Risk management flow chart (Click for more)

There is mounting evidence that ‘risk’ now plays a critical role in the new buying journey.

Sales people have always been taught techniques and methodologies for selling value to their customers: “solution selling”, “consultative selling”, “value-based selling”…these are all designed around the concept of highlighting the ‘economic value’ (return) of the vendor’s solution against a specific customer problem. However, today’s technology buyers, don’t always regard the traditional measures of value (ROI, ROR, NPV, IRR, Time-to-Value etc) as their most important decision criteria. Given that history is now littered with hundreds, if not thousands, of very costly and very public tech implementation failures, buyers are increasingly concerned with risk mitigation strategies when making decisions about which new technologies they bring into their technology eco-system.

Risk versus Return

Sales people that present their value proposition based solely on the usual suspects of ‘great price’ or ‘high ROI’ (and its many derivations) have failed to grasp the very basics of capital allocation – Risk versus Return. As everyone knows, high returns are normally associated with high risk, and so risk has always played an important role in decision making. Sadly, most sales people nearly always fail to pay this increasingly important element its due respect in the buying journey.

My company recently invited one of our key customers to address our sales leaders at our Annual Sales Conference and this customer stated that the “sole reason we chose your solution was because we viewed you as a safe pair of hands”….it had nothing to do with our great price or economic value-add. Most of our customers are now also saying the same thing. This reminds me of the old risk-based maxim that “nobody got fired for buying big blue (IBM)”.

So, how can sales people reduce perceived risks, and make it easy for a decision maker to commit to your solution?

  1. The first thing to do is to put risk firmly on the agenda. Address all risk elements directly with your customer and ensure that you (the sales person) understand exactly how your customers view and measure ‘risk’, especially when it comes to ‘new solutions’. Have the conversation – don’t avoid discussing this critically important topic. Once you know how your customer feels about ‘risk’ then you can set about highlighting how your solution helps to reduce your customers perceived risks, and then make sure that you highlight your strengths in this area relative to your competition. For example – if you have a financial stability strength over your competition then highlight it. If you have more experienced teams of people that have delivered your solution many times before then highlight that. Make it easy of your customer to feel reassured that your company is a partner (not supplier) that can be trusted to deliver.
  1. Secondly, sales people must understand the target customer’s buying centre and work out how to tailor your risk reduction pitch to the objectives at each functional level within your customers business. Remember that there are currently “5.4 (on average) decision makers for every enterprise level sale that occurs” (source CEB)….each one of these buying stakeholders has an increasingly mandate/obligation around risk management. The people that ultimately influence the buying decision often have vastly different views on what constitutes business risk.

I recently happened upon an excellent HBR article by Paul Weinstein (Make it easy for decision makers to approve your deal) that succinctly outlines some key risk drivers for execs at various levels:

  • CEO, President, COO: These highest order decision makers are into the ‘big picture’. They care about pleasing boards and shareholders. Public perception and legacy are what is important to them, so don’t underestimate how important big picture ‘risk’ is to these decision makers.
  • C-level: The C-level includes the members of the senior leadership team, like the CIO or CFO and these guys often manage entire departments. These are the people who have been hired to make sure things don’t go wrong. In general, they tend to be the most conservative decision makers. When it comes to B2B sales, reducing risk at this level is best achieved by having the research and information that documents the strategic upsides, demonstrates how the downsides are minimized and points out the long-term consequences of inaction.
  • Functional Business Managers (Marketing, Sales, Technology). These decision makers are directly involved in generating revenue and they are usually measured based on the numbers. Most business managers have P&L goals that were established in the prior year, and anything that puts those projections at risk is a tough sell. If things are going well for the business manager, then they may be inclined to take a risk. Sometimes they need to do a deal in order to make their P&L look better, other times they are out scouting for a new venture to help them start their new fiscal year off right.

Paul Weinstein’s assessment of key drivers for each of these roles should be understood by every B2B sales person, because without this information the sales person is simply throwing a bucket of mud at the wall and hoping that some of it sticks. In my experience, sales people spend too much time focussed on selling ‘economic value’ – when in fact reducing the perceived risks directly impacts the economic value anyway, creating risk-adjusted value measures for your solution. Therefore, ‘risk’ deserves equal, if not more attention. The successful sales professionals of the future will absolutely incorporate risk-adjusted capital allocation arguments into their value proposition.

So, do the extra research, and focus some pre-sale discussion on ‘risk’…..and make sure that you tailor the ‘risk’ elements of your pitch appropriately to each decision maker at each function level.

Discover more important lessons regarding the modern approach to sales in my new book – ‘Sales Transformation’.

By Graham Hawkins