The Challenger Sale gives sales representatives the insights, knowledge and tools to take control of the customer conversation. In contrast to popular opinion and practice, The Challenger Sale maintains, through its vast research, that the secret to sales success is not relationship selling — especially when it comes to selling large, complex, expensive B2B solutions. The most successful sales representatives challenge customers to think differently by approaching problems differently and offering unique solutions during their customer conversations.
Matthew Dixon, Brent Adamson, and their colleagues at Corporate Executive Board (CEB) invested a great deal of time and energy into researching the skills, behaviors, knowledge, and attitudes correlated to high-performance sales representatives. Their findings have been a disruptive shock to selling because they are inconsistent with conventional sales wisdom. The most successful complex sales reps lead with a challenge — and relationship selling is merely a by-product.
The CEB findings are based on an exhaustive study of thousands of sales reps across multiple industries and geographies over an extended period of time. The result allows for cross tabulation – a statistical process that summarizes categorical data to create a contingency table. In short, when one drills down on a specific set of criteria, the sample size is rich enough to provide statistically relevant results that can be projected.
The Challenger Sale begins by describing three sales breakthroughs which have occurred in the last century.
Hunters and Farmers
The first breakthrough was the segmentation of sales representatives into two groups: hunters and farmers. The catalyst for this discovery was from the insurance industry. In the early days, sales reps hit the pavement and sold new policies. This model worked until a sales rep developed an installed base. Once a sales rep acquired a number of customers, the time required to renew these policies decreased the time available to acquire new business. Since then, new policies were stronger revenue contributors as an incentive existed to segment new customer acquisition from renewals or installed base selling. The Challenger Sale refers to splitting the role of selling versus collecting. In addition, the authors point out that the cost of selling (and the reward or commission) should be greater — and that the skill-set is significantly different from that of a farmer or collector.
The second breakthrough in selling occurred as a result of research published by E. K. Strong in 1925– The Psychology of Selling. Sales techniques centered on highlighting features and benefits, objection handling, the use of open and closed-ended questions and techniques for closing during customer conversations. It was considered a sales breakthrough because it advanced the belief that salespeople can be created and not necessarily born. These findings both created and exploited the sales training industry, proving that selling was not an innate ability but a set of identifiable skills that can be learned and applied during each customer conversation.
The third breakthrough identified in the book came about in the 1970’s. The differences between small transactional sales and large complex sales segmented the sales process. Large complex sales fueled the era of consultative selling. The authors explained this as a sales breakthrough because it gave birth to sophisticated models of selling complex products and services. The result was huge increases in sales productivity through sales automation, sales processes, and customer relationship management (CRM).
Solution Selling – Sales Goes on the Offensive
Solution selling is a popular sales methodology. Through customer conversations, sales representative explores and uncovers a customer’s pain and addresses that pain with a solution comprised of a collection of products and or services . This is very different than promoting product features and functions. One reason vendors embraced solution selling was in response to competition and price erosion. The basic concept is to move from a transactional sale of individual products to a broad-based consultative sales approach. This consultative approach with a bundle of products and services provided a more holistic solution to a customer’s problem. And, because it showed clear differentiation from competitors, it commanded a price premium.
A fundamental tenet of solution selling is that the sales rep understands the customers’ industry, market and business challenges. From a sales perspective, this means asking a lot of questions during the business and technical discovery phases of the sales process. Each proposal must be accompanied by a cost/benefit analysis and a clear ROI. A rep also needs to earn the right to gain access and pose questions. It takes a lot of time to connect with the right people, ask the right questions and develop an appropriate solution. However, if done right, the customer will feel that the time and effort invested will result in the right solution.
Procurements Impact on the Sales Process – The Customer Responds
At the other end of the sales equation (this is the customer’s response to solution selling), a purchasing revolution was taking place. Organizations were spending billions of dollars with vendors yet the purchasing process was decentralized with many people negotiating terms and conditions. The Purchasing function was considered a dead end and was not well-respected within the organization. However, the potential impact (cost savings) that resulted from consolidating purchases by trained professionals turned the purchasing function into a strategic force in almost all organizations. A market was created to design, develop and train purchasing employees on methodologies such as negotiation training, supplier segmentation strategies and sophisticated supply chain management models. This resulted in changes in sales strategy and execution.
The Four Trends in Customer Buying Behavior Evolution
In the last decade, there has been a great deal of uncertainty about the economy and job security. Few senior level executives today exhibit cavalier attitudes or are willing to go out on a limb by themselves to make a six or seven digit purchase. Instead, executives are looking for cross-functional, unanimous consensus before they give their stamp of approval on a purchase decision. In fact, CEB research found executives today require widespread support by the entire team before making a purchase decision. This one fact alone has huge implications on sales productivity as more time is required to bring more people to consensus.
Increased Risk Aversion
In general, deals today are more complex and expensive than before as vendors have embraced solution selling versus point-product sales. More emphasis is placed on return on investment (ROI) in much shorter timeframes. Further, customers are judging suppliers on the metrics used to gauge the project’s success – and believe me those metrics are tightly tied to the financials of the business.
Greater Demand for Customization
As the complexity of companies’ businesses increase, a direct correlation exists between the cost of the solution and time to implement. Customers typically demand modifications or require custom configurations to meet their specific business needs. To complicate matters, customers see this final or complete solution as the promise of value that a vendor must offer because they believe it will solve their business problem. Unfortunately for vendors, customers frequently want out-of-the-box or turn-key solutions, and that creates implementation, support and product roadmap issues for vendors.
Customers frequently employ third party consultants to extract maximum value from the solution. Usually these consultants have worked for the vendor or in an organization where the product was deployed. They know what worked well and what did not. As a result, the vendors take a direct hit on the nose and respond by decreasing prices. Customers bring in consultants to help navigate through the solutions’ complexity. They believe consultants are both neutral and subject matter experts. As a result, issues found by third party consultants frequently result in price decreases to offset the cost of their fees.
Introducing the Challenger Sale– Taking Control of the Customer Conversation
In contrast to solution selling, Challengers approach customers with unique insights about how they can save or make a significant yet realistic amount of money. These reps tailor their sales messages in customer conversations to the specific needs and objectives of the customer while staying relevant to the industry and specific use case. Challengers’ first reactions are not to cave to the customer’s every demand or objection. Challengers are assertive, not aggressive. While in a customer conversation, Challengers may push back when necessary and take control of the sale while ensuring appropriate give and take at each stage.
The Challenger approach communicates a compelling value hypothesis and empowers the customer with new industry knowledge and business insights. Although this approach requires considerable homework up front, when done right, it results in a much tighter funnel with high conversion rates.
Every organization’s top performing sales reps should be embraced and rewarded. The goal should not be preventing them from earning a compensation level commensurate with the revenue contribution they made to the organization. In many B2B organizations, it is not unusual if 10% – 20% of the sales team is responsible for generating 80% of revenues.
As sales models become more complex, the value of narrowing the gap between core and star performers increases. In other words, closing the gap between the core and star performers will have a direct and significant impact on revenue.
Organizations that do not close this gap will suffer because if left unattended, the gap will widen. Because more core than star performers exist, an organization’s close ratio will decrease, more deals will be lost to competitors and market share will erode. Plus, installed base selling will take a hit.
In short, the message from The Challenger Sale is that organizations must equip sales reps to generate new demand in a world of risk-averse customers. Star performers possess rare sets of sales skills that are either innate or learned. The strong always survive, and the best sales reps constantly hone their skills to be effective in any selling situation.
The good news is that the characteristics unique to Challengers can be taught to the average sales rep. Once Challengers are identified in an organization, their approach can be modelled and embedded throughout the sales force. The authors explain how the average rep can successfully reframe customer’s expectations during a customer conversation and deliver a distinctive purchase experience that drives higher levels of customer loyalty and, ultimately, greater growth.