How do we get the margins up to increase the bottom line?

This is a Sales Question and Answer article from guest poster Dave Kahle author and leading sales educator. Follow Dave’s latest Tweets at @davekahle.

Dave Kahle Sales QAS61

Question: It seems like the price is even more an issue today than ever before. In this environment, how do we get the margins up to increase the bottom line?

A. Thanks for the question. Believe me, I understand the constant pressure on your price. I wish there were a simple, 25-words or less formula for increasing your margins. There isn’t. What there is, though, is a set of tactics that have been proven effective in increasing your margins, even in the most difficult of markets. Pick and choose from this list of specific, proven tactics and then apply them methodically, with discipline, over time, and watch your margins slowly grow.

1. Add a point to routine quotes and bids.

Most people get into ruts when it comes to quoting a certain product or range of products. We fall into habits and just naturally put a standard mark-up on the final price. Break out of the rut by trying one point higher. For example, if you routinely quote some product category at 20 percent gross profit, try it two or three times at 21 percent, or 20 ¾ percent. Chances are you are leaving some money on the table by using the same mark-ups you’ve used for years.

I know one point doesn’t seem like a lot, but it typically falls right to the bottom line. Multiply that times every product and quote that you make for a year, and you would have added substantial additional margin to your business.

2. Add a point on price and product changes.

Let’s say several of your customers are routinely buying a product line from you. You have it in at 18 percent gross margin. The manufacturer raises his price to your 3 percent. You refigure the customer’s new price at 19 percent margin. You’ve just gained a point.

Every price, packaging, and product change is an opportunity to add a point or so.

3. Promote higher margin items.

In every industry with which I’ve been involved, there are high volume items that almost every sales person focuses on, and then there are very low volume items that most people ignore. That’s too bad, because the high-volume items are usually the lowest margin, while the odd ball requisition items carry margins that are often multiple times higher.

A low volume item that is too small in actual dollar volume to interest your competitors is a golden opportunity to increase your margins. So, make it a point to present and demonstrate those low volume items that are not nearly as price sensitive. When most of your business is going through at 18 percent, it’s amazing what a few items at 45% can do for your average.

4. Obtain the competitions’ pricing.

We all try to do this before the deal is done. It is, however, much easier to gain this information after a deal is done and then use it for the next round. After the deal is done, and the customer has made up his mind, just ask about the competitive pricing. Whether you won the deal or not you can still use the opportunity to collect useful information. Ask the customer to share with you the prices from everyone else, after the business has been awarded. At this point, there’s little pressure on the customer to keep that information confidential. After all, it’s a done deal. No harm in divulging that now.

As you gather the information after the fact, analyze it to see what patterns your competition is using in their price quoting.

Use the patterns and insights you gained to predict their next quote. Instead of fearfully using very low margins because you are afraid of losing the business to a competitor, you’ll have much better information on what your competitor will probably do, and you’ll find yourself not deeply discounting so often.

5. Give the customer a reason to pay more to buy it from you.

Why should the customer pay more to buy it from you? So many B2B sales people look on every sales call as purely a discussion of product and price that they fail to consider the totality of the factors that influence the customer to buy. Now, if there is absolutely no difference between buying it from you and buying it from the other guy, the n the customer should go with the lowest price. However, I very rarely have seen there to be absolutely no difference.

Your job is to identify all the things that are different when the customer buys it from you. Put those things into a list, turn them into statements of benefit for the customer and memorize the presentation.

Then when the customer says, “You’re a point or two too high,” instead of discounting, share with the customer what he /she receives in exchange for that point or two. If there is some valid economic impact, then you’ve just added a couple points to your margin by giving the customer a reason to buy it from you.

There is no one simple strategy. Increasing your margins is a matter of a methodical, disciplined approach applied over time. Consistently use the tactics discussed above, and you’ll see your margins gradually grow.

Copyright MMXIII by Dave Kahle

All rights reserved

About the Author:

Dave Kahle is one of the world’s leading sales authorities. He’s written ten books, presented in 47 states and ten countries, and has helped enrich tens of thousands of sales people and transform hundreds of sales organizations. Sign up for his free weekly Ezine. Check out our Sales Resource Center for 455 sales training programs for every sales person at every level. You may contact Dave at The DaCo Corporation, PO Box 523, Comstock Park, MI 49321, or dave@davekahle.com

The Devils in the Details when Selecting CRM Software

Advice for Small to Mid-Size Businesses

The Devil is in the Details when selecting CRM Software

The CRM software market is booming and is expected to increase 12% year over year according to Gartner. Despite this growth user adoption is extraordinarily low, customer satisfaction is poor and a large number of companies have indicated that within the first year they had switched CRM vendors because the product they selected did not provide the features they required. I can confirm this because the majority of the inquiries my firm gets every day is from companies that already have a CRM solution, but indicate that it does not meet their needs or is too hard to use.  The question is, why is this happening at such an alarming rate and what can you do to ensure this doesn’t happen in your business?

Let’s first look at the cause of this which I believe is two-fold.  Let’s start with companies that are new to CRM or first time buyers.

#1 Poorly Defined Business Requirements

I cannot begin to tell you how many companies my firm deals with that not only have poorly defined business requirements, but in some cases, no requirements at all.  My team will ask why they are looking for a CRM solution and what specifically it needs to do.  The answers are always generic; we need a good CRM system that’s easy to use.  This is a clear indication that management has not taken the time to define and document what they require from a CRM solution, what problem(s) they are trying to resolve, and how they will measure success.  In addition, chances are the people evaluating the products are not professional software purchasers.  In fact, very few people are.  They have no guidance from management and are not experienced enough to know what questions to ask. As a result, their decision is often based on perceived value, cosmetic appeal and price.  This is not the proper approach to selecting the right CRM solution for the business and I believe is the main culprit of the problem.

#2 False Expectations

Consumers love free or low-cost products and for some reason many small businesses believe they can get everything they need in a free or low-cost CRM solution. Of course, if you have not taken the time to document your specific business requirements and you are looking for a “good system that’s easy to use” as stated above, a free solution looks enticing. In fact, if you are just looking to manage contacts, notes and activities some of these are pretty good.  By this I mean they work and will not blow up on you. But these products are cheap or free for a reason.  They typically are chock full of limitations: data entry and storage limitations, functional limitations, no workflow capabilities, limited or no customization, no reporting, no filtering of data, no security permissions, and no integration with third party products. Telephone support is non-existent, and don’t expect to see new features or product enhancements.

Of course, this is by design and you cannot fault the vendor.  If I am offering you my product for free, I don’t want to hear from you.

Perhaps most important is the hosting, management, and security of your data.  I can tell you that my firm uses one of the best data hosting services in the industry and it’s not cheap. How someone can offer a quality data hosting service for free is absolutely amazing and guess what, they can’t.  While the majority of companies that contact my firm never ask where their data is, if it’s properly backed-up or how can they access it in an emergency, I would suggest that if you are considering a free or low cost solution, you pay close attention to what they are offering. Regardless of the above if you are a very small business, with a few basic requirements and a limited budget you may find some value in these offerings. Just don’t have false expectations of what you are going to get.

Searching for the Right CRM

Narrowing your search for a CRM solution does not have to be that difficult because the solution providers have done a pretty good job of positioning themselves by market sector.  In the small business sector, there are several hundred solutions available and most of the firms are struggling to differentiate themselves. These companies typically offer a basic out of the box, one size fits all solution for managing contacts, notes, activities and sales.  They target companies of 2 to 10 users who have limited requirements and limited budgets.  This sector has to some degree become a bit of a race to the bottom with more and more companies either reducing their price or offering a number of free users if you select them.  It’s hard to differentiate these products or find a compelling reason to select one over the other and with pricing so low I am not sure there is a sustainable business here.    If you are considering one of these solutions I recommend you check the company’s data hosting service, what level of customer support can you expect and how often product enhancements are made and offered to customers. This will tell you more about the company and its sustainability which may be more important than the product itself.

The middle market is the most challenging of all and has the least amount of product offerings.  CRM solution providers that cater to this sector typically offer what is referred to as “All in One CRM”.  This means you can automate all front office services such as Sales, Marketing and Customer Service. Some vendors now offer integrated Project Management as well.  These products offer comprehensive functionality, advanced reporting and analytics, customer portals and integration with third party software programs. Data hosting services are typically best in class and the software is supported by a highly trained staff of professionals that can ensure that the product is tailored to meet your specific requirement and that your staff is properly trained so that they realize the maximum value from the solution.

The most interesting thing about these mid-market offerings is that in many cases based on the functionality you select, they are not that much more expensive than the low-cost ones that offer half the features, limited support and second or third tier data hosting services.  If you really want to get the most from a CRM solution and believe your business will be growing in the future I believe these offerings are the true value play.

Lastly are the products designed for enterprise level companies.   These products target Fortune 500 firms that require use of the product for several hundred and in some cases, several thousand users.  They have very detailed functional requirements and often require extensive customization, integration with several disparate systems like e-commerce, ERP or accounting systems and multi-language, multi-currency support. Installation and on-boarding of these products can take several months.

So, there you have it. A quick analysis of the industry and some tips on where to focus based on the size of your business and the level functionality and customer support you will require.  Remember however, “The Devil’s in the Details.”

About the author:

Larry Caretsky is President of Commence Corporation, a leading provider of CRM solutions for growing businesses and a top 20 selection by Capterra and other software review sites.

Caretsky is considered an expert on CRM and has written numerous white papers on the subject and an e-book, Practices That Pay.  These are all available on the company’s website at commence.com/blog.  You can contact him directly at sales@commence.com.

How to separate yourself from the competition

This is Sales Question and Answer #60 from guest poster Dave Kahle, author and leading sales educator.
How to separate yourself from the competition

Q. A customer (a contractor) has given me and one of my competitors five minutes to present our respective products to him. I know all the features and benefits of the product, but I don’t want to be like everyone else and give him what he’s heard before. At the same time, I want to impress him and get the order. Do you have any ideas that will help make my presentation different, while still highlighting the product’s benefits?

A. Yep, I do. I am reminded of one of the presentations I witnessed in our one-on-one training program. This is a program where myself and one other trainer take six sales people and work with them extensively and intensely from 8 AM till 5 PM every day for a week. They basically role play different aspects of the sales process, we video tape them, and then we critique them. They then do it again, but better.

On Thursday afternoon, we were practicing “making a presentation” — a 20 minute role-play. One of the sales people felt he had to mention every feature of the product, and droned on and on for over 45 minutes. The person playing the role of the customer actually fell asleep, and the sales person never even noticed!

DON’T DO THAT!

Trust me, your customer doesn’t care about every possible feature. What he does care about is which of those might be important to him.

So, I hope that you have already spent some time with him finding out what is important to this particular customer. If not, see if you can do so. Over and over again, your competitive advantage comes from your knowledge of the customer – not from your knowledge of the product.

If you can gain some insight into this customer’s needs, interests and hot buttons, you can build your presentation around them. So, once again, scheduling this time with him and gaining that inside information is the highest priority, most important step you can take.

Now, it may be that you already have that information. If so, good. If not, and you cannot get that time with the customer, then you are going to have to work on assumptions you make about these kinds of customers. That is never the ideal situation, but sometimes it is unavoidable.

Stop and think, then, about what would be important in this product for your customer’s customer. The people for whom your contractor is building – what do they want in a product like this?

Make a list, and then rank them from highest priority to lowest priority. Since you only have five minutes, eliminate all but the top three or four items.

Now do the same thing for your customer. What do contractors like him want in a product like this? Go through the same exercise – make a list, rank them in priority, and then eliminate the lowest priority items.

Don’t worry about not mentioning every thing this product has to offer. If the customer was interested in the entire list, he would have provided you 60 minutes instead of five.

In the presentation, begin by first talking about your customer’s customer. Talk about what he/she wants to see in a product like this. Then mention the few benefits that you have selected for them. Then, move on to talk about the customer. What customers like him typically want in a product like this. Show how your product provides those benefits.

Your strategy is to present the most important features and benefits of the product, and to do so through the perspective of the customer’s needs and wants.

If you can do that, you’ll separate yourself and your product from the competition and clearly and powerfully communicate to the customer. And that’s the best you can do under the circumstances.

Good luck!

Copyright MMX by Dave Kahle.
All Rights Reserved.

About the author:

Dave Kahle is a successful entrepreneur who, for over 25 years, has served as an internationally-recognized authority in sales and sales systems. His twelve books have been translated into eight languages and are available in at least 20 countries. His focus now is to share the wisdom and insights he has gained with people who want to grow their businesses, enrich their careers, and live a more fulfilled life. He has presented in 47 states and 10 countries. In addition, he is a chapter president for Truth@Work Christian Business Roundtables, and facilitates both local and virtual executive meetings. He and Coleen split their time between Sarasota, Florida and Grand Rapids, Michigan. Visit his blog here.

Compelling Reasons to Select Commence as your CRM Provider

2 Reasons CommenceCRM is a Top Choice for SMBs

There is a lot to consider when selecting CRM software and with several hundred options, choosing the right one for your business can be a grueling exercise. While the press typically highlights industry giants Microsoft Dynamic and Salesforce.com, recent news has been about an up and comer that is quietly gaining market share. That company is Commence, makers of Commence CRM.

The company is firing on all cylinders and was recently listed as one of the Top 20 Most Popular CRM products for small and mid-size businesses by Capterra, who periodically reviews industry software products. Commence CRM also made the Gartner’s FrontRunners Quadrant for CRM solution providers and is listed by Business-software.com as a Top Choice for small to mid-size businesses.

Commence CRM is targeted at businesses that need more than the traditional low cost, one-size-fits-all solutions can provide, but who do not need or want the cost and complexity of higher end enterprise level systems. The company offers a number of compelling reasons to select them as your CRM solution provider.

First, the product offers a comprehensive suite of applications that rival enterprise level products at half the cost. In addition to the traditional Contact Management and Sales Automation found in most CRM solutions, Commence CRM offers:

  • Marketing Campaign Management
  • Group Calendaring
  • E-mail integration
  • Activity Management
  • Help Desk Ticketing system
  • Knowledgebase and FAQ
  • Customer Portal
  • Reporting
  • Built-in Analytics

Commence CRM also recently added a fully integrated Project Management application that is getting much fanfare.

Furthermore, the applications are all modular in design, which means you can select only the functionality you need for your business today and add functionality later. Commence CRM is an all-in-one that you will not outgrow.

Commence CRM also includes administrative functions for easy management of the product, multi-level security permissions, and a high degree of customization that is simply not found in competitive products at similar price points. Add a top tier best in class data hosting service, outstanding customer reviews, and customer support that is provided by an assigned account manager and you have a solution that is tough to beat. Visit commence.com for more information and ask for a free trial.

Chase the “Big” Ones?

This is a Sandler Weekly Sales Tip from guest poster Shulman & Associates.

Every million-dollar account started as a 'nickel and dime' account.

The STORY:

Nick had finally started selling his company’s product on a steady basis. For the past nine months, it had been rough finding enough clients who wanted to buy. Now he was comfortable knowing that his commissions were going to be enough to cover his basic expenses. But something was nagging him in the back off his mind.

I’m going, he thought to himself, flat-out every day, six, sometimes seven days a week, and I’m just making enough to cover expenses. How do I find more time to sell more so that I can actually save some money?

Well, he thought, there is only one solution. I need clients who buy more often than the ones I currently have. And the new clients will buy in bigger dollar amounts.

So Nick sat down on Sunday afternoon, his first day in nine months, and calculated the dollar amount of business he needed to generate to really prosper. He then divided that total by the number of clients he thought he could handle.

Wow, he thought, that’s one big pile of clients. I could save time by dropping some of the clients I have now to one of the new guys. A couple of the nickel-and-dime accounts. And that would free me up to go after the really big ones. Boost their buying. Yeah.

Nick knew that this decision was going to throw him back into the 24-hours-a-day, eight-days-a-week work schedule. But that’s OK, he thought to himself with a grin. I can do it because I’m ready to go all the way. I can handle it. No problem.

Some four hours later, Nick had determined that just over half of his current clients could be turned over to one of the new salespeople. The time he would save by not servicing the nickels and dimes would be spent on pocketing the silver dollars.

The RESULT:

Nick is going to be working 48 hours a day, twelve days a week! Perhaps he will find and sell those big clients. In the meantime, he will have thrown away all of the good work he has done for the past nine months without any realization of just how good it was.

DISCUSSION:

Nick has been seduced by a common salesperson’s myth-that sitting out there, wherever “there” is, are the “big” clients just waiting to be approached. Once the lucky salesperson finds these big clients, obviously overlooked by every other salesperson in the world, the “just getting by” days are banished forever.

Along with this myth is the belief, held by many in sales, that small clients take a great deal of time for very little compensation. In other words, small clients hold the “real” salesperson back from the big time. The sooner you can “dump” the moms and pops, the better.

So, goes the reasoning, you can save time and make more money by going after those clients who can spend more money than the ones you currently have.

This all makes sense if you accept the faulty premise that the “big” ones, with more money to spend, are just sitting out there waiting for you to call on them. Do you really believe this?

APPROACH:

The first step in evaluating your client base is to know that the client is buying from you and why. The second step is to learn from the client what else you might provide for him either now or in the future. In many instances the client’s response will be, “We don’t need anything else from you at this time.” Weak salespeople accept this response. A sales professional would respond much differently.

“Excellent. Since this in not a sales call, we can talk off the record. Would you have any objection to telling me where you see your business in three years? I need to evaluate our future business relationship.”

This statement will quickly tell your client that you are a sales professional, not someone who is just looking for the quick buck. Second, you will learn what your potential sales will be to this client for the next year or two. Third, you are in the position of being in on the client’s planning. If you can provide some service or product at some point in the future that will enable the client to reach his goal, and you show him that now, you have just cemented a long-term business relationship.

THOUGHT:

Every million-dollar account started as a nickel-and-dime account. Every last one.

About the author:

Shulman & Associates is a professional development firm specializing in sales and management training and sales force evaluation. Visit their website and sign up to receive the free sales tip of the week. Learn how to increase sales, improve margins, and accelerate new business development.