A Personal Note From the Author

Chief executives who used to ask me, "What do I need you for?" have learned that they need me to equip their sales forces with an answer to that same question when it is asked by their own customers that will give them a compelling reason to buy.

In an era when customers control the way they want to be sold and, by doing so, have superseded their suppliers' pretensions of account control; when products and services, however new, are likely to enter their markets as instant commodities; when margins are the reward for improving a customer's profits rather than for improving your products or services; either you never leave home without new competitive advantages to bring to a customer or you stay in the car.

Customer managers at all levels, even technically trained managers in R&D, engineering, and IT, are getting smarter about their businesses, not just their technologies. In the words of one chief information officer (CIO): "When one of our typical suppliers comes in, it's always some account manager with a classic product-based pitch. That's their comfort zone. They're just not prepared to say, 'Let's talk about where your business is going, and here's how we can help you meet your goals.' Maybe their top management can talk this way, but I never see them. They never see me either, so they have no concept of what my management is telling me I have to start paying attention to. Somebody says, 'He's in technology, so go talk technology to him.' But that's not really where I'm at anymore."

Today's account managers—no longer Arthur Miller's road warrior, who was "out there with a suitcase and a smile"—carry improved profits, not products, in their bag. Theirs is not the gift of gab but the greatest gift of all, being able to help customers grow their business so the consultative seller's business can be grown by high-margin sales in return.

Even at the time of this book's first edition in 1970, creeping commoditization was already in hot pursuit of proprietary brands. Sales representatives were already sounding alike, on the way to becoming commodities themselves. Price lists were already bargaining chips. Customers were already looking for help from their suppliers to make their businesses more competitive, but not many of their suppliers were listening; they were preoccupied with protesting to customers why each supplier was better than the others. Venting had become nine-tenths of vending.

The pioneers who were the first to put their hands in mine had the market all to themselves for improving customer profits. Phil Smith partnered with Oscar Mayer around a value proposition that opened up the packaging of their new product portfolio to his Continental Can Company in spite of duplicative competition with commodity processes and prices. Paula Brown partnered with United Technologies around a value proposition that opened up their telecommunications networks to her AT&T in spite of obsolescent technology and higher prices.

Bill Franklin and John Malone pushed and pulled their engineering-obsessed company, Hewlett-Packard, into proposing business values instead of operating specifications. Kevin Howell made sales history by closing a $1.25 million agreement in the midst of a Consultative Selling training program where his Digital Equipment account team and their customer manager were learning together how to partner in profit improvement. Danielle Buth goes on year after year being Salesperson of the Month at Siemens by reducing her small-to-midsize manufacturing customers' costs and increasing their revenues a little more each time she walks in their doors. GiGi McDougall comes away with a million-dollar-plus agreement from Microsoft for her Storage Technology System after a single six-hour-meeting—a rate of almost $167,000 per hour.

The Smiths, Browns, Franklins, Malones, Kearneys, Howells, Buths, and McDougalls of the world of Consultative Selling keep their eyes on the eagle: their customers. They never see their competitors who keep their eyes on each other and mutter medieval mantras about "killing the competition." For every sign on the walls at Hewlett-Packard that read "Kill DEC," there was an equal and opposite sign at DEC that read "Kill H-P." Meanwhile, their customer midlevel operating managers, whose names they did not even know and whose problems and opportunities were enigmas wrapped in mysteries, were looking in vain for help to avoid being killed by their own competitors.

The power of Consultative Selling to compel customer awareness, positive attitude, and acceptance has been proven over and over again by companies as diverse in size, industry, and nationality as Asea Brown Boveri and Zytron.

Lew Platt, the former CEO of Hewlett-Packard, liked to talk about the challenges that faced H-P and what H-P was doing about them because he thought that it built credibility with customers. Let's talk about you, he was apt to say. What do you think about "the H-P way" of reducing inventory? The way we're reducing receivables? The way we're reducing product design cycles? The way we're reducing manufacturing costs?

Platt envisioned H-P as "a functional, generic commodity business." When people challenged him with what twenty-five words he would use to describe H-P, he could do it in only two: measure and compute, without encumbering them further with a third word about their added value.

As far back as the 1960s, Tom Watson Jr. was restructuring IBM so it could become its customers' profit-improving consultant. "We make computers," Watson used to say, "but we sell customer growth by applying them." In many cases, Watson was able to prove that IBM could grow its customers more cost-effectively than they were growing themselves. A dollar invested with IBM, he went around telling customers, can yield a greater rate of return than the same dollar invested in your own operations. Then he would set about to quantify it.

Watson's competitors, meanwhile, had invented every reason in the world not to replicate his strategy:

  • "We call on a wide range of contacts within our customer base: purchasing agents, technical staffs, business managers, and others. We like to think that we have access to multiple contacts at multiple levels throughout our customers' organizations. But in a practical sense, we spend more time with the technical groups and end up selling to the purchasers."

  • "Our customers are very well aware of our manufacturing costs and how they impact our product costs. We can justify price increases only if raw material costs increase or market conditions change. Regardless of any value-added services we try to associate with our products, our customers still know what the price of the product is, and that's all they will pay us for."

  • "Our sales reps are making an average of 400 calls a year. That stretches them very thin. They know they're on a treadmill of discounting their values away, but they don't have the time to get off it and do anything else. If they try, our customers' purchasing agents do everything they can to discourage them, which includes threats to stop doing business."

  • "The best return we have been able to get for our investment in value-added services is the right of first refusal, which doesn't cost our customers anything the way paying us a price premium would."

I once walked into a conference room where a sign entitled "Why We Are Different" was on the wall. It read, "Compugen's services are differentiated from our competitors by the caliber of our people and the flexibility of our processes." It was signed "Gerry Skipwith."

I wrote my own sign on the whiteboard underneath it and signed it "Mack Hanan." "Compugen's customers are differentiated from their competitors by the caliber of their profits and the competitive advantage of their processes."

The top sign was before Consultative Selling; the bottom sign was after.

Mack Hanan

Consultative Selling(c) The Hanan Formula for High-Margin Sales at High Levels
Consultative Selling: The Hanan Formula for High-Margin Sales at High Levels
ISBN: 081447215X
EAN: 2147483647
Year: 2003
Pages: 105
Authors: Mack Hanan

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