Long Live Profit Sellling

In a typical management meeting,  the first item on the agenda is usually sales performance. Much time is allotted to discussing sales increase or decrease over the prior period, achievement of quotas or targets, and improvement in market shares. After all nothing happens until a sale is made and sales solves a lot of problems.

However, two strong forces have taken the luster off the devotion to revenue selling.  First, globalization with worldwide suppliers competing for the same customer has eliminated control of price management. No longer can profit margin be maintained, never mind grown, through the execution of price increases. As a young product manager learning my trade through the 80’s I was able to achieve desired results through the blind and reflexive execution of annual price increases.  The company was fat and happy and there were little or no market repercussions.  But today, the market simply won’t allow it.  There are too any options available to customers and meaningful, substantial product differentiation rarely exist. The lack of innovation and poor value delivery to customers has led to the primary competitive mode of price competition.

Second, customers, be they consumers or businesses, are becoming increasingly sophisticated and aggressive in their purchasing.  As suppliers strive to secure “life-of-customer revenue”, customers today are less loyal than ever before. Customers have become more knowledgeable and have through technology, such as the Internet, greater options readily available to them.  Customers want it when they want it, how they want it and at the price they want it and if you are not innovative, flexible or adaptable to respond you will lose those customers.  Customers do not act as if suppliers deserve a profit.

These two forces combined with the advent of the internet, an incredibly effective tool for seeking out alternative sources of supply, have created the perfect storm for driving down prices.

The impact of these forces is to remove the known, the comfort of past experiences and introduces new paradigms, new operating practices and the constant challenge of change.  In order to respond to these forces and the new volatile playing field, companies today need to transition from:

a.  Revenue selling to profit selling.  Companies will have to manage to the  bottom line rather than the top line. Volume for the sake of volume is not sustainable without the corresponding profit and cash flow.  This may very well mean picking and choosing, and even firing, customers.

b.  Price management to cost cutting.  Companies will have to constantly

lower costs in order to accommodate rising customer expectations.  A lean mentality focused on continuous improvement for cost effective processes will be fundamental to survival.

c. Good Basic Value to Superior Premium Value.  Companies can no longer assume that good is good enough.  They will no longer be able compromise on value, service, and product quality and  capabilities.  Customers will demand premium service and value and will raise their standards continuously.

Successful enterprises will focus on their bottom line through a combination of profit selling and cost cutting while relentlessly driving extraordinary value to selected customers.