Lab: Packaging products
Challenger Sale book is one of the bibles of modern sales. Everyone knows about it, many have very strong opinions about it and few people have read it.
One of the key points that stuck with me was how to tackle comoditisation of your products and services in your market. What to do when you and all your competitors are basically providing exactly the same product and all you are competing on is price and everyone’s margin are ever smaller.
The proposed solution in the book is to differentiate yourself by redesign your offering from basic products to solutions which would be more valuable to the customers.
For example instead of selling printers, offer a solution that would satisfy all the clients’ printing needs for a regular monthly fee and maybe throw in electronic document management.
Because solutions can’t be compared as easily as commoditised products and because solutions add more value you can increase your margin. However this requires your sales reps to step up and get more involved as they need to explain why a customer needs your solution whereas with commoditised products they are pretty much just discounting and taking orders.
Designing a product is a creative exercise. There should be a lot of input from current customers and you should validate your ideas with real prospects and customers. However in order to properly test if the newly thought out offering will work out and whether it will perform better than the current offer, you want to test this on a larger scale.
What do you do?
Set up a test in your Sales laboratory
- Design your new solution offering — get your best sales reps and clients involved in that.
- Select two teams of sales reps, one offering the existing offer, the other selling the new offer. For the new one I’d suggest you pick sales reps who are agile and love change as it will take a lot of tweaking and testing to find how to communicate the new offering in a way that resonates.
- Let the two teams target two customer segments — new prospects and existing customers. Both segments can deliver very different results.
- Run the test for a few months or more dependent on your sales cycle.
- And importantly measure the results.
What metrics to use to measure the success?
In those commoditised industries revenue is often not a problem, it’s the margin so focus on monitoring profit. Also there might be quite a big difference in customer retention so probably the best metric would be profit customer lifetime value.
It might take a while to evaluate this but some indicators can be measured early.
Conversion rate from lead to sale, Sales cycle length, Average order value and margin.
Summary:
When you find yourself in a trap of commoditised products and your profits start dropping change the game. Don’t just be another apple when everyone else sells apples become a different kind of fruit.
