In the past few weeks I’ve worked with a number of sales teams to refine the business cases that they were creating for own clients. While I’ve discussed Commercial Acumen before as a critical skill in post-GFC selling, it just keeps coming up, and I wanted to add a couple of additional insights to previous comments.
In past blogs, I’ve identified a difference between salespeople that can apply commercial acumen at what I called a Tactical level, versus a Strategic level. At the Tactical level, as salesperson rises above simple price comparisons to quantify the direct impact. On the Strategic side, the salesperson knows the client business well enough (and has the right skills) to cover the impact on multiple parts of the value chain, and, in particular, can link to Strategic priorities like revenue growth. I still think that distinction is right, and I continue to see this as a key separation.
To get to the Strategic level requires an understanding of your client’s commercial model: What are their drivers of revenue? How do they make money? Who are their target customers? How do they differentiate themselves from their competition? These are basic questions, but they influence how you can tailor the business case to the specific client (even if your offering is fundamentally similar across clients!).
By focusing on the commercial model of the client, you are more likely to uncover key areas where your product or service can impact those key levers of commercial success. In particular, being able to connect your offer to impacting customer or revenue growth can really help to set you apart from the competition. Suppliers often handicap themselves at this point in the sales process: they believe that the connection between their product and their client’s commercial model is too distant to even mention.
I argue that it is worth a try, partly because it could uncover significant value that you add, and partly because it will force you to better understand the client’s business, which may unveil more Tactical commercial impact!
For a corporate customer, for instance, you might focus on the value of incremental customers (e.g. How could your product help improve the client’s ability to convert a prospect into a customer?), or on the value of improving the client’s customer retention (e.g. How could your product improve their customer satisfaction?). Perhaps you can help the client to increase their internal speed to market; the value of launching a product one day (or one week) can be simply quantified.
For one account recently, let’s call them Alpha, we helped them to quantify their service to a potential client, we’ll call them FinCo. We applied strategic commercial acumen to look at a slight improvement in FinCo’s internal process within one part of their business. Alpha noted that their service might save a typical FinCo call centre worker about 15 minutes per week. The temptation at this point would be to look at this as a cost savings, but Alpha went further. That 15 minutes a week across the 40 person call centre added up to about 10 hours per week, or about 63 man days per year. Given that the average sales per person in the call centre per day was about $1,000, the solution added about $65,000 in revenue for FinCo. This is on top of the other savings arguments in Alpha’s favour.
Notice, by the way, that in the above example Alpha had to know what was really going on inside FinCo. This came not from guessing, nor even from using past experience. They got inside the FinCo business and had real conversations with contacts. Having your data come from internal sources can make those figures even more powerful.
Even in the Education or Government space, this commercial model idea – and the application of strategic commercial acumen - is an important one. I’ve been working with a few clients lately that shy away from this commercial discussion in the Government and Education space, saying that thinking commercially doesn’t apply. But that’s wrong: it absolutely does. And even worse, if all you’re doing is talking about cost reductions in these sectors, you’re missing out on the chance for a more valuable, more strategic discussion with the account.
A key consideration in the commercial model in the Education and Government sectors is the funding model. The way that the entity gets money is analogous to revenues in the corporate world. Government departments, or government-run organisations, all have budgets. And just like a private business, much of the department’s focus is on growing that budget year-on-year. Once you understand the underlying logic – whether it is the number of ratepayers or patients, the number of employees, or the volume of fines assessed – you can connect your offering to this. In our experience, organisations that sell to the government tend to miss this compelling argument in their pitches.
Education is the relatively easier of the two: whether public or private, a key top line driver is students, so if you can define how you can connect your product or service to attracting more students, or retaining them, then you are talking strategic commercial issues.
In a private school, the commercial model is much more similar to a corporation, but it’s interesting to focus on a few key drivers of revenue for a typical private school: students (and the fees they pay), fundraising (from parents and alumni), income from endowments (generally funded by alumni), and, in some cases, government grants.
The key message is: no matter what sector is your focus, think about value, not just at the Tactical level, but at the Strategic level. Push your teams and yourself to raise their commercial game above cost savings and process improvement, to higher-level impact. If you do, you position yourself as a much more compelling business partner, and you’re more likely to ultimately win the business.
