The Profit Secret

How to sell more at a higher margin

Bob Hayward, Nick Baldock

• Éditeur: Panoma Press
• Année: 2020
• ISBN:
  9781784524869
• Sujet: Negocios y empresa
• Sous-sujet: Ventas

Want to know the secret of selling at a higher margin? This book will explain how Whether you are completely new to sales or have many years' experience as a business owner, The Profit Secret reveals something that has been hiding in full view for years, something that frequently means we lose out on profit, even though we win the sale. This book has a wealth of ideas, mechanisms and strategies to challenge conventional thinking about how to sell profitably. Remember: sales are vanity; profit is sanity.This book will help you to: • Identify the right market to sell to the right people• Improve your conversion ratio from interest to order• Build a powerful value proposition for your company• Avoid price pressure• Defend and justify your price more effectively• Build stronger customer loyalty

I remember it being very hot that day in Dallas in spring 1985.

For an Englishman in a suit and tie in 95ºF heat, it was hot. The sun gleamed and glistened on the mirrored windows of the imposing convention centre as daily Dallas life bustled around it. Lanes of cars moved down freeways with purpose. I stood looking out of the mezzanine floor window at the traffic below, listening to the piped hotel music. It was Missing you by John Waites, “Every time I think of you, I always catch my breath...”

I was there to help the organisers running a sales seminar. The convention centre was big, bright and brash – or so it seemed to me at the time. I was on the door with someone else. Our job was to register people who had booked to attend the sales seminar and to sell tickets at $99.00 to anyone who hadn’t booked but had turned up wanting to get in.

The seminar was due to start at 09.30 and at about 09.00 we were asked by the seminar organisers to sell tickets at half price for anyone who wanted to attend but hadn’t booked. The person I was working with noticed someone near the reception area looking purposefully at the information we had put on display. The curious bystander picked up one leaflet, gave it a cursory glance and then picked up another and began to study it with some focus. He was about 30 and wore smart jeans with a crisp white shirt and casual shoes. He had the sort of tan that suggested he wasn’t from England. I felt the cool air from the air conditioning blowing down on my head as my colleague drifted over to the bystander, no doubt hoping to sell him a half-price ticket.

“Hi there – how ya doin’ today?” my colleague asked. “Would you like to attend today’s seminar? You can pick up some great ideas and tips on better selling and how to influence people more,” went his opening sales pitch. “Not only that, you’ll be pleased to know that you can benefit from this action-packed day for only $49.99.”

“Nah thanks, I’m not interested,” the bystander replied, and turned with a polite smile.

“Sure thing – mind me asking why?” asked my colleague.

The young man replied, “Well, it’s a lot of money.”

My colleague left him at that, with a smile, thinking he would try and pitch to him again in another 10 minutes. So, when we were authorised to reduce the price even further and get people in to try and fill the remaining seats, he approached him again. “Hey buddy, you’ll be pleased to know that I can now get you in for only $30 – what a great deal!”

The prospect looked at him momentarily, his eyes then drifting to one side before saying, “No – it’s too expensive.”

My colleague left, amazed that the other man thought that $30 was too expensive. He told me he was going to try one more time and went back after five minutes to say he could come in for $25, to which the young man replied it was still too expensive.

When the doors were closed, and it was too late anyway, my colleague asked him, “What about $5?” Not that he would have let him in at that price.

“No,” came the answer again, and when asked why, the man said, “Well I’m just not that interested in attending.”

What a massive lesson is in that answer! The fact that he didn’t want to attend in the first place meant that any price would have been too high. The lesson is that unless a salesperson can establish two things first, there will almost always be price resistance. Those two things are: first, a genuine need or desire from the prospect; and second, the perception that the proposition contains greater relevant value than cost.

Those involved in selling – salespeople and businesses – often forget those two things and go chasing the sale at the expense of profit by reducing the price. Too often selling is vanity. Many forget that profit is sanity, not sales. It seems a secret that profit needs to be at the core of our approach to selling.

What is selling?

While there are various definitions my favourite is a secret – don’t tell anyone:

Selling is the process of enabling someone to discover something of relevant value to them, in a way that is profitable for us.

As we go through the book, we will examine how well this definition sits with selling on declared need and relevant value, how this helps you sell more at a higher margin, avoiding the price pressure and retaining the profit.

The way you define selling is the foundation on which all other aspects of the sales process are built. It does not matter how much you know about your company’s products and services or how well you have memorised responses to every possible objection. What matters most is how you fundamentally define selling. And the above definition is the perfect foundation from which we can build robust approaches and strategies as well as a solid, sustainable and profitable business.

Remember, high-quality, ethical and profitable selling:

■ is two way; it is impossible to sell unless you involve the person you are trying to sell to

■ is a journey, not a destination

■ is proactive, not reactive

■ adds value to the buyer and profit to the seller

Good selling means it is the customer and not the product that comes back. Selling may be only the second oldest profession in the world but it is the highest paid. It is not always easy – it can be tough. After all, if it were easy, anyone would do it, right?

It’s all about the price, isn’t it?

The economic collapse in 2000–01 and the financial crisis of 2008 affected organisations and consumers in two key ways. Since then, trust has been more difficult to come by in business-to-business and business-to-consumer dealings; and in all parts of a business and in our lives, prices have come under increased scrutiny. In combination, these two things have led to buyers being more cautious and risk-averse, and buying processes and profits being squeezed. The Covid-19 pandemic in 2020 has added to this.

When people say to me, “Selling these days is all about the price,” I say, “All things being equal, the sale will come down to price. Selling is about showing that things are not equal.”

When the perceived relevant value of our proposition to the prospect is greater than the value of the money they hold and what the competition is offering, the prospect will happily trade their money for our proposition. They win. They get more out of the trade. The greater the difference between those two values, the easier the sale will be to secure and the more profitable our business will be.

This book is about meeting the challenge of price and the potential loss of profit head on. It is about how the sales operation in any business, especially your business, can be designed and built around those three key ingredients: the need, the value and the profit. Every sale you make can be built around those same three keys. Many, if not most, sales are vanity. Making sales profitable must therefore be a secret, even though profit is sanity.

Why is profit a secret?

The concept of value being driven and measured by the customer rather than the seller seems to be accepted. Delivering true, relevant customer value is possible only by listening, asking, adapting, and changing as the world and customer needs change. Sales and marketing gurus and teams have become used to the concept of customer-centric value.

The concept of profit, however, is defined by the business or its owner. At its most basic level, profit is the margin gained by risk-taking entrepreneurs when the total revenue earned from selling a given output exceeds the total costs of producing and servicing that output.

If we increase the total revenue, we increase our total profits, provided we can hold the costs and protect our margin. Sometimes salespeople are tempted to reduce the price in the hope of achieving the sale. Of course, most buyers will ask for a discount. What happens if the salesperson gives even a 10% discount?

What is the true impact of giving any discount? Surely giving a 10% discount just means we need to sell 10% more product to make up for what we have given away, doesn’t it?

The true cost of discounts

Say the regular selling price of an item in this store is £100. That item cost the retailer £60, so the gross profit is £40 or 40%. The retailer makes £0.40 as gross profit to pay wages and expenses on every £1.00 sold. When the salesperson gives a discount, the costs do not change; only the gross profit does.

With the 10% discount in the example above, the gross profit drops to £30, or 33.33%. Now only £0.33 of every £1.00 sold is available for wages and expenses.

In discovering the true costs of discounts, the business owner needs to ask, “How much more will I need in sales volume to generate the same amount of gross profit as before?”

The answer, the secret, is that instead of selling £100 to make £40, the salesperson must now sell £120.01 to make the same £40 in profit. That is a 20.01% increase in sales value. The business owner must now ask a variety of questions or risk losing money. These include:

■ Will the market allow the store to sell at the full price? Is the discount necessary?

■ Is there enough market demand to generate 20% more sales revenue because of the 10% drop in price?

■ What additional operating costs will be incurred in providing 20% more sales to the marketplace?

■ Can the company afford the 10% discount? Can it still be profitable at that lower price?

Profit is the secret that makes sales and business operate authentically. Profit has for too long been pushed aside in favour of a focus on customer-centric value. Forgotten by many at the sharp end of sales. You can deliver value to the market without profit if you wish, just not for very long. If you want your selling to be successful, for your business to succeed, you must make a profit.

There is, of course, another side to the Profit Secret. What happens when we increase the price? If the company raises the sales price in this example by 10%, the gross profit margin increases to 45.5%. Now the store is making 45.5% on every £1.00 and therefore needs to sell only £87.91 to make the same original £40 profit. That is a 12.09% decrease in volume. Ask any salesperson, “Would you rather have a 20% increase in your sales target or a 12% decrease for the same reward?”

“Hmmm let me think…”

Every sale you make, and every business, can be built around those same three keys: the need, the value and the profit. We know that building a house on sand or with the wrong materials is a daft idea, yet we often build sales propositions and businesses on weak, flaky ideas.

Sales are vanity; profit is sanity.

My original sales techniques

Not all sales techniques lend themselves to creating aligned need, value and profit.

As salespeople, we are not always blessed with the best of reputations either. In some quarters, selling still has a bad name, no doubt thanks to dubious sales practices that hopefully have been erased over the years. If you asked someone to consider words associated with a salesperson, you would typically hear things such as ‘pushy’, ‘aggressive’, ‘hard-nosed’, ‘selfish’ and ‘liar’. I have asked this question many times and I have never once heard words such as ‘kind’, ‘patient’, ‘good listener’, ‘ethical’ or ‘customer-centred’. Considering that this is the profession I am involved with, I find that somewhat embarrassing.

While some say that the birth of modern-day sales techniques was in the 1920–30 period, a swathe of sales training ideas and theories appeared from 1940...