John Sedgwick is President of Applied Learning Associates of the Midwest, an HVAC Consulting and Sales Training company. He is widely recognized as one of the country’s leading experts on HVAC distribution.
 

Many of the companies doing business in the HVAC industry were started in direct response to the needs of the growing, high demand HVAC market of the 1950’s, 60’s, and 70’s. During those decades the country built the first tier suburbs to house today’s baby boomers. We shifted from delivered fuels for gravity furnaces to piped natural gas forced air furnaces. We moved from no air conditioning in new or existing homes to the fully saturated market that we have today. During those decades, HVAC was a classic “growth” industry. People needed and wanted heating and air conditioning… and companies sprang up to fill that demand.  

Today we have a different kind of market. Essentially all new homes that could use air conditioning get it at the time of construction. And the modernization market for air conditioning in existing homes has nearly been exhausted. We are quite near to being a new construction and replacement market only.

The HVAC industry will obviously not shrink… it is a huge and stable industry. But it will continue to change from a “growth” industry to a “mature” industry. And the success factors that made companies successful in a growing market will not necessarily translate to success in a maturing market. The thing that characterizes a mature market is the “over served” nature of the marketplace. There are more suppliers than needed by the number of buyers. There is more capacity to manufacture, distribute, and sell product than is actually needed. This causes a predictable pressure on margins, followed by a period of industry consolidation and shakeout to reduce industry capacity. Those who emerge successfully from this period are stronger, leaner, and more effective competitors.

Three factors distinguish the players that survive and thrive during this critical change from a growth driven market to a mature market.

First, these companies develop cost structures that are “best in class”. In other words, they can do what they do at a cost that is as low as or lower than their competitors.

Second, these companies develop quality levels that are best in class. When customers have many choices, companies simply can’t make errors and still retain their customers.

And third…given that they have best in class cost and quality… the survivors/thrivers are the “best marketers” among the remaining competitors.

This “best marketer” concept is key. I am not talking here about marketing as meaning advertising, sales promotion, pricing, etc. I am referring to marketing in the larger sense. The best marketer does four things better that competition. The best marketer…

1. Is best at defining who the target customer is.
2. Is best at identifying the needs of the target customers.
3. Is best at putting together an offering that fits the needs of the target customers.
4. Is best at implementing the offering.

Each of these steps has a number of elements, and over the next four issues we’ll look at each step in detail. Hopefully we can help you become the “best marketer” in your marketplace.

Being the “Best Marketer” October 2006 issue

Step 1: Be the best at identifying the target customer.

In last month’s article, I said that three factors distinguish companies that survive and thrive in over-served (too many competitors) markets. (And, by the way, these same factors apply to individual territories being managed by territory managers.)

First, these companies (or territory managers) develop cost structures that are “best in class”. In other words, they can do what they do at a cost that is as low as or lower than their competitors. `

Second, these companies (or territory managers) develop quality levels that are best in class. When customers have many choices, companies simply can’t make errors and still retain their customers.

And third…given that they have best in class cost and quality… the survivors/thrivers are the “best marketers” among the remaining competitors.

The best marketer does four things better that competition. The best marketer…
1. Is best at defining who the target customer is.
2. Is best at identifying the needs of the target customers.
3. Is best at putting together an offering that fits the needs of the target customers.
4. Is best at implementing the offering.

This article addresses the first step… being the best at identifying who are the target customers.

It stands to reason that the more tightly you can define the “target” customer, the better will be your ability to focus your offering on satisfying a specific set of customer requirements. In real business situations, however, many of the selling companies will fail to define the customer with sufficient precision – leading to an offering that is too generic – and leaving room for a competitor who does define the target precisely to come in and take market share.

This applies to any business…manufacturer, wholesaler, contractor … and even to individual sales territories.

Here’s an example using a wholesaler who wishes to sell to HVAC contractors. Each line adds to the more precise definition of the target customer.

Our target customers are HVAC contractors…
…who do mostly residential work
…who do mostly service
…who are generally small to medium in size (fewer than x employees)

These are much different customers from

HVAC contractors…
…who do mostly residential work
…who do both replacement upgrade and service work
…who are generally medium to large companies (more than x employees)

Both these contractors are going to buy residential service parts, but their business requirements are going to vary. So let’s take three wholesaler companies that all want to sell service parts.

The first wholesaler defines the target as “HVAC service contractors”… and puts together a generic parts offering.

The second wholesaler defines the target specifically as the small to medium
residential service contractor defined above. If his offering better meets the needs of these target customers, he’ll take some of those customers away from wholesaler #1.

The third wholesaler defines the target as the medium to large R/U contractors who also do service… also defined above. If his offering addresses some of the unique needs of those contractors, he’ll take some share of those customers from wholesaler #1.

Poor #1!

We could do the exact same thing for consumers. There are generic “homeowners”. But there are also specific subsets of homeowners – affluent vs. middle class, newer home vs. older homes, seniors vs. young families, etc. If one supplier successfully targets a subset, they will take business from contractors that simply lumped that subset into the generic homeowner pot.

This obviously gets a little complicated… and fast. The reality is that a typical business could identify dozens of possible target customer subgroups.

So how precise do you need to be? Well… the simple answer is that “you need to be the best”. You want to be the one that is continually asking the following two questions.

First…within my broad customer base are there significant subsets that have different needs, and could I potentially take business from a competitor if I targeted those customer needs?

And second… within my broad customer base, is there a subgroup that is being targeted by a competitor, and do I need to take at a look at my target definitions to defend or to regain the advantage.

If the answer to either question is yes…you need to do some “marketing”! Right now would be a good time to get started.

Being the “Best Marketer” November 2006 issue

Step 2: Be the best at identifying the critical needs of the target customer.
 

It’s a little difficult to write an article that combines the subject of customer needs for sale people that do consumer selling – such as dealers- and those that do business to business selling – such as wholesaler sales people. This is simply because businesses have an over riding business need to increase profits, while consumers have mainly personal needs, such as saving money, saving time, and increasing peace of mind. Business to business sellers often forget that their customers are people first and business people second. In other words, they have personal needs just like consumers – in addition to their business needs. So in this article, I’m going to use personal needs to illustrate my general points, and then finish up with a few comments specific to business needs.

The most helpful model I’ve ever found to think abut your customer’s needs is a simple two by two matrix. Take a scrap of paper and draw a large cross dividing the paper into four quadrants. Label the vertical axis “important” at the top, and “not important” at the bottom. Now label the horizontal axis “satisfied” on the left end and “not satisfied” on the right end.

Now you’ve got a simple two by two matrix with four boxes that represent customer needs that are…

• Important…but already satisfied
• Important …and not satisfied
• Not important…but satisfied
• And, not important… and also not satisfied

The rules that you now follow are simple.

• Needs that are not important can give you talking points…but they don’t really drive customer buying behavior.

• If customers have needs that are important, and already satisfied by the offerings of other competitors, then you need to satisfy these needs at least as well as competition.

• But if a customer has needs that are important and not fully satisfied by competition, then you have a true opportunity to gain competitive advantage.

A lot of sales people talk about the equipment they sell. And the quality of what you sell is important. But most consumers assume that all or most of the equipment available is of adequate quality. Their perceived need for quality is already satisfied. You must demonstrate that you are as good or better, but it’s tough to establish a clear competitive advantage around equipment quality.

We’d be better off to focus on the important but not satisfied box. And the most important consumer need in this quadrant is generally peace of mind. This is a truly powerful selling tool. As consumers we buy insurance but worry about both the cost and the amount. We invest like the pros tell us but worry about risk and adequate return. We select a realtor but worry about whether they will get us the best possible deal. If we could just find an insurance agent, an investment advisor, a realtor that we were 100% confident was both an expert, and truly committed to our personal best interests… we’d buy from that person. (Which is the primary reason that some of these folks are rich while others barely make a living).

This “peace of mind” need has many tails on it. The consumer wonders “am I getting the complete information I need to make a decision”, “is this contractor reliable and trustworthy, “will the projected savings come true”, etc.

In the next article, we’ll look at how you can develop an “image of authority” that answers these questions for the customer, and puts you in a position to take advantage of your customers most important but not fully satisfied needs.

A few words about customer needs in business to business selling…

Businesses have an over riding need to increase profits. There are two basic choices… increase sales without commensurate cost increase, and reduce costs/increase efficiencies. If you can help your customers sell more or cut expenses, then you have a powerful sales story. But I’m going to refer you back to an earlier article that is archived in these newsletters that talks about being of “greatest help” to the contactor. It’s one thing to bring an idea on how to sell more…. But it’s another thing to work with that contractor to get that idea implemented. You have to do both… answer the question of how can I help increase sales, and also what do I need to do to make it real. And don’t forget…your customers are people too. Think about how you can save them personal time and work, and how you can increase their peace of mind.

Being the “Best Marketer” December 2006 issue

Step 2: Creates an offering that fits the target customer's needs.

Companies that perform the best in over-served markets (too many competitors) do three things better than their competitors. They develop cost structures that are “best in class”. They develop quality levels that are “best in class”. And third, given that they have best-in-class cost and quality, the winners are the “best marketers” among the remaining competitors.

The best marketer then does these four things better than their competition:
1. Defines who the target customer is
2. Identifies the needs of the target customer
3. Creates an offering that fits the target customer’s needs
4. Implements the offering

In the last article I talked about the need to separate those customer needs that are important from those that are not. Including things in your offering that relate to your customer’s ‘not important” needs can provide you with good talking points but they won’t sway the customer if the competition is better on the important needs.

As I did in my last article, I have to separate the discussion of retail selling to homeowners from that of business-to-business selling to contractors…so let’s look first at an example of putting together and offering for homeowners and then come back to contractor selling.

I know it may be a little controversial to say this, but if you/your dealers are selling to homeowners, the technical features of the product are really not all that important to most customers. Most are not that interested in the grade of stainless steel, the quality of the paint finish, the size of the unit and so on. They just want to know that it’s reliable, and that it will provide the level of comfort that they need.

The sales offering should be built around two things. The first are elements that demonstrate that you can meet or beat the competition in any area where your customers’ have important needs that others can also provide. For example, if your market has many contractors who offer financing, then you had better be good at that too.

The second are elements that demonstrate that you are competitively superior in the areas that are important to the customers, but particularly where other contractors fall short. In the last article I pointed out that the most common area where customers are the least satisfied is peace of mind. A proven, effective way to do this is to create a list of things that most homeowners worry about when buying something from a contractor, such as being licensed, insured, having warranties and guarantees, and then show them that you have all of that covered. It’s that simple. This is actually the theory behind System Selling… so that’s why it’s important to use the tools as they are laid out.

Now let’s apply this to the wholesale business-to-business selling to contactors. As in the retail selling example, you must be able to meet or exceed your competitors in areas where they are competent. Contractors have specific expectations for wholesaler companies, and for their sales people. For example, wholesalers are expected to have excellent product availability, technical competence, and competitive pricing. That’s expected. And most wholesalers perform well against those expectations. You must be sure your offering meets or exceeds competition in those key areas.

But the key to gaining share is not just being competitive in the areas where everyone else also performs well. You need to identify the most important unsatisfied needs that the contractors have, and respond to those needs.

I am convinced that the most important and also the least satisfied contractor need from wholesalers is for the wholesaler to go beyond the “here’s what’s available” type of selling to “business proposition” selling. Fundamentally this means the wholesaler approaches the contractor with a message that says “I want to help you grow your business, and in return for that I would also expect to earn additional business from you”.

Putting together this kind of offering requires that you do one thing. You must ask questions. Because each contractor’s business is different, your offering to help grow that business will also have to be different, or customized, to some degree. Your “offering” is going to be a packaging of elements that are standard for all your customers (such as “twice a week delivery”), and elements that are very specific to the growth challenge at hand (such as “I’ll provide dedicated training for your sales people next Thursday”).

If you find that you are going from one customer to the next and are covering the same items in the same way, then you are not doing business proposition selling. But if you are ending your product pitch like this…” So that’s the new product… now what can I do to help you start obtaining some of these benefits?”…then you’re well on your way to a “superior offering”.

It’s your choice. How are you going to approach your sales calls this week? Same as always? Or are you going to create something different?
 

Being the “Best Marketer” January 2007 issue

IMPLEMENTING A SUPERIOR CUSTOMER OFFERING


If you’ve stuck with this series of four articles on being the “best marketer” in your competitive market area, then you know that the best marketer need s to do four things better than their competition. You need to be better at…

1. Defining the target customers
2. Identifying the needs of the target customer
3. Creating an offering that best fits the needs of the target customer
4. Implementing that superior offering

This article deals with the last step, being the best at implementing that superior offering.

Here are three observations about implementation that might be helpful.

First, implementing any real change in a business starts at the top. The most senior marketing executive in your organization needs to be committed to the entire process that’s been laid out in the last three articles, and completely committed to getting the entire organization lined up behind the customer offering that that process has determined has the best chance of gaining business from competition.

Second, that commitment needs to be shared by all the other managers in the organization… sales manager(s), branch managers, product line managers, the managers who supervise the service techs or drivers, etc … so that the “offering” is carried to the customers no matter how the customers interact with the company.

And third, the employees need to buy in… since they are the ones that ultimately will touch the customers.

Let me give you example that illustrates these observations. Many retail companies have determined that competitive advantage can be gained by having a more personal interaction with the customers. I sometimes shop at Menards, a Midwest home improvement retailer that competes with Home Depot, Lowes, etc. Menards has obviously trained their store employees on the following procedure: if the customer asks where an item is in the store, the employee is supposed to walk the customer to the item… not just point or give direction. This will create customer value if the procedure is followed at all stores, if it is followed by all employees, and if it is carried out in an outgoing fashion, as opposed to grudgingly. When it works at every level, the customer feels valued. But a breakdown at any level leaves the customer feeling bemused (these guys can’t get their act together), or even cynical (this guy really doesn’t want to help me out). Obviously, for the strategy to work it needs to work at every level…management, supervisor, and employee.

Here is very specific process that a business could follow to maximize their chance of being the “best marketer”… including being the “best implementer”.

1. The senior marketing person and the senior management team should agree on which businesses are in fact the companies target businesses. Remember that a “business” is determined by whether there is an identifiable a set of customers and competitors. For example, for most HVAC businesses, new construction, and replacement/upgrade are usually separate businesses since they have separate customer sets and competitors. Similarly, supplies, accessories, refrigeration, parts, etc. are all different businesses for most HVAC wholesalers.

2. For each business, form a team of key employees to ask (and answer) key questions… like the following. Who are the target customers for this business… the ones we really need to get to grow the business? Who are they buying from now, and why? What is competition not doing that the customers would see as a benefit? If we offered that would we gain share? Can we physically and affordably offer that?

3. Develop an offering for each business that maximizes that chances of picking up revenue (or profit), from competition.

4. Communicate this offering clearly and consistently throughout the organization.

5. Implement effectively.

6. Repeat at least annually.

As they say in the Nike commercials… JUST DO IT!

Leadership and Management: Does the Difference Matter? February 2007 issue

By Tom Piscitelli and John Sedgwick

You are always busy, and it seems you are always behind. Urgent matters, emergencies, crises all seem to end up on your desk. Part of you likes this because you are good at handling these challenges, and you feel valuable to your organization because of your contributions in this way. Part of you wishes others would learn how to handle these things and take care of them themselves. Maybe there is hope (see Jill’s article to see what we really mean by “hope”).

Beginning next month Tom and John begin a series of articles on Leadership directed particularly at sales managers… although we’re sure that anyone on your management team will benefit from reading them. We will address the key question of what is the difference between managing and leading, and will give specific steps that any manager can take to become a more effective leader. We hope that you will enjoy them.

These articles are partly in response to the many questions that we have had over the past few years regarding the availability of effective, practical training for sales managers. We have developed the materials for such a program and are in the process of determining if there is sufficient interest for Applied Learning to run one or more regional sales management seminars.

If you would be willing to complete our survey on sales management training needs, that would be very helpful to us. Just drop Tom an email and he will get one out to you. (tpiscitelli@msn.com)

As a thank you we will send you a set of FREE sales force job description templates. These will be available at the end of the first quarter 2007. They will include helpful templates for writing effective job descriptions for sales person, senior sales person, and account executive level sales person.

Be sure to watch for next month’s kickoff article… “What is the difference between managing and leading?”

Attention Wholesaler Managers…Is your management team – especially your sales managers – signed up to receive this e-zine? Register them at www.sellingtrust.com. It takes less than a minute to do it.



Leadership and Management: Does the Difference Matter? March 2007 issue

By Tom Piscitelli and John Sedgwick

In this month’s issue Tom and John kick off a series of articles aimed at sales managers… although we hope that any manager, not only in sales, will find the ideas useful and thought provoking. In these articles we will look into the subject of Leadership: how is leadership different from management, and what some of the steps are that managers can take to be more effective leaders.

Why aren’t there more great…even good…leaders?

The main reason is probably this. Most “managers” simply never internalize the fact that “management” and “leadership” are not the same thing. Bestowing the title of “manager” on an individual does not change that person’s inherent ability to lead. And yet many managers act as though it does. They develop an attitude that communicates that “I’m in charge, I’m the leader…you’ll all do what I say.” Believe it… giving directions and leading are not the same thing.

So what is leadership? A lot of books have been written about leadership. Organizations like the military give long courses on it. But we’ve found it easier to define in terms of an outcome as opposed to a set of actions. You are an effective leader if people willingly follow you.

If you’ve been in the military, then you know that the leader of a unit is not necessarily the officer in charge. The true leader may be a non-commissioned officer, and may not even be the most senior non-com. The leader is the one the troops turn to in times of stress…the one they look to you to answer the question: “what should we do now?”

So leadership is not the same as authority.

Other managers act as though leadership is the same as exhortation. If I give another inspirational talk, or if I send out another fiery memo, that will get people moving in the direction I want them to go.

Certainly there have been great leaders who are also great speakers and writers. Churchill comes to mind. Jack Welch of GE. JFK. But research shows that many great leaders are actually reluctant to take center stage. The book, “Good to Great” by Jim Collins profiles a group of highly effective business leaders. This book points out that the majority of these highly effective leaders were rather humble, low-key men and women. The main trait they shared was not public speaking skill, but rather it was an iron will; a tenacity about moving the organization forward toward a long-term vision.

So leadership is not the same as exhortation.
And some managers act as though leadership is the same as being the “best doer”… the best salesman, the best strategist, the best planner, the best decision-maker.

Call it “lead by example”. While we all know effective leaders that do inspire others through their own personal skills and force of personality, the downside of “lead by example” is fairly obvious. First, what happens to the organization if the “leader” is not there anymore? Second, people become dependant on the leader to take over, so they don’t learn to do things themselves. And lastly, how do employees really feel when they can never measure up to the skills of the leader? It certainly can’t be very motivating.

So if leadership is not just authority, exhortation, or leading by example…then what is it?

Leadership is an outcome of the way that the leader interacts with those who are being led. It is an outcome of the leader’s communication ability, using the term communications in its very broadest sense. Communications includes writing and speaking, but more importantly it includes appearance, body language, listening and questioning skills, coaching (giving feedback) skills, motivational skills.

Next month well look at what it takes for effective business leadership.
 

Effective Sales Leadership - Part 2 April 2007

By Tom Piscitelli and John Sedgwick

Effective business leadership actually requires two elements in addition to this ability to “communicate” or “interface” effectively with the “followers”.

First the leader must have a clear vision of where it is that he or she wants the team to go. People are most highly motivated by clear linkage to a common cause to which they can aspire. Let’s take a sales team as an example. Here are three “goals” that the sales manager might communicate to the team:

• “Our most important goal is to reach our sales plan of 105% of last year.”

• “Our goal is to build a sales team that is clearly the best in the marketplace. One that is capable of increasing our business by 30% over the next 5 years, and of sharing in the rewards from that growth.”

• “Our goal is to build a sales team like no one has ever seen in this market; one that is capable of literally changing the way people do business in this marketplace.”

The first manager is communicating a simple message that we need to hit the numbers. It’s not a very inspirational goal. It’s short term. And it is hardly a “vision for a better future.”

The second manager at least creates a vision of a superior sales team; a message that many team members will be able to commit to. It’s certainly better than the first.

But the third manager clearly sees a better world where his/her team actually changes the marketplace. It is visionary. It is obviously based on a strategic determination that the best way to gain rue competitive advantage is to focus on changing the selling behavior of the customers in the marketplace. The right team of individuals can get, and stay, committed to this goal.

The second element that is needed is the iron will I mentioned earlier. Great Leaders don’ts just lay out a vision and then forget about it. They stay with it. They talk the talk…and they walk the walk.

Combine the ability to create a vision of the future and the tenacity to stay focused on that vision, with a strong ability to “communicate” (in the broadest sense), and you’ll be a great leader.

Being an effective business manager/leader is a very complex task. Think about it this way. The “marketplace” says that those who are supposedly the best at this are worth 10’s of millions of dollars per year. Regardless of where you are on the issue of CEO/executive pay, we all agree that mastering all the skills, knowledge, and capabilities needed not just to run a large business, but to move it forward against competition, is truly valuable – and relatively rare.

As a sales manager, you’re not expected to have all the abilities of a Fortune 500 CEO – and you’re not going to be paid $10 million either. But the basic abilities are the same.

Here’s one way to break these abilities down into categories that you can use to looks at your own personal capabilities.

An effective business manager/leader needs to have:

1. A certain amount of knowledge (specific to the job and the task at hand)

2. Certain skills also specific to the job

3. Certain personality traits

4. General management skills

5. Communications skills and abilities

In our next article and in articles following that, we’ll look at each of these capabilities separately, and then will go on to specific steps that any manager can use to be as effective a leader as possible.



Effective Sales Leadership - Part 3 May 2007

By Tom Piscitelli and John Sedgwick

This month we’ll look in more detail at the elements of the management job, and see which of those elements are most closely linked to effective leadership. There are five basic elements of the management job… knowledge specific to the job, job skills specific to the job, management skills not specific to the job, and communications skills and personal traits, … and some of these are related to leadership and others are not. Let’s look at each one.

Knowledge…and Skills Specific to the Job

First, a complete manager/leader requires certain knowledge and skills. Some of these are specific to the job at hand. For example, if we are talking about a sales manager of in the HVAC industry, then this would include knowledge of the market, the types of HVAC equipment, basic labor management practices, and so on. Some of these knowledge/skills elements would also include general supervisory and management skills; legal requirements, how to do a basic job interviews, how to conduct a performance review, how compensation systems work, etc.

One important observation about the knowledge/skill area is this…a highly effective leader does not necessarily need to be the most knowledgeable or skilled individual contributor. We never give it a thought that the best football or hockey or baseball coach probably wasn’t the best player, or may not have even played the game at all at the highest level. The best coach is a student of the game, and a leader of men and women. Similarly, the best HVAC sales manager doesn’t need to be the most knowledgeable person on the product, or even the most skilled sales rep. He/she needs to be adequate in these areas, and that’s sufficient.

General Management Skills

We can separate management skills into three categories – administrative, strategic, and visionary.

All managers need to be adequate administrators – doing budgets, reports, tactical plans, etc.

All managers must also be adequate strategic managers. Three skills stand out:

1. Strategic Planning Skills…the ability to set achievable (but stretch) goals, to identify the issues related to achieving those goals, and to develop strategies to deal with those issues.
2. Decision Making Skills…the ability to see all sides of a question, to analyze options clearly and unemotionally, and to pick one and stay with it. And to do all the expeditiously.
3. Problem Solving Skills…the ability to get at root causes by analyzing all the facts, to see all the possible solutions and again to pick the best one. And to do that expeditiously as well.

We said that all managers must be at least “adequate” in these areas. However some managers go well beyond adequate, becoming superior strategic thinkers/planners. Obviously, a superior strategy can drive superior organizational results… leadership aside.

Some leaders, the best ones, develop strategic thinking that can be labeled “visionary”. Great leaders are ultimately known for the vision of the future that they can see, combined with their ability to communicate that vision. Think of JFK’s “ask not what your country can do, as what you can do for your country.”, or Ronald Reagan’s “shining city on the hill”. Regular folks, not just presidents, develop visions for their companies or for their small piece of a company as well.

Being visionary requires that your start out being “strategic”. The starting point for strategic planning is the ability to develop realistic but stretch goals. And the starting point for being visionary is the ability to see goals more broadly and deeply. Some people limit their thinking to goals like “105% of last year.” Others see broader goals like “change the market” or “create a different kind of company.” The difference between a good strategic thinker and a more visionary thinker is to think about goals in a broader and deeper way.

Communications Skills

When people think about “communications” they first think of the obvious ones… like speaking and writing ability. And these are important. But one’s ability to “communicate” includes many other elements. Here are some others:

• Question asking skills
• Listening skills
• Body language
• Voice modulation
• Bearing/appearance/image
• Ability/skill to read differences in people and to match the message to those different people

In essence, leadership is largely an outcome of communications ability.
Earlier we developed an operational definition of leadership…the leader is the one that people willingly follow. It is the perception created by the way the leader interacts with others that determine whether these people want to follow or not.

There are numerous examples in both world history and business history where leaders took their followers to both the heights (Churchill, MLK, Gandhi) and to the depths (Hitler, Jim Jones). In fact, there is nothing on earth more dangerous than an evil person with great communications skills.

Traits

Traits, like honesty, integrity, work ethic, and many others are all important. But since we are focusing here on effective business leadership, we want to limit our thinking to those that are directly linked to that effectiveness. Referring back to the book we cited in last month’s article… “Good to Great” by Jim Collins… careful research shows that the one common trait in the leaders he looked at was “iron will”. These leaders developed a vision… but then they were tenacious about pursuing that vision. There employees followed them.

Putting It All Together

Positive, effective business leadership is a combination of certain traits (particularly iron will), certain skills and abilities (particularly the ability to do visionary thinking), combined with the ability to communicate.

Obviously some people have more innate leadership ability than others. All the consultants, coaches and make-up artists in the world couldn’t produce another George Patton. But examples like those are rare. Sound, even excellent leadership is not uncommon. And with a reasonable amount of training coupled with a personal commitment to practice certain skills and abilities, just about any manager can become a better leader, and many can become truly excellent leaders.
In our next segment we will look at a series of specific steps that nay motivated manager can use to become a more effective leader.
 

Effective Sales Leadership - Part 4 June 2007

By Tom Piscitelli and John Sedgwick

We had indicated that in this article we would provide some specific steps that any manager can follow to be become a better leader.

Step 1 Honest Assessment

Step 2 Reassess Your Goals

Step 3 Develop a Personal Commitment to the Goals

Step 4 Really Work on Your Communications Style


In our last article we said that effective business leadership is a combination of certain traits… particularly an iron will when it some to moving toward some broad vision of the future; certain skills and abilities… particularly the ability to do visionary thinking; and, the ability to use ”communications” in its broadest sense.

So here are the steps we recommend.

Step 1 Honest Assessment

Make an honest self assessment of your current leadership ability.

Why are you where you are? Were you a great individual contributor? Did you bring broad management experience top the job? Are you a highly motivated go-getter? Did you have unique skills that your current job needed?

And, what is your current leadership style? Do you tend to exhort? Lead by example and hope others follow that lead? Focus on the numbers and on giving feedback on results?

And, based on what you’ve read in our prior articles, what would you like your own personal management style to become?

If you are totally honest with yourself in this assessment you can gain a great deal of insight into your current strengths and weaknesses when it come to leadership and move yourself toward those elements that will make you a stronger leader, and move away from things that make you less effective.

Step 2 Reassess Your Goals

People are more motivated to follow leaders in the pursuit of something that they perceive is truly important.

As a leader you need to set goals for your unit that are as motivating as possible.

Even if you do not feel that you have the luxury of doing a lengthy, formal strategic planning process on a regular basis, you do at least need to take that time to sit down (usually annually) and ask yourself “where do we need to get this next year” (our goals), and “how in general terms will we do that” (our strategies).

Try to go beyond the numbers. A goal of “105% of last year’s sales” is not very motivating. Try to reach for goals that include words like best, dominant, leading, team, unique, etc. Example: “Our goal is to achieve a dominant position in the xyz market, as measured by our ability to gain 10 points of market share”. Or: “our goal is to be the leading sales team in the company, as measured by our ability to outperform the other two regions by x percent”.

These goals have measurable numbers, but offer more for the team to shoot for.

Step 3 Develop a Personal Commitment to the Goals

Not every goal is going to be achieved… but don’t tell that to a great leader. The leader has to believe that goals can be reached, and cannot let up on the pursuit of those goals until a realistic assessment proves beyond doubt that they need to be restated. And even then it doesn’t change the leader’s long term intention to reach them when the situation allows.

Couple this belief with language that you use consistently and relentlessly. At every opportunity repeat that language… “remember folks… our overall goal is to take share from competition, and to be the leader in this market”. Or “remember…our goal is to be the absolute best in customer service at every level. Given that how should we handle this problem?”

People can on really focus on a few things. We don’t know what the exact number is … but it’s low. The leader is going to be a lot more effective if he or she focuses on two or three goals that must accomplished rather than a laundry list. And those need to be the subject of every interaction with the team.

Step 4 Really Work on Your Communications Style

As a business leader you really need to be the very best communicator you can be. We believe this allows for tremendous variation in personal style. You don’t need to force yourself into some image that isn’t comfortable for you. But you do need to be the leader. You need to communicate often and openly. You do need to be a better listener than a talker. You do need to coach. That means you need to spend time with your team members on their turf… not in your office. You do need to repeat yourself… focus on those few things that are truly important to you and make them important to your team. A great deal of your communications should consist of giving public recognition for the success of team members. Be generous in success and humble in failure.

Summary

Here’s a summary of some key points for becoming a more effective leader.

• Develop group goals that are as meaningful as possible.

• Make sure you are personally 100% committed to the most important goals… you believe absolutely that they can be accomplished.

• Focus your public persona on those few that are most important to the group’s success.

• Get out of your office and in front of the team. Listen to the teams input.

• Spend time with your staff members and give them feedback.

• Give generous credit for success.

• Take responsibility for failure… regroup and start over.

John Sedgwick is President of Applied Learning Associates of the Midwest, an HVAC Consulting and Sales Training company. He is widely recognized as one of the country’s leading experts on HVAC distribution. He can be reached at jsedgwick@charter.net

Effective Sales Leadership  August 2007

By Tom Piscitelli and John Sedgwick

Wholesalers: Survive on 5 or Thrive on 10? Here’s How

I am sure that none of you reading this would disagree with the following statement. “Companies that are able to sustain a customer service-based business model will be more profitable than those that are not.” Wal-Mart has a profit rate before taxes of about 5.5%. Nordstrom's has a profit rate of over 10%. Okay, Wal-Mart is about 20 times larger than Nordstrom's -- but their profit is only about 10 times greater. Even Target, who competes more directly with Wal-Mart for price conscious buyers, has a profit rate of over 8%. They are only about one sixth the size of Wal-Mart, but their profit is one fourth.

The reason that better customer service produces better returns is obvious. Not everyone buys strictly on price. Ask Tom for his material on the “Goldilocks” study. Only about 20% of buyers buy strictly low price. Those who are willing to pay more do so on the basis of a perception of higher value... and that includes a better customer service experience. If a company can add $100 of cost in the form of better service, and gain $150 in added gross profit as a result, and that's a good deal!

If you're a business manager/leader who would like to be more profitable (and I would hope that includes everybody) then you need to think about customer service and how it fits into your overall business strategy.

One place to start is by assigning your business to one of two categories... businesses that can gain competitive advantage through economies of scale, and businesses that cannot.

Economies of scale mean that there are cost advantages in being bigger. These advantages can include purchasing leverage, facility leverage, and even human resource leverage. Wal-Mart for example has shown that they can buy better, move more products per store/warehouse/truck, and even gain labor cost advantages by being bigger.

In our HVAC industry there are economies of scale in manufacturing and distribution. But even in these areas, economies can be quite small. Examples are niche manufacturing, and niche distribution, such as commercial system specialists. If you are in a business where potential economies of scale apply, you’d better have strategies to be a cost leader -- or to offset the cost leader’s advantage in some other way!

In the contracting area, there are certainly economies of scale for large commercial contractors, and even residential new construction contractors. But, for servicing and upgrade contractors, the scale economies are small. The cost of putting a trained technician in a truck actually on the job in a specific market is about the same for everyone. This is the reason the contracting remains a highly fragmented business.

Large economies of scale can allow large cost advantages that potentially could allow a low-price strategy like Wal-Mart. I say potentially can because it is also possible to convert some of the cost advantage in other strategies -- like R. and D., marketing, and customer service, for example.

If there are no large economies of scale, then major competitive advantage must be gained not on the cost side, but on the selling/customer side... unique niches, superior sales and marketing, or superior customer service.

Over the next few months we will share some of our thoughts on how you can gain competitive advantage and higher profits via an optimal customer service strategy for your business.

Effective Sales Leadership  September 2007

By Tom Piscitelli and John Sedgwick

How to use Customer Service to Beat the Competition

This month continues a discussion of customer service -- and how to use it as a competitive business strategy. This particular article makes two critical points. In fact, these points are so critical that I would say it is not possible to use customer service as a competitive business strategy unless you completely buy into them. I know that that is a rather absolute statement -- so feel free to get back to me if you disagree after reading the article.

Point number one is this: superior customer service is not the same as complete customer satisfaction.

In speaking to thousands of folks over the years, I have used the following brief exercise any times. “Complete the following phrase... A customer will choose to continue to buy from you and will refer new business to you if that customer is ___________.”

I would say that over 90% of people respond with some variation of the word “satisfied”. It's easy to demonstrate the inadequacy of this response. Have you ever done business with a company that provided satisfactory service -- but you would nevertheless do business with their competition if it were more convenient? Or cheaper? I've been to many restaurants that were satisfactory -- but I've never been back, or referred anyone to them. I'm generally satisfied with my car dealer’s service level -- but I'd probably check other dealers if I decided to trade. I just completed a phone survey with Home Depot where I expressed “complete satisfaction” with a purchase which they delivered -- but I prefer to go to Menard's if both stores have what I need. I was satisfied with my last heating purchase. The dealer installed it for the agreed to price and its performed well. But I've never heard from the dealer -- and would have no particular reason to use him again if the need should arise.

Here's an explanation for this. Over half a century ago the number of experts -- most notably a professor named Edward Deming -- developed an idea that manufacturers could achieve cost savings and competitive advantage by building products with high quality. They reasoned that the cost of building quality into the product was lower than the cost of scrap, salvage, and warranty, and also the cost of lost customers. While US manufacturers were slow to embrace these ideas, they were widely adopted in Japan -- and the rest, as they say, is history. Japanese manufactures did achieve higher quality and lower costs. But the really stunning consequences were not on the cost side -- but on the sales side. Customers liked the idea of cars that worked! And lasted! By the 1980s, the Japanese had 30% of the US car market -- and today Toyota is the largest global car company. Why? Because they exceeded their customers’ expectations.

If we meet a customer's expectations we have a satisfied customer. But if we can exceed the customers’ expectations we have a delighted customer. When customers are “delighted”, “exceptionally satisfied”, etc. their behavior changes. They become loyal. They come back. And they refer other people to the seller.

There are tons of books out there that have refined these customer satisfaction ideas over the decades, but the underlying principle is simple. If you want a customer to continue to buy from you, and to refer new business to you, and you want that to happen reliably and predictably, then you need to exceed the customer’s expectations.

That's why so many companies survey you today. They want you to be “exceptionally satisfied”. But wanting it, and achieving it, are two completely different things. In fact, in any industry only a very small fraction of companies will be able to establish a true competitive advantage via superior customer service.

The reason for this brings us to point number two. Let me limit my discussion to non-manufacturing companies -- in other words companies that provide some kind of service to individuals or to other companies. This would include retailers, wholesalers, contractors, restaurants, hotels, etc. For these kinds of companies, superior customer service largely equates to people as opposed to products. Hotels and can have great rooms, restaurants can have great food, contractors can have superior technical skills, stores can have great inventory -- but if the customer is not treated well then the customer will not be satisfied. And, if they are not treated better than they expected to be treated, then the customer will never be delighted, be loyal, or refer people to you.

So there it is. Point number 1 -- growing competitive advantage through customer service means exceeding as opposed to meeting customer expectations.

And point number 2 -- in non-manufacturing companies, the key to exceeding expectations is for employees to treat customers better than they expected.

Sounds simple -- so why are so few companies able to establish superior customer service? We’ll continue that discussion in our next article.
 

Effective Sales Leadership  December 2007

By John Sedgwick

Customer Service Part 3: Being Different From Your Competition

Let's continue our discussion of customer service by looking at the subject of customer service strategy.
There are any number of possible differentiators for any business that could compel customer s to choose one over another and even willingly pay a premium for very similar products. For example, a wholesaling business might use any combination of the following differentiators:

• availability (extremely high service rate)

• specialty inventory

• full line

• exclusive lines

• convenient location

• delivery service

• personal customer service

• field coverage

• business expertise

• technical expertise

• training services

• other unique services (such as crane trucks)

Which differentiators to use depends on the nature of the business, the customers, and the competitive situation.

For example a wholesaler serving the residential new construction market might use a combination of full-line offering, delivery service, field sales coverage, and business expertise to differentiate the offering. A wholesaler in the refrigeration market might use availability, exclusive lines, technical expertise, and training as key differentiators.
A very common -- and increasingly common -- situation is one where multiple wholesalers are selling very similar -- or the same -- lines in an over-served market environment. You could call these companies "commodity product" suppliers.

There are very limited options in differentiating commodity products suppliers. Availability, product lines, pricing, product expertise -- all are going to be fairly equal. In fact, if a wholesaling firm is out of line in any of these, that firm will not be able to compete. Conversely, it is very difficult to gain significant advantage in any of these areas.

The best differentiator is going to be "customer service" where the term customer service encompasses the total experience that the customer has when buying from your company. This can include how easy you are to reach (on the phone and physically), the appearance of the business, how merchandise is displayed, how long transactions take, timely availability of technical support, how often errors are committed, and especially, how the customer is treated.

All these things I’ve listed -- including how customers are treated – are outcomes of the company's customer service strategy.

We can identify four different customer service strategies that distributors use.

First-- and unfortunately most common – there is no specific customer service strategy. Many businesses assume that their employees are reasonably intelligent people who have some innate sense that customers should be treated respectfully, so that's where strategy ends. The strategy is, in effect, "hire good people assume they will do a good job". As we know, maybe they will, but maybe they won't.

In under-served markets -- which are by definition "Sellers markets" -- this non-strategy probably is adequate. But in over-served markets -- where there is an excess of supply, and which are by definition "buyer's markets" -- buyers have choices, and buyers will go where their needs are served best.

The second strategy -- and the one that we should think of as the minimum strategy in an over-served, commodity environment, is to provide "better customer service than our direct competition". Sometimes I see this written in strategic plans as being "the easiest company with which to do business". Hopefully a company with this strategy has at least looked at each element of the customer service experience, and compared their company's performance against the best direct competitor. These elements include the ones that listed earlier:

• locations

• delivery

• service rate

• store layout

• product merchandising

• transaction speed

• error rate

• technical backup

• how the customer is treated

The last item -- how the customer is treated-- has a huge number of tails attached to it -- so many that it will be the subject of a separate article in next month's e-zine. For now it's just look at the other available strategies.

The third strategy would be to offer a unique level of customer service. A company with this strategy is committed to the development of customer service elements that competitors don't even offer. Let me give you a few non- industry examples to demonstrate. One of the companies that has been written up a lot is Commerce Bank. While most banks hate having to deal with coins, Commerce Bank has actually put in special coin counting kiosks were customers -- including kids -- can bring in that piggy bank , count their coins, package them -- and convert them to paper money if they wish. Another example is a successful New York restaurant group which maintains a reservation system that tracks complete customer personal data -- birthdays and anniversaries, table preferences, food preferences, prior experiences, etc. This obviously allows a very high level of customer responsiveness when customers call for reservations.

Any business -- with sufficient marketing imagination -- could come up with unique ideas… such as dedicated customer reports, creative merchandising ideas, unique information tools, etc. And that would make sense as long as the business gained exceeds the costs of implementing the idea.

The fourth strategy would be to focus the customer service offering on a target customer base. For practical reasons, this is probably going to be the most affluent, or the most productive customers. This is the Ritz Carlton strategy -- appeal to the affluent travelers. It is also the Nordstrom strategy. We see this in our industry at the contractor level in the form of the contractor who focuses exclusively on the most affluent homeowners, or on working with the highest end builders. It certainly is theoretically possible for a wholesaler to develop a unique offering aimed at tying up the business at the largest contractors, builders, or users.

So let's recap quickly.

The four possible customer service strategies are:

1. The default strategy. Don't have a strategy except to hire decent folks and assume that they will treat the customer fairly.

2. Develop a strategy to provide better customer service than your direct competitors. This should be the minimal strategy in an over-served market environment.

3. Develop a strategy to provide unique customer service elements.

4. Develop a strategy to focus on a specific customer set.

Next month we can look in detail at what it takes to provide a truly "superior customer experience".