Lessons learned from “CONSULTATIVE SELLING” Book

Consultative Selling

The Consultative Selling: The Hanan Formula for High-Margin Sales at High Levels, 7th Edition by Mack Hanan is mainly targeting sales representatives to provide a specific and consistently successful approach and techniques for better sales.

I read the book and I found that it very helpful and useful for sales representatives.

Personally, I have met a lot of salespeople who are selling without knowing anything about the customer needs, challenges, or strategies and they are selling products features without presenting the true added value of these products. I think you may have faced the same, especially with the infrastructure and equipment vendors.

The book offers some useful techniques and tips to enhance the selling process and make it a value-driven process for both the customer and the seller. I think most of the big companies are using similar approaches and techniques mentioned in the book with different flavors.

I tried to summarize the key points which I think are important to others while I do recommend reading this book.  Here are the key lessons I learned from this book

key Lessons

  1. Transform the sales team from “Vending” to “Consultative” sales.
  2. Create a business-manager-to-business-manager context for customer decision making, not a vendor-to-purchaser context.
  3. Compete for added business value differentiation not at lower prices.
  4. Sell business value, not product features.
  5. Target Business users and line of business departments or units, not the purchasing and procurement department.
  6. Think about how to add more profit to the customer, not adding more features.
  7. No matter what consultative sellers make, they sell the value it adds.
  8. You need to build you Norm value database and understand what is the norm added value you add to business according to the type of business.
  9. Business-line-specific and business-function-specific and consists of two categories; 1- Profit-centered line of business, 2- Cost-centered business function
  10. In Profit-centered line of business, your sales should focus on how to increase revenues
  11. Cost-centered business function, your sales should focus on how to reduce operation and make improved cost savings.
  12. In business, money has one purpose: to make more money
  13. Solutions are not only to solve customers problems which is a problem-solving system, but they can also capitalize on current customer business and create new opportunities which this is an opportunity-seizing system.
  14. Define the solution and how it can be done operationally.
  15. Transform your relation with your customers to a partnership.
  16. Unless you know it, you cannot grow it. You have to be an insider to grow your customer business
  17. You should find the partnerable customer.
  18. If the customers tell you the pain and their dreams, if they keep asking about future plans and solutions, they are partners.
  19. In order to achieve a successful partnership, you need to select the right partners and to know why they need to partner with you, in terms of what is the return for them after their investment.
  20. In order to achieve a successful partnership, it should be a win-win partnership, both parties should win.
  21. The loss of one partner will raise doubts, create assumptions, and foster anxieties that threaten the stability of other client relations. And it will have an effect and open a door for the competitors to take an advantage of this situation.
  22. The are two reasons to lose partnership:
    • Divergent objective, which the objectives of the partnership have not been tracked well and they have deviated from the original ones
    • Unequal risk, the risk cannot be eliminated with partnership but should be reduced and balanced and shared between partners.
  23. All business operations have a flow they have a beginning, a middle, and an end. The consultative sales should be able to assign appropriate costs to the most critical success factors in each process the 20 percent that contribute the 80 percent.
  24. Nothing happens in business until funds flow. You need to focus on where is the fund is allocated.
  25. You need to create three databases of information for value-based selling:
    • Industry Database, what are the industries you serve.
    • Customer Database, what are the customers you serve in each industry.
    • Customer’s Customers database, what are the customers, each of your customer has.
  26. TThese databases will let you understand better about your customers and how they perform in comparison with other customers in the same industry. If the customers are falling below the norms, this means new sales opportunities.
  27. There are the five “must knows” in order to Profit Improvement Proposal (PIP) most cost-effectively and these should be known by the managers and the customer operations:
    • What are the best of breeds in your operation and how do you compare to the competition? From operation managers
    • What are the KPIs for your operation right now and how much/how soon must you improve them? From operation managers
    • What are the critical success factors in your operation? From a line of business managers
    • What is the economic value added? From a line of business managers
    • What is the economic value added? From business functions managers
  28. The rule of thumb about money is that a dollar today is always worth more than the value of the same dollar tomorrow because today’s dollar can be invested today to make more dollars. So, you should take care of the time as it will be your enemy. You need to focus on time and make the value faster.
  29. Any business can make money on five principles:
    • Circulating capital
    • Turnover
    • Contribution margin
    • Return on Investment
    • Payback
  30. Circulating Capital Principle is about making the initial cash grow into more cash:
    • The initial cash is the inventories
    • The inventories circulate into receivables.
    • The receivables circulate into cash which complete one cycle
  31. The Turnover Principle is to measure the rate of turnover for circulating cash in a complete cycle. The faster the turnover, the greater the profit. Then your solutions should focus on how to speed this turnover.
  32. Contribution Margin Principle is about how much margin each product line or business unit contributes to a customer’s total profits. There are two ways to do this:
    • Increase sales volume at the current contribution margin.
    • Increase contribution margin at the current volume of sales.
  33. Customers calculate the value of the projects and solution you offer by how much, how soon, and how sure criteria.
  34. “How much” criteria can be calculated by Net present value (NPV), Return on investment (ROI), and After-tax cash flows.
  35. “How soon” criteria can be calculated by payback.
  36. “How sure” criteria can be measured by how soon is the payback.
  37. You need to remember that you are not selling a technology or you are selling solutions to customers’ business problems such as “improving customers satisfaction” or “increasing integration channels ” You are selling improved profits.
  38. That’s because customers are considering the solution as a new asset which consumes part of their capital and they need to gain a profit from their investment in that asset, so you need to make that fast and to be sure about how fast will be.
  39. The selling product is improved profits

In conclusion, I would like to have a quick comparison between Vending (Transactional Selling) and Consultative Selling.

Vending (Transactional Selling) and Consultative Selling Comparison

Vending (Traditional Selling) Consultative Selling
Focus on QuotationFocus on Proposal
Compete on priceCompete on value and profit generation
Price is the main driver to close the sales process (sales cycle)Price is not important, the value is the key to closing the sales process (sales cycle)
Targeting Purchase managersTargeting Executives and Business Managers
Focus on FeaturesFocus on Value
Discount SellingHigh Margin Selling
The selling product is a device, solution, or service.
Seller and Buyer relation with the customerPartnership relation with the customer
The uncertainty of the processThe certainty of the process with planning capability

I think Mack Hanan repeated some of the same concepts intentionally all over the book to communicate the information through different perspectives and to ensure the reader’s understanding of these concepts. This may be annoying for some readers like me 🙂 Overall It is a great book and worth reading.

Cite this article as: Mohamed Sami, (January 1, 2018). "Lessons learned from “CONSULTATIVE SELLING” Book," in Mohamed Sami - Personal blog. Retrieved October 4, 2023, from https://melsatar.blog/2018/01/01/lessons-learned-from-consultative-selling-book/.

Also published on Medium.

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