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Funnel Building: Increasing Average Contract Value

In my last post, I reviewed the connection between building a larger sales funnel and the skill of disqualifying prospects that can’t buy. For this article, I’ll share some insight into another funnel building skill which helps those who may not have the luxury of having too many prospects.

Years ago, I worked for an organization that was mired in a sales productivity sand trap. For several years, the average productivity per rep was stuck at about $1.4 million in software sales. As a result, we were faced with a challenging dilemma: either add people to grow the company – a very expensive option, or learn how to grow our deal size. Due to our limited market size, we ruled out the strategy to sell to more customers since they didn’t exist, and we considered focusing on shortening sales cycle time, but ended up getting that with the deal size increase as an added bonus.

The strategy that emerged was to use professional services to grow our deal size. This intitiative taught us how to grow our average contract value with both software and services while shortening our sales cycle. The key was targeting new stakeholders in our existing opportunities. Specifically, we began a company wide effort to include the business stakeholders into our opportunities. Prior to this initiative, we limited our contacts mostly to the technical side of the house.

In my sales training and consulting business, I see this self-limiting behavior frequently. The actual end user or IT will engage in a dialog about a solution, and the seller concludes this is who they should spend their time on. Unfortunately, these contact types have limited budgets, limited political power, and are compelled to NOT rock the boat; consequently, smaller deals result. Conversely, business people are steeped in a culture of rocking the boat, looking for growth opportunities, typically monopolize power in many organizations, and have larger budgets. (Most companies allocate 1-2% of the budget on IT, while sales and marketing get upwards of 50%). The opportunity is to learn to tap this reservoir for your sales initiatives. If you do, you will see growth in your average contract value.

As a starting point, here are three skills I suggest you adopt:

1. Change your vocabulary.

The first skill set to master is learning how to speak to different cultures. If your technical contacts typically want to talk about bandwidth, analytics, quality, throughput, or any topic that has a technical flavor, you have to limit those adjectives to that audience. The business culture uses terms like revenue growth, new product introduction, customer acquisition, and differentiation, to name a few. Take some time to connect each of your technical capabilities to business problems and issues. Then use their vocabulary to get their attention, build credibility and gain access.

2. Understand that nurturing and expectation setting will be required.

Just yesterday, one of the sales people in a client company told me cold calling on the business side wasn’t working for him. I wasn’t surprised. The business stakeholders aren’t aware of his company or his solution, so they naturally avoid engaging as a standard calendar management tactic. I suggested he take a three step nurturing approach to the targeted business stakeholders. First, inform them you are working with others in their company on an initiative that will have an impact on business results they may be interested in. But don’t ask for anything yet! Just let them know that you thought they should be aware of the initiative. If it’s an important topic to them, they’ll do some investigating. I call this creating hallway buzz.

Your communication may sound something like this: “Hi Joan, I’m reaching out because I’m working with your IT organization (John Doe) on a solution for the <insert problem in their vocabulary> that is impacting your <revenue, cost management, or some other business issue> results. Based on your role, I thought you might be interested. Let me know if you have any questions about the project.”

It’s very common at this point to get your hand slapped by the technical contact. They’ll get an inquiry from the business stakeholder as a result of your communication, and in turn, demand that you limit your communication to them. They do this from either a place of insecurity, habit of control, or many other common personal agenda related reasons including avoiding visibility on a non-budgeted project.  This is where expectation setting becomes critical. You’ll need to become comfortable setting boundaries with your technical contacts. I suggest describing your modus operandi and rationalizing the action with your company’s learning experience; it might sound something like this, “I’m sorry this activity was upsetting to you. We’ve found the best successes include engaging the business stakeholders in the dialog, whereas the opportunities that end up in no decisions usually exclude them from the conversation. I thought it would make sense to start that dialog, don’t you?” Ideally, you can steer the conversation to a collaboration agreement on the topic and put the hand slap behind you. In any event, your goal is to continue to include the business stakeholders in the dialog and the best case is when your technical sponsor sees the light and agrees to collaborate on their inclusion.

If they aren’t convinced with the operating rationale, it doesn’t hurt to help them see how it will help them personally. As an extreme example: “Joe, if you want to become CIO someday, you’re going to need to get comfortable engaging the business stakeholders in your initiatives, perhaps we can use this opportunity as a chance to collaborate together to help you build this skill.” Or less extreme, “Joe, you mentioned your frustration with how small the budget was for this project, doesn’t it make sense to see if someone else might be willing to add some funds to your initiative?” (Research from CEB indicates that the best sponsors are the ones that mobilize other stakeholders into the conversation, so it’s in your best interest to coach your contacts if needed.) Of course, whatever rationalization and personal interest tactic you take will require your judgement based on the context of your discussions and your rapport.

If you navigate this first stage of the nurturing process (and technical contact control effort) successfully, you are ready for stage two. At some point, when you’ve gathered enough information about the relevant problems their organization is experiencing, how much it’s costing them, and how that relates to key business issues they are focused on, you (or your now collaborative technical sponsor) should reach out to the business contact again to confirm this is a value proposition that is accurate and worth pursuing. (Notice, you haven’t asked to meet the business stakeholder yet. You’re nurturing the relationship with value before asking for time.) If you’ve done a good job gathering the information and articulating it in their vocabulary, don’t be surprised if they ask for a conversation at this point.

Here’s an example, “Hi Joan, reaching out to follow up on the XYZ project. After a series of investigative reviews we’ve identified a value proposition that I’d like to verify from a business perspective. We’ve found that a database problem has resulted in about 14% of your customers abandoning their website purchase process prior to checkout due to frustration. As a $100M company, the simple math says this is about a $14M issue. Wondering if you see it the same way or think it’s not worth solving in light of other issues. Your perspective would be valuable to me in my allocation of resources.”

Even if they don’t respond with a suggestion to discuss at this point or point you to another contact they delegate with the responsibility, you have another nurturing opportunity. I recommend a follow up communication to see if they would be interested in understanding the business proposal you will be submitting. I also suggest that you (or your collaborative sponsor) offer to invite them to the formal meeting with the technical team, but offer to provide them with a 15 minute executive overview if they don’t have time for the one to two hour meeting with the rest of the evaluation committee.

Guess which one they usually prefer? In the event they elect to go to the technical meeting, they can be a great resource for keeping the business proposal focused on the outcomes instead of price. I suggest using their presence as the rationale for starting with the executive summary identified below.

I’m sure you can imagine there are other ways to deliver value and build credibility with information in your nurturing campaign. I’ve only highlighted a few, but the idea is to build your credibility without a major ask too early. However, at some point you may need it. If you’ve done a good job and navigated the pushback from the technical team, you should be in a position for a big “ask” if the circumstances aren’t in your favor. “Hi Joan, I’m reaching out to ask for some help on the XYZ project. I’ve run into a <budgeting shortfall, prioritization problem, or other IT roadblock> that I could use some coaching on. Can I get 10 minutes of your time to share the details and see if you have any ideas for eliminating the $14M problem we’ve identified with your online storefront?”

If you’ve navigated this successfully, you will likely find yourself with a more powerful ally in your quest to close your opportunity. Along with the more powerful ally comes wider discretion over fixed budgets, the insight to reprioritize for business reasons, and a more willing sponsor to take you to even more powerful stakeholders should the need arise.

3. Restructure Your Pricing Proposal to be a Business Proposal.

Remember the suggestion to invite the business stakeholder to the proposal presentation, or offer to summarize it for them individually? The key to success on this topic is to structure it like a business proposal, not a solution overview and price quote. The executive summary should include the key problems uncovered, the impact of solving or not solving the problems in terms of revenue, cost reduction, or other tangible return, and the relation to the current business issues of the senior management. The technical details should follow last. The executive summary should not be a summary of your company’s history and solution overview as a majority of technology proposals tend to exemplify. 

Your goal should be to develop a proposal that compels action – not negotiation.

Summary

The example situation I described at the beginning of this article grew average productivity of sales people from $1.4M to over $10M in a five year time span, largely due to targeting more powerful stakeholders.

Although none of these tactics are foolproof, with practice, and anticipating the hand slap response, you’ll find your access to more powerful stakeholders (obstacle removers) improving along with your average contract value and sales cycle. Asking for forgiveness in light of a well thought out rationale can relax many ruffled feathers. I would also suggest practicing on your new relationships versus your long term customer relationships. New relationships tend to allow more leeway than longer established relationships where behaviors have been cemented in tradition. Also, as many who have learned to integrate two culture selling into their practice have told me, it’s a lot more fun to sell to the business side of the house!

Please “like” this post or leave a comment! It helps to spread the word on best practices.

Kevin Temple guides sales teams to be more agile and improve revenue outcomes. He can be contacted at kevin@enterprise-selling.com. The Enterprise Selling Group is a leader in delivering sales training, coaching and project oversight to improve the agility of sales teams around the world.

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