Selling your way out of a recession

Posted on 7 Apr 2009 by The Manufacturer

Evidence suggests that it pays to train your sales staff better in a recession. Steve Thurlow, business director, manufacturing, at sales and negotiating skills training provider Huthwaite International outlines some successful sales strategies to deploy in tough business conditions.

‘Recession’, ‘credit crunch’, ‘ economic austerity’ – there are plenty of euphemisms for the state of the UK economy through 2008 to date. Yet it is only now, a full year on from signs that the financial crisis had begun to bite, that on January 23, the Office for National Statistics revealed a second consecutive fall in GDP, confirming that the UK is technically in recession.

In response, well-established manufacturing companies have downsized operations sharply and a recent spate of redundancies has left businesses operating defensively. With firms looking to cut spending throughout the organisation, the axe often falls on staff training, at first a simple and obvious way of reducing costs.

But cutting training costs can be a flawed economy. It has been estimated by TUC general gecretary, Brendan Barber, that companies who do not train their staff are more than twice as likely to fail as those which do. One of the main reasons for this is that front-line staff, especially salespeople, need higher levels of skills to succeed when conditions are difficult. If salespeople are given training when times are good, surely their need for sustained training is even greater when times are bad?

How many of your sales team have experienced working in a recession before? How many of them have ever had to think through the different ways they must operate to differentiate themselves — and their company — from the competition?

With sales managers, ask yourself if they are experienced in developing recessionary strategies or have the fortitude to implement them? Do they have the skills and experience to guide their sales team through tough times? Without training or experience, many just hope for the best with sales. What they should be doing is planning for the worst. Many managers revert to pressing the ‘more’ button, but in all the sales research Huthwaite has conducted in the last 30 years, no companies have found that this works. In a recession, customers pay more attention to their purchasing decisions so it should be more about quality than volume.

Quality not quantity
Asking a sales team to make more calls, to chase up every scrap of potential business and put pressure on them to close sales can only work in an environment of low value sales. It might create a lot of activity, but in most cases it simply diverts them from the actions that might help win good business. And ‘more’ also assumes that there are more potential customers to sell to — not necessarily true in hard times.

At such times budgets are tighter, priorities change and more people tend to be involved in decision making processes, resulting in decisions that take longer to reach. No good can come of salespeople putting pressure on customers to close a deal in these circumstances.

A great mistake that many companies make is to believe that price is the only issue. If this were true, only the cheapest suppliers would survive. Yet time after time, organisations who charge a premium for their goods and services continue to win business and survive through even the most difficult trading conditions.

That is not to say that price is not an issue: on the contrary, when things get tough, price is a valuable weapon for customers to deploy. Yet in a very competitive market, all suppliers are forced to cut prices and the result is lower margins and price parity. Cutting costs only buys time, it is not a solution and it is not a strategy for survival.

The solution
It is about finding innovative and creative ways to differentiate the business in a ‘me-too’ environment. Research shows that in difficult conditions, companies are extremely risk-averse and more likely to opt for the safest, rather than the cheapest, option — this applies, irrespective of whether the purchase relates to professional services advice from accountants or lawyers or to the procurement of engineering equipment required to support a manufacturing process. In tough times, firms cannot afford to take too many risks so they play safe, often meaning they are willing to pay a premium for that low risk solution. To succeed, the supplier needs salespeople with the skills to convince the customer that they have selected the best and safest option.

It is vital to remember that the quality of the sales force is a crucial factor. One may cut production costs, or design and manufacture things more cheaply, but if a sales force is not selling, the product is worthless. In short, properly-skilled salespeople are the key to staying in business.

Less effective salespeople — and certainly those which have not experienced a recession or been trained for it — pursue every sales opportunity and become embroiled in time-consuming small sales. These eat up a lot of time and often result in low revenues and low margins.

More successful salespeople focus on their best prospects and spend time planning how to win that business, whether through tailored sales strategies or call plans. Instead of focusing on what they’re going to sell the customer, they focus on exploring what that customer needs and build up a relationship with them.

That sales skills are critical to a company’s success was supported in a survey of 244 senior executives of global companies conducted by consultancy Accenture in 2004, which showed that a lack of selling skills, rather than difficult trading conditions, was the most likely cause of under-performance. Two thirds of executives saw the sales team as the most important factor in achieving company growth and yet half considered their own sales force to be no better than their competitors. There can be no stronger argument for investing in skills training during difficult times than when, for many, survival rather than growth is the objective.

Sales skills to be addressed in an economic downturn

1. The ability to identify and develop customer needs

The most important skill needed in a recession is that of exploring, identifying and developing customer needs. Independent research revealed that training salespeople to use selling skills can actually increase sales, even in a recession.

In one study for telecoms group Motorola, sales increased by 17% in a trained group, while their untrained counterparts experienced a concurrent fall of 13%.

If one of your survival strategies is to win more new client business, then training your sales team to use questioning-based sales techniques might prove a sound investment. After training their sellers during the 1980s recession, Motorola increased sales to new clients by 63%. In addition, the average value of these sales also increased.

2. Train sellers to develop competitive advantage

In a downturn there is a greater need to win business at the expense of the competition. Sellers need to understand the strengths and weaknesses of their offerings and develop needs where they are strong, plus provide the skill set to explore and build the skills that deliver a competitive edge.

3. Develop stronger perceptions of value
Customers are more concerned about costs during a recession so salespeople need to demonstrate the value of the solutions they bring. Too often, they do this by telling the customer about the benefits they can deliver. A more effective strategy is to help the customer to think through the savings and benefits that will accrue from adopting the solution. Helping the customer to explore the savings and benefits themselves means they are more likely to identify the full value of the solution.

4. Teach salespeople to handle customer concerns about risk
As customers are more risk averse in a downturn, they are more likely to buy safe solutions they can trust. Salespeople need to identify potential areas of risk for the customer and help to eliminate them. Research by Huthwaite shows the ability to handle customer concerns is an essential skill in winning high-value sales.

5. Develop sellers’ negotiating skills
Price pressure is inevitable in a recession, often leading to salespeople making unilateral concessions to try to win or retain business. Where margins are already tight, this can mean taking on unprofitable business. Salespeople need to know how to negotiate concessions tightly while offering the client the best, mutually beneficial deal. Developing effectivenegotiation skills is one of the fastest and most cost effective ways of helping deal with price pressures.

Strategies for beating the recession
To increase your chances of survival and success in a recession:

• Don’t focus all your efforts on cost and price cutting
• Don’t dissipate your efforts by chasing every sales opportunity
• Focus your sales effort on the best prospects and address their needs
• Develop your sales teams’ skills to deal with this new market situation

Thus armed, manufacturing companies should be well equipped to compete for sales and even grow the business at the expense of competitors. Choosing to not modify your sales approach can be an effective strategy for becoming a victim of the recession rather than a survivor.