Consultative Selling of Pre-Packaged Software Products

Executive Summary

Sale is the art and science of defeating competitors and winning clients to gain business. Sale comprises procedures and processes both qualitative and quantitative that needs to be followed to create predictable results. Though the underlying principles of selling across industries remain the same, each industry has its own selling flavor.

Several sales models were created to cater to the as of existing needs of selling. Few of the popular sale models are Sales Scripts model, Product/Service Pushing through model, Relationship Sales model, Problem- Solving Sales model, Partnering, Team Selling model, Complex Sales model and Consultative Sales model. Each of the models has its own advantages and disadvantages. Also each of these models fit best to a particular industry or industries.

Software industry is an industry of heavy competition. In software industry the sale is for services or pre-packaged products. Services comprise consulting, manpower to support existing software solutions or products, manpower to design and code a solution. Pre-packaged products are ready made software products, ready to be implemented and used.

Several products from different software companies addressing the needs of a particular process of a certain industry are now available for a buyer to choose from. Also most of the products have similar functionalities to address a given business problem. Hence how does a software vendor differentiate its products from its competitors in a sale cycle? How does the software vendor outsmart the competitors and convince the client to buy its products?

The other critical problem most software companies are facing is to meet the sales target. The gap between the sales target and the achieved sales is fast increasing. For many software companies the sales force ability to meet sales target is declining and is at around 50%. To add to this problem the Pareto principle seems to be prevalent in the sale force team of most software companies i.e. 80% of the business is generated by only 20% of the sales force team.

The above trends clearly highlight the fact that the traditional approach of selling a software product is no longer holding good and a newer approach is required. The key to the problem is “Consultative Selling”.

The paper explores the underlying principles of Consultative Selling of pre-packaged software products that is resulting in a paradigm shift from the traditional push approach of selling products to address business problems to the newer approach of selling solutions to achive the ultimate goal

Background

As businesses across industries grew and evolved the need to automate certain or all business processes became a critical requirement. Software companies helped to automate these processes by coding the processes in a software program. The software companies saw the opportunity to package the software program as a software product. The product could then be sold to different clients. These readymade products were implemented and ready to use for a client. The time required to implement a readymade software product was much less than the time required by clients to develop software program for their business processes. Hence the concept of implementing software products vis-à-vis developing an in-house software code became popular.

Competition was less and the software product companies could sell their software products by claiming that their product could solve business problems using the industry best practice process flows. However most products had solution gaps. But still, in the requirement to stay ahead in competition and to handle the growth clients were facing, half-backed software products were being implemented. In doing so in many cases the clients started to fit their business processes as per the processes defined in the product rather than developing software solutions to fit to their business processes.

With time many clients realized their mistake and then came the challenge for software companies to sell their products to their clients. Clients became clearer on their software needs and investments. The decision points for clients to select a software vendor can be listed as below

- Software company with deep understanding of the clients industry

- Software company with complete understanding of the clients business problems

- Software company that knows how to solve the clients problems by providing solutions rather than product or products

Consultative Selling

The earlier approach of selling a software product was a traditional approach where in a software company listed the features and functionalities of its standalone products claiming to solve certain business problems. For example a software company could list out all the features and functionalities of its demand forecasting software product. But it does not clearly define how this demand-forecasting tool could be used for a given industry. In other words how can this demand forecasting software solve a retailer’s problem differently than a manufacturing company?

Today’s buyer is an informed and intelligent buyer. Information for any product is easily available, Internet being a boon for easy accessible of information. The buyer already knows what problem he/she needs to solve using which software product. Hence it becomes even more difficult for the software companies to sell their product to a buyer as the buyer is already sold.

Problem Solving Approach

In today’s informed world selling is done on hard facts rather than just an impressive sale pitch by a super confident sales team. The clients are interested to work with industry focused software companies. Software companies selling software products need to show industry focus by highlighting their complete understanding of their clients industry by following the steps listed below

- Define clients industry problems in a way the client connects with them

- Define clients business problems clearly

- Highlight industry best practices used to solve the problems

Hence the problems and the best practices are the hard facts. Highlighting these hard facts clearly portray the software company as a clients industry expert.

The objective of the software company would also be to try to get the client share the goal the client is trying to achieve by implementing a software solution for a business problem. Knowing both the Goal and the problem would help the software company to create a sale pitch inclined to solve the clients problem while generating value to the customer in alignment with the goal and the business problem of the client. This results in a shift from the traditional push sales approach to a newer understanding the problem and proposing to solve the problem sales approach.

The next step the software company makes is to provide a complete solution to the business problems; mapping of business processes to IT process flows. Hence the objective is to propose a solution for problems and not propose products for problems.

Selling Solutions rather than Selling Products

Software products solve only a finite set of business problems. Hence software companies develop different products to address different business problems. In order to solve multiple business problems the products are then integrated together to solve the complete problem. This integration of products is nothing but a solution.

Also as discussed previously that the sale force team should not only try to understand the business problem the client is trying to solve but also the ultimate goal the client to trying to achieve by solving the business problem. Solutions ultimately are best derived when one knows both the Problem and the Result (Goal).

For example a retailer might require automating its demand forecasting of its merchandise and also the replenishment of the merchandise to its stores and warehouses. This requirement is driven by the goal of the retailer to improve demand forecasting and hence improve inventory levels to achieve an improved customer satisfaction and hence increase business. A software company developing both a demand forecasting product and a replenishment product could propose an integrated forecasting and replenishment solution by highlighting the complete solution capabilities and solution business flows rather than the capabilities of individual products. Focus should be made not only on the solution capabilities but also the value that would be gained by the customer in terms of improved demand, improved inventory levels and increase of business. Hence the sale pitch would be premised around the ultimate goal set by the retailer.

Differentiating consultative selling with traditional selling with an example as shown below;

Software vendor: A software company providing supply chain planning solutions and products. Products include demand forecasting tool, inventory planning and replenishment planning tool.

Client: Manufacturer of electronics consumer durables.

Clients’ Goal: To be the market leader across electronics merchandise, starting with digital cameras. To grow marketshare by initiating a VMI process with the top 5 retailers selling electronic merchandise.

Clients’ Business Problem: Needs the ability to accurately forecast demand using retailers’ point of sale data and maintain optimal level of inventory across DCs and Stores.

Traditional Sale Pitch: Highlight the features and functionalities of Demand forecasting products separately to solve the forecasting requirement of the client. And then highlight the features and functionalities of the inventory and replenishment planning products to solve the inventory requirements of the clients. Sale pitched from a product point of view to solve the clients’ business problems, as the sale team is aware only of the business problem and not the unltimate goal.

Consultative Sale Pitch: Propose a complete “VMI solution” by highlighting the features and functionalities of the integrated demand forecasting, inventory planning and replenishment planning products in terms of business process flows. The sale pitched around the premise of providing a solution to address the business problems to ultimately achieve the goal. The sale team is aware of the goal due to in depth interviewing of the client as a consultant rather than a sale person.

Implementing Consultative Selling

Someone very wisely said that the only thing constant is change. Change is good but there is always the inertia working against it. People resent changes, but changes are required to adapt to changing times. Hence implementing Consultative model of sale in a software company will ensure a lot of resentment among the sale force team early on but the results benefitted out of this change will ensure Consultative selling to be a natural practice among the sale force team.

As true for all other sales model the following underlying principles hold good for the Consultative sale model too

- Sale is all about process and procedures. These processes and procedures are the very foundation on which a sale cycle should be based on. The processes and procedures are following the companies’ sale policy of updating the CRM or sale force tool with the latest information of a sale cycle. This information could be analyzed to predict the outcome of the sale cycle. Even sale cycles have patterns and these very patterns are driven by the processes and procedures to get a predictable result.

- Soft skills such as good presentation, positive attitude is as much important as the product qualities.

- Investment to provide proper training to the sale force team members.

The sale force team mindset needs to be changed from just selling products or solutions to that of consulting and problem solving. The sales force team should engage with the clients as consultants and not salespersons. The objective would be to understand the problem well and recommend best practice solutions. Ultimately the client is interested in fixing his business problems to achieve a goal and not just buying software solutions.

Apply Plan-Do-Check-Act methodology to sale cycles. The PDCA can be applied to the sale cycles by the following steps

- Documentation: Every step of a sale cycle from generation of lead, sales lead qualification, interviewing client, preparing proposal, developing price and result of the sale cycle should be documented in the CRM.

- Analysis: Analyze the complete sale cycle of both sales that the company won and those that it lost.

- Summary: Summarize the results of the analysis. The analysis will give leads of a pattern and will help the software company define the processes and procedures for sales cycle to predict outcome of a sale cycle better.

- Communication: Communicate the processes and procedures to the sales force team.

The feedback loop of PDCA helps streamline the sale processes and to make early corrective actions to ensure sale pitches are in line with the client’s expectations.

Conclusion

In consultative model of sale the thought process of the sale team from trying to sell products to trying to solve clients’ problems is required. The obejctive of the sale team is to enagage with the client as consultants, trying to solve the clients’ problem and help the client achieve its goal. The bottom line is the client is trying to solve a problem and it needs advisors and consultants to solve it. Hence the approching the client as consultants, the sale force team engages better with the client. Applying consultative model of sale to pre-packaged software products has tremendous benefits but implementing it among the sale force team has its own challenges. However training the sale force team to follow the guidelines and processes set by consultative model of sale and the desire of the sale team to act as advisors to clients can ensure a successful implementation of consultative model of sale.

Oppertunities of "On Demand" business model in Software Industry

Louis V. Gerstner Jr. had an idea, the idea of On Demand business. He wanted business software solutions to be available like water and electircity. When someone requires water all one has to do is open a tap. Similarly if someone requires electricity all on has to do is turn on the switch. Closing the tap or turning off the switch stops the water and the electricity supply respectively. The other point to note is that in either cases we dont own the water or the electricity , we are just the consumers, and just pay for the usage of the resources.

On Demand business is premised around a similar structure. The underlying principle of On Demand business is that clients might not want to own some software solutions but require them on need basis. Hence a software company might be the supplier of the software resources for end consuming by the consumer, in this case the client. All the client needs to do is turn on the switch to consume the software resources and pay for the usage and then turn off the switch whne it doesnt require to use the software resources, hence the resource is available "On Demand". But the question to ask is; Is there even a demand for On Demand services in the software industry? The answer is Yes and the opprtunities associated with this model are abundant.

Oppertunities for Software Company
1. Partnering: The "OnDemand" model is a brilliant platform for a software company to partner in a long lasting realtionship with a client. Since the client is now dependent on the software company for some of its business process being solved by the software service, the software company can look at oppertunities of providing other services to the client on demand. On Demand model requires an intergrated mode of business bewteen the software company and the client. This results in the software company getting involved with the client on a day to day basis and hence slowly builds the rapport to slowly expand its services portfolio it provides to the client. Hence the business growth oppertunity that the software company gets for a given client is plenty.

2. Knowledge : In partnering with the client the software company gets an oppertunity to understand the clients buisness and the clients industry better. This knowledge can be further used for ehnacement of software solutions/products.

Oppertunities for Clients
1. No Ownership: In implementing solution in house the client has to invest in infrastructure and services invloved with implementation. Small clients might not be capable of investing heavily at one go on their software needs. Hence instead of on time heavy investment the clients can opt for investing only on services without any investment on infrastructure.

2. Service Termination: Terminate service as and when needed: Since the client does not own the solution the client may terminate the service as and when required.

3. Solution trial : Clients may opt for a solution in "On Demand" as a solution trial before investing to own the solution.

Point of Sale...Not Just about Sales!!

Point of Sale tool is the front-end tool that a retailer uses to conduct sale transactions. It is used to create the transaction where in the sale associate scans items and then finally generates the print receipt for the customer and accepts tenders from the customer for the sold merchandise. But is that the only function that the point of sale system is expected to perform?

Point of Sale system being the only front end system for the retalier; can be put to use in lot many areas for the retailer to better execute his business.

Firstly, the point of sale tool could used to manage customer and perform analytics on cutomer information in order to serve the customer better .The business interaction between a customer and the retailer is done via the point of sale system. Hence capturing of customer information such as customer address, customer birthday could be done at the point of sale system. While making a transaction for the customer the transaction could be linked to the customer and this information could be persisted for analysis. The customers’ buying basket could be analyzed from such persisted data. The customer buying basket data could then in turn be used to create custom promotions for the customer.

Secondly, promotion is a crucial component for a retailer to increase footfalls in its shops. For a retailer that has shops spread across geography a given promotion might not succeed at all places. Instead of cascading a centrally defined promotion across all shops the retailer might execute local promotions via the ponit of sale tool itself.

Thirdly, the sale data captured via the point of sale system could be shared by the retailer with a supplier if the retailer enagages with the supplier in a VMI model. Instead of forecasting demand on the orders made by the retailer the supplier would now forecast demand based on the point of sale itself and hence the demand forecast would be more accurate as in doing so the “bull whip” effect is eliminated.