Tuesday, 18 January 2011

When is Selling Important, if at all?

This post sets out to explore the hypothesis- “selling skills are always important to a business in a competitive industry”- the question is- is it?

The reason this question is important is because sales and marketing are always expensive efforts, and hit the p&l strongly, and reduce margins. And if there is an option to minimise that effort, that option ought to be examined real hard, because it means better business margins.

Owing to a tech product i am building , I found myself in Taiwan recently, working through hardware suppliers, and got into a quaint situation- yes there is a language problem-very difficult to do business there if you don’t speak and understand Mandarin, but, on top of the language problem, i found little display of selling/consultative skills, and very little flexibility in terms- so basically, i was confronted multiple times with- these are my terms, take it or leave it- large order or small...and this was despite having someone fluent in English and Mandarin with me to discuss terms.

This set me thinking- obviously, Taiwan is a very successful nation when it comes to this particular market- most electronic components are made in Taiwan, and its home to the largest manufacturers of anything you care to name- memory, chips, motherboards, lcds, etc etc... So how did they become so successful without the selling/customer interface front end that i had assumed was a necessity of doing business?

The answer- in this particular instance- selling is absolutely NOT important. Why? To answer this, i would try and answer the critical question- how is my business configured- or put differently, how do i make money in my business?

Let me put this idea a different way. I am sure all of you have gone shopping for veggies in a market sometime ... Has the owner of Stall A ever tried to sell you the benefits of one vegetable over the other? Say carrots over potatoes? Just imagine the conversation- “potatoes are brilliant because they give you all the carbs you need blah blah“- and that results in a 1 kg purchase- in the meanwhile, the stall opposite has sold 4 kilos of potato, 6 kilos of carrots and 10 kilos of tomatoes and laughed away with 20X profits. Clearly we can see stall A going out of business very soon, right?

So the insight is- If i am in a low margin, high volume business, or work with buyers know what they want, and configure it properly, i can make the business work with little or zero sales effort.

You would be surprised at how many situations this applies to in businesses. Research indicates that 4 out of 5 consumer purchases happen because the buyer finds the seller, which, if you think about it, is counter intuitive, considering the effort any business puts into sales and marketing.

A quick and easy way to get out of the need to sell is to position yourself right- and i mean both conceptual positioning as well as the location. This is the logic that leads people/shops that sell the same things to group together- a marketplace for something- the veggie market with lots of stalls, or, for instance Tottenham Court Road for electronics in London, or Mumbai’s wholesale market, the Masjid Bunder, whose 40 shops were responsible for 10% of my revenue (from 10,000 shops) as the Sales Head in Mumbai- I am sure you can think of multiple examples...

But a caveat- this works for products or services that have a reasonably established demand. If your business is in a new product or service, and there is a need to create demand , i am afraid you don’t have an alternative but to look for sales and marketing help...