THE STORY
When I was a child in school, I preferred multiple choice tests over true or false tests. With multiple choice tests, I found it relatively easy to guess when I did not know the answer. In nearly all cases, the correct answer would be the option that had the most words in it. So when I didn’t know the right answer, I’d pick the wordiest option.
True or False answers were
harder to guess. You either wrote a “T”
for true or an “F” for false. One was
not wordier than the other. For awhile,
I tried to perfect the writing of an answer that looked half-way between a T or
an F. It sort of looked like it could be
either a T or an F. My hope was that
the teacher would be biased towards correct answers when grading and that my
half-way letter would be interpreted as the correct answer due to that
bias. But that method was not as
reliable as the multiple choice guessing method.
In the business world, it often seems as if executives look at sales as being like a true or false test. The question goes something like this: “Did you get the sale? (T or F).” And from the point of view of the executive answering the question, this seems logical.
The problem with this approach
is that it does not provide any insight into the selling process. It doesn’t help us answer a variety of essay
questions, like:
- Why did we get (or not get) the sale?
- What would cause us to get more sales?
- What is causing us to lose sales?
- What approach should I use to get the next sale?
- How can we make our sales more profitable?
Worse yet, I think the true or
false approach wrongly distorts the way we look at the selling process. Yes, from the company’s perspective, getting
the sale is a true or false event.
However, from the point of view of the potential customer, the event is
much more like a multiple choice question.
The consumer has lots of choices
for how to spend their time and their money.
To them, the choice is rarely binary—it is not “Do I buy your product?
(yes or no).” Instead, the question to
them is “Which of my many options is the best choice for how I spend my time
and money?”
The alternatives to the consumer
are many. It can be between very similar
products such as “Brand X” soup versus “Brand Y” soup. It can be a choice between related products,
like eating soup at home versus going out to eat at a restaurant. It can also be between vastly different
products. An extreme example could be a
young woman’s choice between going back to college or having a baby.
Choices between extremely
different options happen all the time. For
example, a teenager may want to be popular at school. To get there, the teen may consider a number
of different options, like spending their money on the latest clothing fashions,
or buying the latest technology gadget, or buying drugs.
The multiple choice answers are
quite varied. And unless you frame the
question properly to understand the real problem being solved (“What will make
me popular with my peers?”), you will not understand what is going on in the
mind of that person when they are making that choice. For
example, if you sell teen clothing, your biggest problem may be in convincing
that teen that your clothes will make them cooler with the in-crowd than the
latest smartphone.
That is why it is so important
for executives to look at sales as a multiple choice exercise for the
consumer. It helps orient executives
towards understanding:
1.
What problems the customer is trying to solve;
2.
What is the vast array of options that can solve that
problem; and
3.
How can I make my product become the best answer for
that multiple choice question.
And, as I found out as a child,
the best multiple choice answer usually has the most words. Or in this case,
the customer chooses the answer with the most attributes related to solving the
problem. And you won’t know which
attributes are relevant unless you understand which multiple choice question is
being asked.
The principle here is that if you want to increase sales, and do it profitably, you need to have a strategy which makes you the best option to a multiple choice question asked by a large segment of the population. There are only two ways to create that superiority—natural advantages or bribes.
Natural Advantages
A rational natural advantage
occurs when your product or service inherently has features making it meaningfully
superior to the alternatives in solving a customer’s problem. For example, if a consumer has a need for
durability in their bicycle, the manufacturer making the most durable bicycle
has a natural advantage over others trying to sell to that segment. It is the natural preferred choice because
the durability is a key part of the nature of that bicycle.
Natural advantages come in two
varieties: rational and emotional. A rational natural advantage would be like
that durability in the bicycle.
Durability is a rational excuse for preference. It can also be rationally shown that the
parts of a particular bicycle are stronger and longer lasting and more
reliable.
By contrast, an emotional
natural advantage occurs when your product or service provides makes consumers
feel better about themselves. Usually, that means that your offering provides a
superior feeling of self worth over the alternatives. For example, a status-seeking woman would
choose a Louis Vuitton handbag over others because that brand image provides a
superior sense of self worth to her. It’s really not about the durability of the
handbag. It’s the image and reputation
of Louis Vuitton which transfers to the owner of the brand, making her feel
better about herself.
Sometimes rational and emotional
advantages can become intertwined. For example, if you have a movie star known
for playing rugged, durable movie roles endorse the bicycle, some of the
emotional connection with the actor will transfer to the bicycle, reinforcing
the durability advantage.
WARNING: A natural advantage is
not the same as a strength. For example,
you may be strong in “quality,” but that is not an advantage if:
a)
There is insufficient demand for quality as a solution with
your market; or
b)
Others have a similar level of strength in quality
(your quality is not meaningfully superior in the mind of the customer).
Therefore, the goal is not to become
strong, but to become different and meaningful. In other words, a strength must also make
your solution superior to alternatives AND relevant in solving the particular
problem faced by the customer.
Any efforts in areas which do
not lead to difference or relevance are a waste of time. Therefore, you strategy should emphasize
trade-offs in the direction of difference and relevance.
Bribes
If you do not have a natural
advantage over the alternatives (or cannot create one), then the only way to
sell your product is to layer on incentives, like deep reductions in price or
gifts with purchase. I refer to these
added incentives as “bribes.” In other
words, if you cannot find a way to be “better” than the alternatives, then you
need to bribe people to choose you by being cheaper or more convenient than the
alternatives.
Bribery is the more difficult
path to sales, because it is costly and easily neutralized by
price-matching. Look at Apple. It has created strong natural
advantages. It has created rational
superiority in ease of use and features.
It has created emotional superiority with the “Cool Factor” and the
pride and self worth which comes from owning the Apple brand (big emotional
attachment). As a result, Apple can sell
millions upon millions of units at a premium price.
By contrast, the competition has
had difficulties creating natural advantages over Apple. As a result, the competitors have to sell
their products at a significantly lower price than Apple. In essence, the competitors are bribing
people to forgo the natural advantage of Apple because the price differential
is big enough to shift the value equation.
Of course, that price reduction
is a high price to pay to get sales. It
makes the competition far less profitable than Apple. Less profitability makes it harder to keep up
in innovation. And if the competition
ever starts getting closer to narrowing Apple’s advantage, all Apple has to do
is lower its price a little to get the advantage back.
Therefore, the best sales
strategy usually revolves around natural advantages rather than bribery.
Relevancy
So how do you create the natural
advantages which lead to a rise in profitable sales? Two actions must take
place. First, you need to fully
understand which problems people are trying to solve and all the factors going
into how they choose amongst the wide variety of alternatives. In other words, if you want to be the
superior option for the multiple choice question, you need to know what the
question is and how the person thinks about the solution (e.g., are my teenage
clothes creating superior acceptance over smartphones with the peer
group?). Only after taking these steps
will you know which strengths are worth pursuing.
Second, the only way to
typically become superior in these strengths is to focus on them more than
anyone else. Given limited time, money
and manpower, gaining superiority in one area means forgoing superiority in
other areas. It is a matter of
trade-offs—do less in a non-relevant area in order to do more in a relevant
area.
The first step tells you what is
relevant and the second step makes you relevant.
SUMMARY
To the customer, purchase decisions are the result of answering a multiple choice question: Which alternative best solves my problem or makes me feel better about myself? If you want the customer to answer that question by purchasing your offering, then you need to provide superiority on the factors most relevant to the problem being considered. That is best accomplished by determining the natural attributes which contribute to relevancy and then making the proper trade-offs needed to achieve superiority on those attributes. Otherwise, you are stuck with the weaker option of bribery.
Relevant superiority in natural attributes does not happen by chance. It requires forethought and a focused approach to trade-offs. That only comes by having a strategy. So if you want strong, profitable sales, start with a great strategy.
