Sales

Question 1

Sales

Answer 1

converts prospects into customers

Question 2

Pricing Uncertainty Principle:

Answer 2

1. “All prices are arbitrary and malleable.” It’s an executive decision. You can price something anywhere you want.
   → However, prices have to be justified to a prospect or potential buyer before a transaction can take place.

Question 3

4 pricing methods (1):

Answer 3

1. Replacement cost - typically a “cost-plus” value meaning the total cost of making/replacing something plus the margin you want.

Market Comparison - what are other products of similar nature priced at?

Question 4

4 pricing methods (2):

Answer 4

1. Discounted cash flow/net present value - “How much is it worth if it can bring in money over time?”. Used for items that will make other people money to justify a larger upfront cost. DCF/NPV is only used to price things that can produce ongoing cash flow - this makes it a common way to price businesses when they are bought or sold.

Value comparison - (usually the best way) what is the value of your product to the customer? Price accordingly.

Question 5

Discounts

Answer 5

Attract customers when the offer is a commodity” or items which are price-elastic.

Question 6

Price Transition Shock

Answer 6

1. When testing different pricing strategies, there are certain thresholds where you stop appealing to certain segments and start appealing to segments with different characteristics

Question 7

2 major considerations while keeping transition shock in mind:

Answer 7

1. Potential profitability
2. Ideal customer characteristics

Question 8

Pricing strategy

Answer 8

1. The best strategy is to set prices to appeal to prospects that will ensure you work with your most desirable customers in a way that results in higher profits.
   → This is dependent on the industry and target market’s expectations.

Question 9

Value-Based Selling

Answer 9

• The process of understanding and reinforcing the reasons why your offer is valuable to the purchaser. This is how you support the set price.
• This is about listening, not talking. It’s all about value to the customer

Question 10

SPIN Selling: 4 phases of successful selling:

Answer 10

1. Understanding the situation
2. Defining the problem
3. Clarifying the short-term and long-term implications of that problem
4. Quantifying the need- payoff or the financial and emotional benefits the customer would experience after the resolution of the problem

Question 11

Education Based Selling

Answer 11

1. The process of making your prospects more informed and better customers. It requires an upfront investment of time into prospects, but is usually worth it. You simultaneously build trust in your ability to deliver value and your expertise while making them better customers

Question 12

NBA: Next Best Alternative - or BATNA - Best Alternative to The Negotiated Agreement

Answer 12

When there’s no common ground, what is the next best alternative? → Knowledge of a prospects BATNAs can be used as leverage.

Most power belongs to the party that is able and willing to walk away from a bad deal.

Question 13

Exclusivity:

Answer 13

Creating a unique offer or quality that other firms can’t match. iPhones → Apple {for now}. Exclusive offers maintain high perceived value. Exclusivity makes the most sense for products and services. Sole source is the ultimate winner! aka monopolies

Question 14

3 Universal Currencies

Answer 14

1. Resources - tangible items
2. Time
3. Flexibility - giving up freedoms or liberties

In every negotiation, one currency can be traded for more or less of the others.

Question 15

3 Dimensions of Negotiation- Setup

Answer 15

• The environment, mostly. Prep work (setting the stage for a satisfying outcome to the negotiation).

— Who are the involved parties? Are they open to dealing with you?
— Do people know who you are how you can help them?
— What are you proposing and how does it benefit them?
— What’s the setting for presenting an offer?
— What are the environmental factors? Are any outside circumstances affecting the outcome?

Question 16

3 Dimensions of Negotiation-Structure

Answer 16

1. Structure - of the deal you are proposing. Structuring the terms of a proposal that make the prospects likely to accept.
   — What will you propose and how will you frame it?
   — What are primary benefits of proposal to other party?
   — What is their BATNA? How is your proposal better?
   — How will you overcome the other party’s barriers to purchase/ objections?
   — Are there trade-offs or concessions you’re willing to make to reach an agreement?

Question 17

3 Dimensions of Negotiation- Discussion

Answer 17

Discussion - talk about the proposal with the other party.
End results consist of:
— Yes, we have a deal on these terms
— We don’t have a deal quite yet— counteroffer or another option to consider
— No, we don’t have a deal or common ground and we should suspend negotiations.

Question 18

Buffers

Answer 18

3rd parties empowered to negotiate on behalf of someone can be used to improve odds of a favorable outcome and save time.
→examples include: agents, attorneys, brokers, accountants.

Question 19

Persuasion Resistance

Answer 19

When a prospect senses that they are being convinced or compelled to do something they are unsure about and reactively resists the attempt + tries to leave the convo.

Question 20

Reciprocation:

Answer 20

A desire people feel to pay back or return perceived favors or gifts. It is not necessarily in proportion to the original benefit provided.

Question 21

Damaging Admissions

Answer 21

can make sellers seem more honest and trustworthy and increase the likelihood of sales.

Question 22

Barriers to purchase

Answer 22

Risks, unknowns, and concerns that prevent prospects from becoming buyers. The primary job of a salesperson is to identify and eliminate these barriers.

Question 23

5 Standard Objections

Answer 23

1. It costs too much→ Tackle with value based selling
2. It won’t work→ best addressed using social proof
3. It won’t work for ME→ same as above
4. I can wait→ use education based selling. Especially if prospect is unaware of their problem.
5. It’s too difficult→ same as above

Question 24

With a Prospect’s attention and Permission

Answer 24

You have to either (1) convince them that the objection isn’t true (2) convince them the objection is irrelevant

Question 25

Risk Reversal

Answer 25

Removing barrier to purchase of associated purchasing risk. Money back guarantees, for instance. Transferring risk from buyer to seller.

Question 26

Reactivation

Answer 26

Re-engaging past clients in a new sales cycle or attempt. Re-convert!

Question 27

Value delivery

Answer 27

• Involves everything necessary to ensure every paying customer is a happy customer.

The best businesses in the world deliver the value they’ve promised in a way that exceeds the customer’s expectations

Question 28

Value Stream (or Chain)

Answer 28

All the steps and processes from the start of the value creation process to the value delivery. It’s a combination of the two.

→ The best way to understand it is to diagram it.

Question 29

A distribution channel

Answer 29

Describes the form that your value is actually delivered to the end user. 2 types: direct-to-user (or consumer) and intermediary

• DTU operates across a single channel
  → limited by your own capacity

Question 30

Intermediary (like retail reselling)

Answer 30

• Operates across multi-channels allowing for greater distribution scale.
  → constrained by counterparty risk - the risk that your partner will hurt your reputation

Meeting expectations is the baseline of a happy customer.
People view Quality = Performance - Expectations

Question 31

Predictability is the central tenet of expectation and customer retention. 3 Criteria of Predictability:

Answer 31

• Uniformity - you deliver the same thing
• Consistency - you consistently deliver the same thing
• Reliability - you consistently deliver the same thing without error or delay

Question 32

Duplication

Answer 32

Ability to reliably reproduce something of value. i.e. Factory

Question 33

Multiplication

Answer 33

Duplication for an entire system or process. i.e. Franchise

Question 34

Scale

Answer 34

Refers to being able to duplicate or multiply in response to an increase in demand volume. Determines maximum potential volume.

Question 35

Duplication + Multiplication + Scale

Answer 35

Products typically duplicate better.
Shared resources typically multiply better.
Humans don’t scale. As a result, service business aren’t very scalable.

Question 36

Accumulation

Answer 36

Is a business concept related to improvement.
Like Toyota Production System (TPS) which iterates on the philosophy of Kaizen - incremental improvement by removing waste from a system.

Question 37

Amplification

Answer 37

Is the concept that small changes to scalable systems produce large results.
i.e. saving $0.01 isn’t trivial when you are saving it across 100 million units.

Question 38

Don’t focus on your competition.

Answer 38

Best way to beat your competition is to out-innovate them and to always focus on producing remarkable products that exceed consumer expectations. Always focus on delivering more value instead.

Question 39

Force multipliers

Answer 39

Relate to tools that multiply productivity/output. Usually costly. One of the only capital expenditures that can be justified. Factory equipment is an example.

Question 40

Systemization (KEY)

Answer 40

A process made explicit and repeatable. Only way to improve a system is to outline the system. Things need to be repeatable.