the same can be said for two competitors, each of whom is also talking to your potential client about increasing top-line revenue by changing the account development process.

Several issues then arise, such as the level of detail. (Just how does your approach to changing the account development process differ from theirs?) You could call this a deeper level of value proposition, but below some level it starts to look like just product variations.

But the biggest issue for buyers at this point is often not the value proposition at all, but the confidence or trust the buyer has in the seller. Confidence and trust can not only overcompensate for lower stated value, but they can overturn the value proposition entirely.

Expected Value

Consider two firms competing for a bid, with general agreement on the value proposition that the client is looking for. Let’s say the economic value calculated by each firm is about net $5 million. Sophisticated decision analytics might reveal the client has 90% confidence that firm A will deliver fully on the expected value, but only a 75% level of confidence that Firm B will do so.

That’s 15 percentage points variation in expected value—the same as if one firm had quoted a value of $750,000 more than the other! It’s also a discrepancy often sufficient to entirely wipe out the fees difference between the two sellers. Even greater discrepancies emerge when the issues turn to, “what if things go wrong? What will they be like to work with then?”

Yet this discrepancy virtually never gets talked about—at least not in a direct and quantitative way. The discussions are more along the lines of, “I don’t know. I just don’t feel like when push comes to shove they’re going to be able to get with our program.”

If you lose a bid and are lucky enough to get some post-bid debriefing, you’re not likely to hear, “Well, we just didn’t feel like when the chips were down you’d be able to get with our program.” That would be the corporate version of politically incorrect speech.

Instead, you will hear, “The other guys had a more compelling set of resumes on their team, ” or “We just felt like we had to go with their longer track record in this area.” In other words, the language of value proposition gets cited as post hoc justification even though it was not the basis for the actual decision. More prosaically, people buy with their heart and rationalize it with their brains.

Trust Can Even Overturn a Value Proposition

I’ve been on both ends of this one. I won a job by telling the client they flatly didn’t need to do a significant part of the job they were requesting. I didn’t win because I came up with a better value proposition; I won because I showed I could figure out the right thing to do. And the proof of it was they didn’t bother to solicit other bids around the new value proposition.

Sadly for me, I’ve lost this way, too. It’s not about picking the right game, it’s about picking the person who knows how to pick the right game.

The Role of the Value Proposition

Too often it’s assumed that the purpose of the value proposition is so obvious it doesn’t need stating. Doh! We assume clients buy value, clearly expressed, and tightly calculated. After all, that’s what they say they do.

There are seriously valuable roles for a value proposition, of course. They are:

  • To force the seller to have a Point of View: my client may or may not buy what I’m selling, but my statement of it marks a beginning point of discussion, a coherent account—one that suggests other ideas, proves I’ve thought things through, and shows I am worthy of valuable time.
  • To give the buyer “air cover” in justifying a decision internally: a B2B buyer wants to be able to tell anyone who asks, but especially his superiors, that they bought a proven product with a 35% ROI that will provide a 15% CAGR by an experienced-based approach to account management. They do not want to tell everyone they chose vendor A because, gee, they really felt good about them—even if that’s the truth.
  • To undergo a required, universal protocol: like meeting ISO standards, following tax rules, or complying with traffic laws, the tight definitions that come from rigorous thinking about value propositions are an assurance of quality. They may be a little pro forma, they may be subject to some tweaking, and they may not be a guarantee. But if everyone must do them, they form a common denominator by which to compare something of importance—value.

Value propositions are powerful, useful, and often necessary. Typically, however, they are not sufficient. Don’t go to into the sale armed with a value proposition alone.

 

This post originally appeared on RainToday.com

When to Offer a Low Price

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Last week, we talked a bit about pricing low to get the sale – and how that is not always the best option. But when is it okay to offer a low or  lower price? There’s always an exception (or two) to every rule out there. So, if you want to know a bit more on when you should offer a discount – read on.

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Few things in business have such dramatic impact on customer perception as how you handle your pricing, particularly when and how you offer discounts.

People may evaluate your products or your service by averaging out multiple experiences. But drop your price just once, and you’ll see how hard it is to recover. For a current example of how powerful your pricing image is, consider Bill Ackman’s painful failure to revamp the image of JC Penney—away from frequent discounts to everyday low prices as a strategy.

Yet in professional services and complex businesses, we play with offering discounts all the time. Shouldn’t we have a strategy behind it?

Don’t Just Stand There: Stand for Something

There is no one “right” approach to offering discounts. Your approach will vary with your business, your objectives, and your markets. But there are some things every approach should do:

  • You should have a rule for when to discount.
  • That rule should be easily explainable to clients.
  • You have to be willing to live by the rule.

That may sound obvious. But how often have you heard things like, “Don’t tell Bill that Joe got that price. It’ll only encourage him to want it,” or “Those guys’ll do anything to get the business.” Those statements indicate a lack of policy, and that’s death on your reputation.

What to Stand For

Again, your business will vary. Here’s what I decided for mine. I run a high-end professional services business, offering speaking, training, coaching, and related services. I want to be known for high quality, professionalism, and subject matter expertise. And in my case, because the subject matter is trust, I need to be seen as completely above suspicion.

It’s clear, then, that I need to articulate and live by some rules about when to discount. Here’s what I came up with over the years.

1. Frequency. I want to be at the opposite end of the spectrum from a JC Penney strategy of frequent discounting. I don’t want clients looking for bargains. If they’re looking to price shop, I want to send a subtle message that they’re in the wrong place.

2. Exceptions. To help that message, I need to be very clear about where discounts are appropriate. In my business, I can clearly state three such situations:

Volume. In my business, perhaps the biggest cost is cost of sales (the time, expense, and investment it takes to generate professional fees). It stands to reason that if someone can reduce my cost of sales, I have room to pass some of those savings along in lower prices.

The biggest example of that is a simply volume discount. The economics of selling one training session to 10 clients vs. selling 10 training sessions to one client are pretty clear. I am happy to receive multiple orders, and I’m happy to offer volume discounts to reflect it.

For me, volume discounts are easy to explain and easy to justify.

Special Situations—For Me. Sometimes I want to work in a new industry or with a novel offering. Those situations are as important for me as they are for the client. In those cases, I will offer a significant discount. I don’t want to shave nickels; I want to send a message about what is important and what isn’t. And in those cases, it’s about the learning. Those kinds of discounts rarely happen.

Special Situations—For the Client. Non-profits never have the kind of money that corporations do; most associations are limited as well. I don’t say yes to all those requests, but when I do, it’s only reasonable to price “off-label.” (Government is a special case, and one I won’t go into here.)

3. Non-Exceptions. That’s about it. That leaves a lot of other situations where I choose not to discount. It’s worth pointing them out:

Pleas for budget. Sorry, I have a list of charities, and corporations with a squeezed budget this year are not on the list. And make that never if you’re in the pharmaceutical or financial services industries, or if you have office space in midtown Manhattan. I have convinced myself that I need your money more than you do.

Bargaining. I have a simple way of declaring that this is not a bazaar: transparency. I explain my business model, explain when and how I give discounts, and—that’s it. I recall one client who, after our initial phone call, said, “I assume that if we go ahead, you’ll grant us our customary 20% discount.” He assumed wrongly.

The Positive Alternative. “Just say no” may (or may not) be a good strategy for drug usage, but it’s not a satisfactory answer to a client on the receiving end. None of us like to be told no, even with a great explanation.

Over the years, I developed another business practice that turned out to have a great side benefit: making people appreciate my saying “no” to discount requests. That practice is to simply take a few minutes extra to talk with them about their situation and refer them to someone else who can help them.

I am a very small player in all the markets I play in. I am far from the only one providing great service. If someone doesn’t happen to fit my business model, they may be caviar and champagne for someone else’s model.

It costs nothing to spend a little time thinking about alternatives for clients who don’t quite fit with my needs, and it generates huge amounts of goodwill. It’s a small investment with a big marketing return: they may come back when they have a need that is a fit with me, and they may speak well of me to others. And—they’re no longer complaining about how I don’t discount.

Again, my model is not the only one. You have to decide what’s right for you. But whatever it is, it should be clear, it has to be explainable, and you have to be willing to live by it.

 

This post originally appeared in RainToday.com

And the Winner Is Low Price. Wait – No…

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It’s a time-honored business strategy – low prices. Michael Porter codified Low Price as one of three generic competitive strategies, but it’s not like it wasn’t already commonsense in  every business culture. Still, it’s remarkable to see the over-reliance on this particular strategy in our “modern” times.

Which leads me to ask: Just what is it with low prices?

You see products and services being sold on the basis of low price every day, all around you. Yet you’re also well aware that you shouldn’t compete on just price—that price competition is ruinous and that low prices suggest the absence of larger value.

But just what does that mean for your business? Don’t take my word for it; find out for yourself. Are you in a vicious, cut-throat, price-gouging business? Or are you in one of those cushy, big-margin, fat, dumb and happy businesses that doesn’t have to worry about price competition?

You may be surprised at where you fall on the continuum.

The 3-Question Price Competition Quiz

First, make a subjective estimation of where your business stands on a price sensitivity scale of 1 to 10, with 1 being “price ranks very low on the scale of our customers’ concerns” and 10 being “low price is just about the only item our customers care about in this business.” On which side of 5 does your business lie? And how far over toward the end?

Second, make a list of the last 25 competitive bid jobs your company bid on—and lost.

Third, make a list of the last 25 competitive bid jobs your company bid on—and won.

Now, for the “lost” list: in how many of the 25 cases where you lost the competitive bid did the client say something like, “Nice job. Thanks for bidding, but, well, you were just a little too far out of line on price.” In other words, how many jobs did you lose on price? What percent is that of the 25?

And finally, for the “won” list: in how many of the 25 cases where you won the competitive bid did the client say to you, in effect, “Congratulations, you won the job; looking forward to working with you. By the way, the reason you won was you were the low bidder.” In other words, how many jobs did you win on price? What percent is that of the 25?

And the Winner Is …

Let me guess: your percentage lost on price is larger than your percentage won on price.

Let me guess again: your percentage won on price is closer to zero than it is to 25%.

Another guess: your percentage lost on price is less than half.

Another: the ratio of your percentage lost on price to your percentage won on price is 2.5:1 or more.

And finally: looking at your subjectively estimated ranking of your business’s level of price competition, does it fall on the same side of 5 as your estimated wins and losses based on price?

Now, if those guesses are wrong, please write me. I want to know what business you are in! Because for most B2B businesses, particularly those with larger, more complex sales and services offerings, those guesses are well-based on historical data (my data, that is, from giving the quiz in classes).

The Pricing Conundrum

Assuming your results look like my guesses, that raises several conundrums.

One conundrum is this: “If we’re such a price-competitive business, why do both wins and losses appear to be less often based on price than on something else?”

The other is this: “Why do we seem to lose on price more often than we win?”

The answer to both conundrums is that price is overrated as a factor in buying decisions. The real question is why? The answer has mostly to do with buyer psychology.

How Buyers Think about Price

One level of buyer psychology is available to us simply by asking, or by envisioning, what goes on in client organizations. Many consultants and accountants I talk to (and nearly all lawyers) have a tale about how the client’s procurement process is destroying quality—”all they care about is price.”

That is not what the procurement people will tell you, however. Procurement specialists have little interest in incurring the wrath of internal clients with legitimate quality concerns just to be able to say they got the lowest bidder. Value and quality are hardly irrelevant to their concerns.

And assuming your data is like I suggested above, the low bidder doesn’t always win. In fact, the low bidder, it would appear, wins considerably less than half the time, even judging from the higher of the two numbers you estimated (percentage of time you lost on price). And considering the number of times you won on price, one has to wonder how the myth of price competition arose in the first place.

The answer goes deeper into buyer psychology. Suppose you worked for a client and were charged with telling the losing bidders the bad news. How would you deliver the message?

Perhaps you’d prefer to do nothing and just skip the unpleasant task. But you know someone has to do it, and you owe it to the bidders to give a decent explanation.

You don’t want to share too much about the decision process, however, for a variety of reasons—chief among which is you chose the winning firm because, frankly, “we just feel more right about working with them.” You can’t saythat, for heavens’ sake!

So, you end up with several generalizations. Your team wasn’t quite as qualified, the winner had a really strong track record, and that game-ending no-appeals-allowed reason—your price was just a little too high.

Price is an enormously appealing excuse. It’s quantitative (and we all know numbers are good, right?). It’s completely opaque—the proposer has no way of knowing anyone else’s price and would never ask (and only partly because of legal issues).

But most important of all, the bidder wants to believe price was the reason they lost. Because the alternatives are unpalatable: they don’t have good people, they don’t have a good reputation, they don’t appear trustworthy, and so on. No selling team, particularly a team that would be involved in delivering the work, is interested in a message like that!

So, price becomes their refuge. “Darn! If we just could have priced it a little lower. I knew it. The market is tough out there; next time we can’t afford to be so choosy. We need to get in there and fight. And if we have to lower prices to get the work, well maybe we need to do just that.”

And that’s how the myth of low prices gets perpetuated. The moral of the story: if you think you lost on price, think again. Price is just the most convenient excuse for something more fundamental.

 

This post originally appeared on RainToday.