At last week’s annual Sales and Marketing Summit, “Inside the Customer’s Purchase Decision,” the keynote address was delivered by Dr. Robert Cialdini, author of the well-known book Influence: The Psychology of Persuasion.

Dr. Cialdini’s work on persuasive techniques is always an interesting read for sales professionals, but what made his speech especially timely and relevant for the summit was that it was about persuasion during times of greater information overload and uncertainty.

Faced with more information than ever before, stricter budgets and approval processes, and greater internal consensus requirements, customers are increasingly uncertain about making purchases today.

According to Dr. Cialdini, people exhibit several possible responses when faced with decisional uncertainty:

• Freezing—a reluctance to act or make a choice until the uncertainty is resolved
• Loss Aversion—a tendency to prefer choices designed to prevent losses over choices designed to obtain gains
• Heuristic Choices—when choices are made, they are based on a single, relevant factor rather than a set of relevant factors

It’s no easy feat for sales forces – and marketers crafting commercial strategies – to contend with customers exhibiting these behaviors. Reps can help customers overcome their decisional uncertainty and hesitancy though, by using some key principles of persuasion and influence.

In his talk, Dr. Cialdini discussed the six principles of influence:

1. Reciprocation—people feel obligated to give back to you the behavior you have given them
2. Scarcity—when people think they can’t get something, it increases their demand for it and forces them to take action
3. Authority—people’s uncertainty is reduced if an authority figure endorses something – it gives them more confidence to act
4. Consistency—if people commit, orally or in writing, to an idea or goal, they are more likely to honor that commitment because of establishing that idea or goal
5. Consensus—people are more willing to take a recommended action if they see evidence that many others, especially similar others, are taking it
6. Friendship/Liking—people are easily persuaded by other people that they know and like

While all six of these principles are important and merit further discussion (stay tuned for further posts on the topic!), there’s one that especially jumped out at me (and many of the sales executives sitting in the room): consensus.

When uncertain about a decision, people can be compelled to act by seeing others’ past successes or hearing testimonials of similar others. Simply put, people are most persuaded by people like themselves.

Dr. Cialdini used an example about hotel water conservation to illustrate this point. He cited a study on what language most encourages people to reuse their towels in hotels (and therefore, conserve water). After trying different messaging and wording, the study showed that the most effective approach was not to lecture hotel guests with environmental warnings, but instead to point out how many other people were reusing their towels. And not just any people…the people who had stayed in the exact same room.

Yet another example he shared was about restaurant menus – when restaurants put ‘our most popular item’ next to a dish on the menu, it increases sales of that item 13-20%.

Though these examples come from the B2C world, the same thing rings true for B2B sales and marketing: people want to know who else like them has made this purchase. And when people are uncertain, they rely even more on their peers to provide guidance on the next steps to take.

And as it turns out, this can be a golden opportunity…

Because customers are unsure of how to buy suppliers’ increasingly complex and disruptive solutions, they tend to lack a formalized buying process for solutions of such scope. Enter the well-informed sales rep – by learning from trends in previous sales with similar customers, reps can help customers identify the stakeholders that typically need to be involved in the deal, as well as possible points of risk, concern, and objection in the sale.

Reps can essentially lead customers through the sale and provide guidance on the next steps to take. And because reps do this using information gleaned from interactions with customers’ peers, it capitalizes on people’s inherent need for consensus and builds customers’ confidence to act. We call this approach of leading customers through the purchase process Commercial Coaching – (MLC members, much of our B2B work over the last two years has been focused on this subject – see Influencing the Newly Empowered Customer and Developing Your Insight-Based Marketing Strategy for more)

What are your thoughts on the six principles of persuasion discussed above? Are some more effective at influencing customers than others?

“Oil companies need holes, not drills” - Old Sales & Marketing Saying

This post was written by former colleague Andrew Kent of the Sales Executive Council. Visit the original here.

The utilities business faces a looming crisis—if not today, then in the decade or two to come. Simply put, the industry’s current business model is set up such that smarter use of its product threatens its profits, and this tension between supplier and customer can’t go on forever.

But utilities companies need not view this as a threat. On the contrary, leading utilities are already capitalizing on one of the biggest megatrends in Sales today: the need to make more money by selling less stuff.

The root of utilities’ problem is this: their ability to grow depends on selling more kilowatt-hours each year, but consumers and society have an urgent need to use less—and are waking up to the fact that they actually can. Peter Fox-Penner writes in the Harvard Business Review (July-August 2009):

Utilities have always assumed that their output would continue to grow… But electricity and gas customers—aided by the utilities themselves—are reducing consumption. Sales are already flattening, and they’ll only fall faster as governments put in place more incentives to control greenhouse gas emissions (p. 18).

The U.S. Department of Energy projects U.S. energy demand to grow by only 0.7% a year over the next 25 years, and U.S. energy use per capita will never surpass its 2000 peak. Indeed, McKinsey estimates that the United States could cut $1.2 trillion off its energy bill over the next ten years.

Source: U.S. Energy Information Administration (EIA) “Annual Energy Outlook – 2011”, released April 26, 2011

This is great news for consumers and the environment, but it’s a lot of revenue for a sales leader to give up. How do you cope with a world in which policy, consumer needs, and the very planet conspire against your mandate to sell more stuff?

The answer is to stop selling stuff altogether, and start selling outcomes. In the case of energy, you’re not selling kilowatt-hours, therms, or joules—you’re selling light, heat, and motion. Fox-Penner explains:

Selling services, not output, is the logical next business model for the industry. To put it simply, customers would pay for each lumen of light generated [or unit of computer time, heat, cooling, and so forth] rather than each watt of power consumed… Because the use of such energy services will continue to grow for the foreseeable future, utilities could expect rising rather than falling revenues. Moreover, power companies would have a strong incentive to develop and market new technologies. Utilities would get into the business of selling or leasing such technologies and persuading customers to use energy-efficient appliances (pp. 18-19).

In other words, utilities’ profits go up when they help customers do the same things without burning costly fuel.

This isn’t as far out as it sounds. Indeed, one forward-thinking utility recently sent SEC its new Commercial Teaching pitch showing customers how to spend less on energy.

Three factors make the shift to outcomes-based energy sales inevitable (and possible):

1. Energy-Saving Technologies. These are becoming cheaper and more widely available, aggressively marketed by firms like Schneider Electric and GE. Winning utilities will preserve revenues by partnering to include these technologies in energy services bundles.
2. Smart Grid. Widespread Smart Grid adoption will soon provide utilities and consumers with device-level detail on energy usage. In the long-term, this will enable utilities to charge customers based on device usage instead of energy usage.
3. Competition and Regulation. In competitive markets, selling customers better outcomes for fewer units of energy helps utilities win share from competitors and justify higher prices; this helps makes up for lower volumeper customer. In many regulated markets, utilities face stricter efficiency targets but can’t raise rates; energy services are a primary option for making up lost revenues.

Of course, this is all easier said than done. Next week, I’ll be back with practical guidance on how to convince customers to come along with you for the journey, and what skills your sales reps need to sell outcomes instead of energy.

In the meantime, please leave your thoughts on whether you see this shift to outcomes-based energy sales coming, and what you’re doing to get ahead of it, in the comments section.

By Whitney Satin

Thinking Caps is a new series on Wide Angle, where we’ll digest an academic study on marketing and give you the top takeaways. Look for it every other Wednesday!

The ups and downs can be hard to stomach (and by that I’m referring to both the economic recovery and Brett Favre’s performance).  But one question plagues marketers regardless of the economic outlook: how do I get customers to focus on more than just price?

HBR had an interesting take in the article How to Stop Customers from Fixating on Price published earlier this year.  Authors Marco Bertini and Luc Wathieu set a familiar stage: while marketers recognize the worlds of difference between their products and those offered by competitors, that appreciation fails to trickle down to customers, who instead focus largely on price.  Marketing needs to establish a deeper connection with customers in order to prove that the product justifies the price in the first place.

Interestingly, Bertini and Wathieu suggest that how a company structures its pricing can actually go a long way as far as clarifying this value.  They outline four pricing strategies that ultimately moderate the power cost has in the final purchase decision:

• Strategy 1: Use price structure to clarify your advantage. Call attention to the value your product or service delivers rather than the cost per given unit.  When Goodyear priced its tires according to the number of miles they could last, customers were much more willing to consider paying for a premium.
• Strategy 2: Willfully overprice to stimulate curiosity. If comparable goods share a comparable price, a lone expensive standout may cause customers to take a second look.  Good ol’ human psychology predicts that customers will at least want to know what about that particular product warrants the higher price tag, opening the door for Marketing to expose customers to benefits they hadn’t previously considered.  Think Burt’s Bees: suddenly, lip balm was about social responsibility, not just preventing chapped lips.
• Strategy 3: Partition prices to highlight overlooked benefits. Breaking a price out into its component pieces can allow Marketing to explicitly call out a source of differentiation whose value was previously underappreciated.  IKEA prices its table tops and legs separately, drawing attention to the modularity of its products.
• Strategy 4: Equalize price points to crystallize personal relevance. When product options involve the same production costs, applying the same price allows customers to focus on which option best meets their needs—not the initial price.  Swatch demonstrated the effectiveness of this approach in the 1980s when, by offering its entire line at the same price, it mitigated price-based competition from Asia by making the selection of a watch a matter of self-expression.

The success of each of these tactics stems from their ability to make competition about the personal relevance products or services have to customers, something we hold as a fundamental truth at MLC.  MLC members can view our resources on negating price-based competition by highlighting unique benefits and showing that products and services help customers achieve their desired outcomes.

By Whitney Satin

More than 70% of B2B marketers are racing to position their firm as a thought leader, but as our research on Insight Marketing shows, the success rates of these efforts are questionable at best.  Marketers invest a lot of time to arrive at edgy insights that have the potential to reframe how customers view particular business challenges, but these insights often fail to stick.  Why is that?

Consider the typical approach most of us take when communicating our thought leadership prowess.  Having arrived at an insight that demonstrates just how smart we are on a given topic, we bombard customers with whitepapers, webinars, newsletters, and events.  The goal is to ensure customers have every opportunity possible to see and internalize what we have to say; it’s very much a posture of pushing our insights onto the customer.  But this media blitz strategy wrongly assumes that customers are receptive to our ideas in the first place.  In reality, actually internalizing an insight places a pretty significant burden on customers.  We’re asking them to not only to think about their world differently, but then to also change their behavior—and in way that ultimately favors us as a supplier.

What can marketers do to help lower that insight acceptance barrier?  We’ve seen marketers pursue the following strategies to make it easier for customers to internalize game-changing insights:

• Engage earlier. Given the amount of information available online, customers readily arrive at preconceived notions about your areas of expertise before they consume your thought leadership content.  Marketers need to get their insights in front of customers long before they are a qualified lead, when opinions are more likely to still be malleable.
• Secure permission. Customers may be skeptical about the supplier’s neutrality or, if an insight is truly groundbreaking, the supplier’s expertise on a given topic.  Tapping into raw customer voice by engaging advocates or influentials can help your insight feel authentic to the broader customer set.
• Sequence customer exposure. Being a true thought leader can feel analogous to an organ transplant; if you say something too bold too soon, customers will flat-out reject what you have to say.  Breaking an insight into smaller bits of content and then leading customers along a deliberate path that builds to a major reframing of the customer’s world ultimately makes the insight easier to swallow.

Bottom line: The better you can lead customers to your insight, the stickier it will be.

MLC members, check out how Cisco followed these principles to ultimately create customers who were receptive to its insights.

But what is thought leadership and why are we so focused on it?

Gartner defines thought leadership marketing as “the giving — for free or at a nominal charge — of information or advice that a client will value so as to create awareness of the outcome that a company’s product or service can deliver, in order to position and differentiate that offering and stimulate demand for it.”

We’re focused on thought leadership because we are all desperately trying to grow when demand is flat.   Meanwhile, we’ve seen more involvement from external consultants, plus the rise of consensus buying, all adding up to a massive focus on price and other fixed buying criteria (which generally aren’t the criteria we would like).

It used to be that we could safely assume that once a salesperson got to talk with a potential customer, we could influence purchase criteria enough to get the sale. But these days that’s a lot harder – one member told us customers have finished 70% of the purchase process before even reaching out to suppliers.

This means we need to start influencing the purchase long before a customer self-identifies—requiring us to position and differentiate our offering through thought leadership.  But most thought leadership approaches fall well short of this goal.

Gartner describes three types of thought leadership marketing (TLM), typical of what you see in the marketplace:

• Opportunistic. This type of program tends to be short-term and promotional-campaign focused. It boosts interest in and therefore sales of a specific offering.
• Door-opening. This type of program can help establish or expand permission to play and is ongoing, although it evolves as acceptance grows to build visibility and credibility in the market.
• Brand support. This is the most sustained type of TLM program and is used to reinforce the brand promise and image.

The problem with all of these approaches?  Either we are commercial or we are instructive, but never both.  With opportunistic and door-opening approaches, if it works we get qualified leads – but still end up in the competitive gridlock we just described.  With brand support approaches, we get brand image benefits that may accrue to us someday, if we have the patience and we’re lucky enough to cut through the clutter.

But in all cases, we look a lot like everyone else.  Take a look at the ‘thought leadership’ pages of most major companies and you’ll see comments on regulatory changes, or discussions about the industry.  Each written and delivered the same way. How can we expect to be thought leaders if it looks the same as what everyone else does?

To break the tradeoffs, we need to teach potential customers something that makes them smarter and helps us win.  We can lead customers to what we do better than everyone else and help them understand why that difference is critical.  That doesn’t mean we’re blatantly commercial – instead, we’re educating customers on how to run their business in the areas we know best, and do best.  By the way, that’s what customers want.

Best of all, if you are truly leading to what you do best, you can bet nobody else will be out there with the same message.

MLC members, find out how to craft these thought leadership messages – and how to deliver them – at one of our upcoming live sessions.

I’ve even heard echoes of the debate when members refer to their employers:

“It’s our nature to follow very specific processes”

“Our culture hasn’t changed in 85 years”

“Our leadership believes that our go-to-market strategy from 2002 is still relevant”

“Our brand personality mirrors one thing: our company’s history”

In other words, some members claim that Nature trumps Nurture.  That the innate qualities of a firm’s culture, leadership, brand personality and politics (Nature) eclipse the impact of externalities and experiences (Nurture).

Well, to appropriate an old saying – we plan, the economy laughs. Your Nature doesn’t mean much in the face of news that stock market growth is stalling, that real estate prices are taking another dive, and that unemployment remains uncomfortably close to 10%. In an overwhelmingly consumer-focused economy, those numbers should give even B2B marketers pause.

For firms ‘burdened’ by Nature, externalities like economic trouble signal opportunity.  Given the gravity of changes surrounding your firm, there is no better time to impact change inside your firm.

Not sure where to start?  Our research on Insight Marketing may be relevant.  For years, members have been searching for methods to prevent pricing discussions from hijacking margins.  MLC’s answer: through the power of insights.  If a supplier is able to both generate insights about their customers’ business and demonstrate how only they can uniquely solve their customers’ business challenges, they will effectively abolish price from the conversation.

This isn’t untested, laboratory-only theory.  Volvo’s done it successfully.  By identifying a game-changing insight that aligned with their strengths, Volvo sold more trucks – at higher margin – in a down economy.

And, who best to uncover these provocative insights?  Marketing, of course.  Our most successful members rewire marketing into an insight factory that helps power once-idle sales teams.

MLC members, if your go-to-market strategy could use an industrial strength alteration, dive into our most recent research on Insight Marketing, then join us for an upcoming webinar.

By Erin Lynch-Klarup

(Note: This is Part 2 of a 4-part series on marketing planning. Part 1, “Making the Case for Higher Spend“,  can be found here. Check back here every Wednesday in August for a new installment!)

B2B marketing organizations today are emphasizing the transfer of ideas to customers (just consider the rise of terms like “thought leadership”, “consultative selling” or “solutions”).  This makes sense – done right, an insight-based approach is one of the few ways suppliers can avert pure price-based competition. Additionally, our research shows that insight is valued by customers in the long term.  “Teaching” activities such as offering unique perspectives on the market or helping the customer navigate alternatives strongly predict loyalty.

It follows that marketing plans this year should have a strong insight orientation.  Naturally the marketing plan will align to broader organizational strategy, but the marketing objectives that support company strategy should be grounded in delivering insight that changes customers’ valuation of your offering.

Metrics, of course, are a key element of the marketing plan.  They’re the primary tool we use to operationalize marketing’s goals.  The right metrics will measure progress, yes, but also to communicate the marketing plan at a level that individuals can act on.

As we examined insight-led marketing this year, we found ourselves wondering how the metrics we track change for a marketing plan geared towards educating customers (in a way that prompts purchase).  In partnership with MarketingNPV, we’re in the process of developing a metrics framework for the insight-led world.

We’ve divided the relevant metrics into four categories:

Marketing

Broadly, we want to know if marketing is identifying compelling insights for target segments, and getting them out to those segments through content and sales enablement.

Sales

We want to know if marketing’s closest functional partner “buys” the insight-based approach.  Is sales adopting or even helping to co-create an insight-led sales pitch?

Customer Engagement

On the customer side of things, we want to know if customers are consuming our content and sharing it with others.  And if so, is this earning us purchase and loyalty?

Outcomes

Are we transferring insight to customers in a scalable way?  Are we teaching customers things that clarify their decision and prompt purchase?

MLC members, for more on how to build insight selling and commercial teaching into your marketing plan, please make plans to attend our webinar, Building an Insight-Led Sales and Marketing Strategy, on September 14. Two times are available; one from 9-10AM eastern, the other from 2-3PM.

Not surprisingly, when talking about current challenges, we had lots of conversation around the consensus-based sale – these days, you need to convince more people with different interests to agree on any purchase.  But how do you get everyone to agree to a purchase, especially if it’s the slightest bit disruptive?  Clearly, we have a stronger need for advocates inside an organization than ever before.

For Marketing to support that, one thing we need to do is engineer our content to make people want to share it.  But how?

It turns out two Wharton professors already looked at what makes people share, with an investigation of what makes people share New York Times articles.  Independent readers described articles using a number of adjectives, and then the professors looked at how likely the articles were to be in the list of top shared articles.

Short answer?  The most shared articles are those that inspire awe.

(In case you’re interested — number two: things that inspire anger, three: practical utility, four: emotionality, tied for five: anxiety and surprise, bringing in the rear: positivity.  Things that inspire sadness are much less likely to be shared.  You can find much more in the – ironically – widely shared New York Times article about the paper here)

What does it mean to be awe-inspiring?  In the New York Times, this generally meant it was a complicated, intellectual article about science, including ones with headlines like “The Promise and Power of RNA.”  As one of the authors says, “You’d see articles shooting up the list that were about the optics of deer vision.”

At the highest level, here’s how the authors defined awe-inspiring: “Its scale is large, and it requires “mental accommodation” by forcing the reader to view the world in a different way.”

From a practical, B2B marketing perspective, what does this mean?  More points for commercial teaching as a strategy.  What ‘awe-inspiring’ means in a consumer context is that they’ve learned something new and fascinating about their world.

What that means in a business context is they need to learn something new and fascinating about their business.  This requires a careful cocktail of surprising rational information about issues customers care about delivered with an emotional punch to grab attention.

If you do this, your customers will tell each other about your insights.

MLC members, check out one of our upcoming sessions to learn more about how to build an insight-driven content engagement strategy.