In the late 1980s a number of organisations, principally in America, achieved surprisingly high increases in productivity through experimenting with DBR, (Drum-Buffer-Rope). These improvements, which varied from at worst 20% to figures well in excess of 50%, were the result of identifying the firm’s constraint, or scarce resource, and managing it according to the process described in the book ‘The Goal’ by Dr E M Goldratt. Much to Dr Goldratt’s chagrin, however, the majority of these firms chose not to use the improved levels of productivity to increase their throughput; instead maintaining output at existing levels whilst reducing the size of the workforce.
Annoyed at feeling responsible for the laying-off of hundreds, if not thousands, of employees, Dr Goldratt asked the owners why? The answer was very simple; it was easier to layoff employees than to sell the increased throughput. This prompted Dr Goldratt to apply his mind to developing a system that virtually guaranteed selling more without having to lower prices. Lowering prices has long been a traditional ploy for increasing sales. In fact he insisted that his solution, the ‘unrefuseable offer’, must not lower prices but result in more products or services being sold at the same, if not higher prices. Dr Goldratt describes the concept of the ‘unrefuseable offer’ in his book, ‘It’s Not Luck’.
The ‘unrefuseable offer’ also provides the solution when an organisation’s constraint is external, that is in the market, rather than internal as described in the previous paper on ‘increasing productivity’. More often than not the result of applying DBR is to increase throughput to a level where the constraint moves and then becomes the organisation’s inability to sell all it can produce, shifting the constraint outside the organisation into the market. Pursuing any further improvement, such as opening up the market, often results in the constraint oscillating back and forth between being internal and external. This is undesirable from a management point of view. The more elegant solution is to hold the constraint internally, where you can control and manage it, whilst continuing to open up the market to prevent the constraint from moving outside. An ‘unrefuseable offer’ is an excellent way of opening up the market.
One of the most satisfying assignments a consultant can undertake is to assist an organisation in developing and implementing an ‘unrefuseable offer’. Such an offer involves changes in policy that benefit both supplier and customer. Developing such a marketing solution, one that results in the organisation selling more at the same or even higher prices will give any organisation a head start of at least two years on its competitors. Reducing prices to increase sales is a ‘mugs game’. Not only do you sacrifice the return on your throughput but also your competitors can quickly imitate you, should they so wish, immediately negating any dubious advantage you may have derived. On the other hand, changing a business policy makes it much more difficult for your competitors to emulate. Changing two or three policies makes it virtually impossible.
When stipulating their terms and conditions of sale, most businesses think solely of how these policies will benefit themselves, rather than how they might affect the customer. For example, in order to minimise distribution costs many organisations offer significant discounts to customers who place orders over a certain size, oblivious to the problems that this might cause their customers. These discounts can be at a level where the customer is forced to buy the discount quantity in order to remain competitive, but then finds that when they wish to re-order specific items, they have to purchase a further large quantity, whilst stuck with significant quantities of slower moving stock. Fortunately there are solutions to this and other problems, which can benefit both parties. One-sided policies, designed out of self-interest, have a knack of backfiring and not being nearly as beneficial as they were intended.
A key requirement of all ‘unrefuseable offers’ is that they must be ‘win-win’.
‘Unrefuseable offers’ rely on a fundamental principle of marketing, which is that there are two separate and very distinct perceptions of value regarding any product or service. These are:-
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The supplier’s perception of value, which is based on all the costs that go into the manufacture of a product or provision of a service. These include provision for items such as materials, labour and overheads, plus some reasonable (or even unreasonable) margin,
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The customer’s perception of value, which is based entirely on the amount of benefit or gain that the customer expects to derive from purchasing your product or service, and bears absolutely no connection whatsoever to the supplier’s perception of value.
Successful marketing is achieved when an organisation raises and succeeds in keeping the customer’s perception of value at a level higher than the supplier’s perception of value. The role of an ‘unrefuseable offer’ is to achieve this aim and provide the customer with an actual level of benefit (bottom line) from purchasing your product or service, which they simply cannot obtain elsewhere and that they find difficult to refuse.
It is not the purpose of this paper to go into the mechanics of how to design and develop an ‘unrefuseable offer’. Suffice to say that it is based on helping your customer to overcome problems that they in turn experience with their customers. The idea is that you should present your customer with an offer that makes their life easier and more profitable, to the extent that the customer realises it is worth paying more for your offering. Why else would a double-glazing company in America pay its supplier twice as much for its glass? A very common feature with ‘unrefuseable offers’, however, is that whilst the customer can clearly see the benefits to them of your offer, and is eager to do business, it can often be more difficult to convince the supplier’s own staff that the offer will be mutually beneficial, and that you are not ‘giving away the shop’.
A characteristic of ‘unrefuseable offers’ is that every one is unique and has to be tailored for the specific circumstances encountered in each specific situation. This is different from designing internal operating solutions, all of which will be based around the fundamental concept of DBR. The results achieved from a DBR implementation, in the form of reduced lead times and improved due date performance, can frequently contribute in a supporting role to the design of the ‘unrefuseable offer’. Because of shorter and more dependable lead times, and their impact on the reliability of due date performance, organisations can improve their offer even further by providing guarantees that their competitors couldn’t even contemplate, or risk. There are numerous examples and case studies on the Internet of exciting and innovative ‘unrefuseable offers’.
How many organisations and businesses would benefit from being able to sell more of their products and services at the same, or higher prices?
It is essential that every organisation have a clear understanding of their customer’s perception of value. This in turn must be reflected in a marketing plan that is closely linked to the organisation’s overall business strategy. Marketing has to permeate every function and activity within an organisation, and is absolutely core to continuing success and survival. Regrettably many managers perceive marketing as merely another discrete and independent function like all the others within the organisation, the ‘silo mentality’, rather than as an all-embracing expression of the organisation’s culture and ethos. Designing and developing an ‘unrefuseable offer’ requires the combined efforts of all functions within the organisation, as well as the approval and cooperation of every member of staff.
Selling, on the other hand, is a more clearly defined activity and not to be confused with marketing. Dr Goldratt explains the difference in the following analogy:-
“Marketing is spreading corn for the ducks to come and sit. Selling is taking a gun and shooting a sitting duck”.
Traditionally selling has been regarded as something of a black art best left to the devices of the individual salesperson, instead of being seen as capable of being an organised and managed activity. Great store is placed on the personal talent and skills of each salesperson. We also rely on the salesperson being personally responsible for a range of related and unrelated activities, including:-
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Finding new sales opportunities, including all the promotional activities,
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Arranging appointments, writing reports and maintaining records,
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Preparing quotations and supplying technical specifications,
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After sales and customer service activities,
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Trouble-shooting and chasing payment.
These are in addition to the key role of meeting customers face-to-face and closing the sale. All of this results in the salesperson having to multitask, which can distort priorities and requires a high degree of self-discipline to strike the right balance between the various activities. Research in Australia has shown that, taking into account all these other activities, salespeople are achieving as few as two planned business-development appointments in a week.
There have been a number of interesting developments in the field of sales and selling over the past few years. Disappointingly, I see little evidence of any of them being used widely in the UK. Among the new ideas that I would recommend all directors and executives to acquaint themselves with include:-
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‘SPIN selling’ as described in the book of the same name by Neil Rackham. This is particularly appropriate for so called ‘big ticket’ sales, where the sales process can extend over a period of time and can involve a number of meetings with the prospective client. The acronym ‘SPIN’ stands for; Situation, Problem, Implication and Need-Payoff. The technique was developed from analysing many hundreds of sales situations, and is now used by over half the ‘Fortune 500’ companies. It is taught extensively in business schools and universities throughout America,
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‘Re-engineering the sales process’ developed by Justin Roff-Marsh, the managing director of Ballistix, an Australian consultancy firm. This approach has a lot in common with DBR, with selling seen as a process comprising a series of consecutive activities that are scheduled and buffered. A promotional coordinator and a sales coordinator undertake almost all of the supporting activities in the sales process, leaving the salesperson to concentrate their individual talent on negotiating and closing sales. The promotional coordinator is responsible for maintaining a constant supply of sales opportunities and the sales coordinator schedules the salesperson’s appointments from these opportunities. A buffer of sales opportunities is maintained between the two coordinators, ensuring that the salesperson can be kept fully employed in their key role of meeting clients and closing sales. In conventional sales management, a lot of effort is expended on trying to improve the conversion rate, that is the percentage of sales opportunities that are converted into actual sales. The scope for making any significant improvement in conversion rates is marginal at best. ‘Re-engineering the sales process’, on the other hand, allows you to increase the number of face-to-face selling opportunities while accepting and maintaining the existing conversion rate. Experience using this process has shown that the number of business opportunity appointments, and hence successful sales, can be increased by an order of magnitude.
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‘Delta T-Selling’, a systems approach to selling described by Dieter Legat and Bill Woehr in their book, ‘Unblock the Power of your Salesforce’. Legat and Woehr head-up an organisation in Switzerland called the Delta Institute. The Institute publishes literature and runs training courses around their systems based approach to sales. Like most modern approaches to selling the ‘Delta T-selling approach reaches beyond the customer, in helping to solve their problems. Delta Institute’s concept of ‘Sales System Management’ is made up of ‘Sales Policy Management’ plus ‘Sales Process Management’. One major proponent of ‘Delta T-selling’ is Hewlett Packard.
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‘Soft Selling in a Hard World; plain talk on the art of persuasion’, is outlined in a book by Jerry Vass, the originator. He believes that it is essential for all professionals and small business owners to be good at persuading. Not everyone is a born salesman, but everyone needs to be good at getting their point of view across, be it convincing your colleagues of a new idea, persuading your fellow directors of a course of action or, as a small business owner, selling the potential value of your product or service to a customer. It is largely a mechanical approach, where you can prepare and practice the various stages. Vass refers to the stages as tools, and these include; mission statement, probe, listen, problem/ solution, proof statement, support, isolate, close and cross sell. The keys to the ‘Soft Sell’ are:-
Don’t talk - Listen
Don’t tell - Ask
Don’t sell - Solve
Don’t pitch - Probe
Don’t leave - Close
Soft selling in a hard world can be a very valuable attribute, irrespective of your primary role or profession. Being able to convince other people of your case can be a real asset at any time and in every walk of life.
The means now exist for all organisations to sell more of their products or services, and at even higher prices. ‘Unrefuseable offers’ can be developed for any product or service, including commodity items. Fortunately all of your customers have problems, and the emphasis today must be on helping them to develop solutions that create value for their customers and themselves.
Developing an ‘unrefuseable offer’ and re-jigging the sales process can be carried out at minimal cost and in less than a couple of months, given that you overcome any initial resistance.
I have now identified five ‘silver bullets’ that can be applied by any organisation to improve its performance. None of these ‘silver bullets’, however, will deliver the desired results without the people to carry them out. Every organisation needs to attract, retain and manage a talented workforce. The next and final paper in this series will show how to acquire such a workforce and how to turn talent into performance.
