Sales

Drivers for Buying Decisions

Commercial enterprises are driven by profit which is derived from a combination of margin and volume. Margin is the result of sell price, less costs. Volume is a function of market size and market share. Successful companies have business models focused on either low volume but high margin, or high volume but with low margins; think about Coca Cola versus Boeing.

A business seeking to improve margins needs to increase their selling price or reduce their costs (COGS means Cost of Goods Sold). If, on the other hand, a business is seeking to increase volume; then this can be achieved by gaining more market share or accessing new markets. The selling organization must either help an organization to reduce costs or enable them to increase the prices charged for products or services; or you must help them increase market share or access to previously untapped markets.

A final consideration is customer retention, as the cost of acquiring new customers is significant and it is far more cost effective to invest in retaining existing customers than replace those lost due to poor service or failure to provide adequate value. When you seek to sell at the very top in a commercial environment, you must align your value with their focus and business drivers.

Government and charitable organizations are not driven by profit; instead they are focused on achieving outcomes. They either want to improve service value (improve efficiency and service levels); or they want to increase service volume (the numbers of people or organizations utilizing their range of available services). When you seek to sell at the very top in a government or charitable ‘not for profit’ environment you must also align your value with their focus and drivers.

You must help them to increase efficiency and improve productivity or you must help them to cost-effectively increase the reach and utilization levels of their services. In essence, the drivers are almost always to improve compliance and service levels or operate more efficiently. But beware of any government employee telling you that their business case is compliance alone. The very top people in government see compliance as a relatively low level — tick in the box — issue and will not allocate a serious budget for it in isolation. Compliance may be a driver for some but it is never a business case alone. Compliance outcomes must be the by-product of investing in improved efficiency and service levels.

Finally concerning selling to government; if you are responding to a tender and did not have prior engagement, it is difficult to exert influence with relationships and strategy. If you do decide to bid, and you probably should not without prior engagement, it is vitally important to focus heavily of the V (value creation) and P (buyer process alignment) of RSVP. If you can achieve best value and complete alignment with their evaluation and buying process, then you've maximized the likelihood of winning.

In addition to business drivers, you also need to consider an organization’s level of urgency, or motivation, in solving problems or realizing opportunities. Organizations in either high growth or crisis survival mode will make decisions quickly but if an organization is in business-as-usual mode, decisions will be slow. Any business in survival mode is desperate to reduce costs and improve cash flow. A business experiencing high growth, on the other hand, will be driven to increase profit and achieve greater efficiencies. The problem with selling to a business that is maintaining the status quo (business-as-usual) is that they often end up doing nothing and deferring investment decisions. Although they want improved profitability through greater efficiency and reduced costs, they struggle to commit to investing and move so slowly that decision momentum can be lost completely through endless analysis.

So, be crystal clear in your own mind about the value to offer and why they should buy from you. Then seek alignment politically, economically and with their selection and procurement processes.

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