Note: To read the previous installment, click here.
Deal size erosion, downward pressure on price, discounts by competition, and unfavorable business terms all contribute to a growing unease in the software business about the risks of spending too much time on large deals that end up too small. What approach should the salesperson take? Should they simply give up and assume they'll always be on the weak side of the negotiating table without much leverage?
"Not so fast" was a recent comment from the vice president of sales for a provider of digital data archiving products. "As long as we continue to demonstrate how we're different and why we represent better value, there's no reason to enter a bidding war with our competition. Only if we fail to do that should we expect to discount."
Gartner Group, in a 2003 software industry report, noted 45 percent of Global 2000 clients could not distinguish any difference in enterprise solution proposals they received from a variety of vendors.
There's a prevailing view that you should expect to give up a lot in the negotiation. But it doesn't have to be that way. Instead, software companies need to focus on how to build long-term value into each client relationship. The only way to do that is to help the client see how and why you're different from your competitors.
When salespeople fail to achieve this, it leads to "siloed" negotiation where the discussion surrounding the exchange of product and or services for fair monetary compensation is treated as an "event," usually at the end of the sales cycle. When negotiation is "siloed" toward the end of the decision cycle, opportunities are missed in earlier interactions to build "currency" with the client on the way to the negotiation table.
For example, during an initial or follow-up discovery session, the client may add buying criteria involving the insertion of SLA (service level agreement) guidelines in an effort to minimize risk to the organization. If this is a requirement you can map against with more value than your competitors, the time to bring it up is when it is first introduced—not in the 11th hour when most salespeople attempt to "defend" the value their solutions represent.
"Integrated negotiation," by contrast, adopts the view these exchanges take place during a series of conversations early in the cycle, and continue though the close of business and into the post-sale relationship.
In fact the larger the opportunity, the greater the need to integrate the negotiation discussion into as many client interactions as possible. It's much easier for both the client and vendor organization to discover and discuss the mutual value of a long-term relationship at each interaction point, rather than trying to define value in a vacuum in the final hours of the decision cycle.
The CRM Factor
Without entering into a full-blown discussion on the relative merits of implementing a CRM system, let's start by saying this: Pursuing and winning an enterprise software opportunity without leveraging CRM technology and process is like creating an agreement to merge two companies on the back of a napkin. It simply won't suffice.
Whatever issues companies may have had in the past in implementing these systems, the point remains that there's a lot of critical information that needs to be shared across the selling organization about the enterprise opportunity: Details on key executive decision-makers, information on multiple areas of potential need within the client organization, communication for and between team members preparing for calls and meetings, updates to management including key metrics being tracked, and so on.
Only systems that are designed to capture, store, and share such information can keep pace with all the data points that are characteristic of the large software deal. One of the best illustrations of this need is when the CEO or CFO of the vendor organization receives a call from a salesperson or manager asking for assistance to push a deal "over the finish line." Without a single, shared repository of information on the opportunity, two things are likely to happen.
First, the salesperson will take his eyes off the target at exactly the
wrong time to prepare a report for the CXO, detailing all the information that could have been captured in the CRM system. Secondly, recalling critical conversations from memory and searching for notes written on scraps of paper will only increase the chances of misinformation and lead to a potentially embarrassing lack of preparation on the part of the vendor executive.
Let's go back to the same $450,000 that the some enterprise technology vendors spend to acquire a major client. Now add to that amount some portion of the budget spent each year on CRM. With all the time, resources and funds expended in the quest to capture the enterprise software deal, why jeopardize it with misinformation, or worse, missing information?
End-user adoption an issue? Here's a thought: Since the introduction of CRM and SFA systems in the mid-1980s, companies have historically embraced one of two common approaches towards getting salespeople to use and update these systems on a regular basis.
The first is a more passive approach relying on hopefully well-designed, user-friendly environments to speed adoption rates. The second is the "heavy-handed" method where effective utilization of the system by the sales force is an absolute "condition of employment."
We've seen many examples of both approaches, and their relative pros and cons can be argued at length. But the association between winning the enterprise sale and maximizing technology and process is unmistakable: The larger and more complex the opportunity, the more essential it is that deal-related data is captured accurately and shared immediately. From a variety of perspectives, CRM systems are the best place for that to happen.
When companies take the time to do careful win/loss analysis, especially on large opportunities, a common pattern emerges. Enterprise deals are often won or lost on the basis of what intelligence the selling organizations had or didn't have.
How often has it happened where your company had the better solution, reputation, references, support, and even the better pricing level and still lost to the competition? In most cases, you lacked a critical piece of information that gave your opponent a last-minute, decisive advantage.
What kind of information do many salespeople lack? It's not data about the company or industry. For the most part, this type of intelligence is readily available and we would suggest too often the exclusive focus of research efforts by sales executives. The kind of information that typically sinks a sales campaign (when your competitor has it and you don't) usually involves intelligence about the competitor themselves, or about a specific executive decision-maker and their personal initiatives and motivations.
Truly resourceful salespeople know that if they search long enough, they will ultimately find that one missing kernel of knowledge about a competitor's strength's and weaknesses or an executive's personal goals that can make all the difference. This, of course, can be a very time-consuming endeavor.
In fact a 2005 survey by BluePrint Marketing suggests salespeople spend as much as 40 hours a month looking for and re-purposing information to support their selling efforts. Fortunately, there's a new crop of sales intelligence applications that speed up the process of collecting, organizing, and making such data available to the sales force with a just few clicks of the mouse. Now that some of them are integrated with popular CRM systems, they're worth a look.
The Path Forward
Despite all the sales training that has taken place to date, the natural ability to identify and capture the enterprise software deal remains inherent in too small a portion of each sales force. Stories abound of heroic efforts to land "the big deal" in the 11th hour by doing what EDS used to call "painting the sky black with eagles." In other words, put a lot of people on planes and overwhelm the client organization with resources in an effort to prevail in a contest of will against the competition.
For the 10 percent or so of the sales force that has demonstrated the propensity to do this on even a semi-regular basis, it has become a way of life in the complex sale environment. Not so fortunate are the dozens of other client opportunities that slip through the cracks each year, never living up to their full potential for generating substantial additional revenues for your company.
It's time to learn from the past decade of hits and misses in the enterprise software space and bring the sales force up to speed. Great hiring will always be the cornerstone of any plan to build great selling teams that can identify and close the larger deals.
The rest comes from better skills development, knowledge, and education on the topics covered in this series. The path forward doesn't require, nor does it promise, any "silver bullets." What it does require is the consistent application of all the acquired wisdom gleaned from selling large software deals.
The first step on that path is awareness—awareness of what your salespeople may not see when they first come across an enterprise opportunity, and awareness of how effectively (or not) they move forward when they do.
Chris Deren is the CEO of SellMasters, a global sales training company in the high-tech industry. Stephen J. Bistritz, Ed.D., is the president and founder of SellXL, a worldwide sales training and consulting firm, as well as the co-author of "Selling to the C-Suite."