Sales professionals create value in the mind of the customer. Period. They don’t persuade, they don’t trick, they don’t deceive. They create value, regardless of industry vertical or deal size. But sales professionals create value in different ways. In this post, I’ll outline the 4 fundamental kinds of sales value creation. Many sales jobs will not perfectly fit into one of these categories. However, all sales jobs can be predominantly characterized as one of the following.
These people are technically sales professionals in job title, but they create only marginal value in the mind of the customer. They exist to answer the phone (or worse, fax), enter information into a system, and process payments. They don’t really sell in the traditional sense of the word. Order takers do not exist in startups. Order takers exist in commodity businesses in which both parties have long understood exactly what’s being sold, the value of the product service, and have an intuitive sense of the price. They also exist when startups grow up into real companies well after they’ve achieved Initial Scale at ~$10M ARR and are on a clear path to $100M ARR.
SalesForce is a great example. Although SalesForce offers a self-serve option, they employ hundreds (maybe thousands?) of people who deal with SMBs who are paying just a few hundred dollars per month. These sales people aren’t doing any selling. The SalesForce brand is selling itself. These sales people may answer some questions about billing and some features for customers, but they don’t carry quota, and they aren’t doing any material value creation in the mind of the customer.
Airlines are a great example of a commodity business that employs order takers. Airlines still employ thousands of people who answer the phone and place orders into ticketing systems. Big companies know that order takers are purely a cost center. The brand and the marketing has done all of the value-creation in the mind of the consumer, so the order taker is left purely as a cost center. As such, most airlines actually charge customers an additional fee to place orders by phone as a way to encourage consumers to buy online, where no human cost is involved. Airlines have literally decided to pass the cost of order takers onto consumers.
Similarly, SpareFoot, an Austin company, just shuttered its call center. Why? They removed the 800-number from every page of their website and instead drove traffic to online self-serve channels. When they flipped this switch, they obviated the need for 84 call center staff. Assuming a fully loaded cost of $50,000 / employee / year, SpareFoot just added $4.2M / year back to the bottom line. That’s a huge profit lift considering that SpareFoot is orders of magnitude smaller than SalesForce or airlines. Just imagine how much money those companies spend on order takers.
Volume players can be easily confused with stereotypical sleazy sales people. Some volume players are indeed sleazy, but many aren’t. Volume players are used car sales professionals, people who try to sell magazine subscriptions over the phone, and Sales Development Reps (SDRs) who sell low annual contract value (ACV) products. Examples include Yodle, MainStreetHub, andOutbound Engine. All of these companies sell to SMBs and their price points don’t exceed $300 or $400 / month. These companies probably have SDRs and Account Executives (AEs) in the sales cycle, but their business is really just a numbers game. They employ some order takers, but most of their sales staff are dialing for dollars.
The beautiful thing about volume players is that the sales cycles are short and relatively easy. They typically have a low conversion rate, which is exactly why volume players are volume players: they have to make up for low conversion rates in volume. The low conversion rate isn’t the fault of the sales professional; rather, it’s just typical of low ACV customers. Volume players create value in the mind of the buyer, but the purchase decision is in many cases made on a whim (easily characterized by 1-call closes), or made through the lens of “I’ll try it for a month, it will only cost a few hundred bucks, and kill it if it isn’t working.” There’s nothing wrong with that thinking through the lens of the customer. If the product works as advertised, then everyone has won: the customer has extracted value from the product/service, the company has provided value, the company has generated profit, and sales professional has earned her commission.
Volume players live and die by the rules of the system. The VP Sales and sales ops leaders design the system, and the volume player SDRs and AEs live in the system. They thrive in it. The rules are clearly defined, comp plans are crystal clear, every objection and concern has already been considered, everything is mapped out in SalesForce/SalesLoft, and there is almost no ambiguity or material decision that needs to be made at any point in a given sales process once a sales professional is trained and up-to-speed. It’s easy to identify the best volume players: they work at companies that have optimized the system to a teel, and they more than double their base salary with variable comp. They are looking for structure and support from their employer so they can focus on creating value in the mind of the customer without any distractions.
SDRs who sell high ACV products are often volume players as well. However, they only operate at the top of the sales funnel, and can afford to think in terms of volume. AEs who sell high ACV ($50K+) products are…
Magicians create material value in the mind of the customer where there was once no value. That’s why they are magicians. They create something out of nothing. This is real enterprise selling. It’s also by far the most difficult form of sales. The best magicians take home $1M+ / year after taxes.
Magicians sell novel, high ACV products. That means magicians only really exist in enterprise technology sales. Very few other products fit that mold.
The 1st step to becoming a magician is to develop a deep understanding of the customer. Magicians learn everything they can about their current customers’ existing processes, workflows, and problems. They become industry experts. No detail is too trivial.
The very best magicians don’t want to figure out the basics on their own. They expect to spend the first 30 days going through rigorous sales training that has already been devised and laid out for them by the VP Sales and sales ops leadership. Early stage CEOs are by definition magicians. They have to literally figure out all of the consumer’s paint points, and what messaging resonates with them. Overtime, the CEO will work with sales leadership to extract all of the information from the CEO’s brain and turn it into a magician-factory, AKA a sales training program.
There will be a phase from $500K — $5M ARR where the sales training system isn’t fleshed out to support the best magicians. This is the hardest phase in which to hire magicians. The best magicians will know exactly what kind of supporting infrastructure they need. They’ll figure this out with just a few questions:
- Have you built out a full customer lifecycle map with all of the relevant stakeholders, the the key concerns and objections they have, and relevant materials to overcome those objections?
- Do you have half a dozen case studies on the website of customers who are paying $[median ACV * 1.5]?
- What are the top 2 reasons VPs buy the product?
Real magicians know that if the company can’t answer these questions (and many more) in two sentences or less, the infrastructure isn’t ready to support them. They know what they need.
The phase between $500K and $5M ARR is tough. The CEO sold the first $500K haphazardly. That’s standard. But as the company passes $1M ARR, the CEO will need help. The CEO can’t maintain 15% m/m growth as the numbers become ever-larger. But real magicians won’t join because they know they won’t make as much money as they will if they stay at their current, larger, more mature company.
Finding people who will become magicians but aren’t yet is incredibly difficult. They have to be smart enough to think on their feet and adaptable, they have to understand the customer, they have to learn real enterprise selling, they have to know they will lose deals simply because the company hasn’t encountered all of the variables yet, but not yet far enough along in their careers to have comp expectations > $250K. That’s a very fine needle to thread.
Over the last 30 years, the sales process has become increasingly value-creation focused. There was a time (so I’m told) where $10M deals were sold based on relationships. This is by and large not the case in enterprise technology anymore due to any number of factors: the cloud, free information on the Internet, social media, technology maturity, etc. Today, magicians conduct enterprise sales.
Note, magicians come by many names: enterprise sales professionals, consultative sales, etc.
Relationship Based Selling
This is “old boys” sales. This involves wining and dining customers, playing golf with them, and doing anything possible to spend time with the customer. Per the Benjamin Franklin effect, if someone spends that much time with another person, how can they not like one another?
Relationship based selling is by and large gone today in enterprise technology. But it still exists in many other industries including real estate, pharmaceutical, and med device. These sales processes only work for high ACV items because the cost of maintaining the relationship is high.
The worst examples of this exist in the implantable med device industry. I have met medical device reps who are proud of the fact that they pick up surgeons’ dry cleaning. This process is being curbed by the growth of value analysis committees in hospitals, but it is still prevalent in in healthcare, where sophisticated med device and pharma companies charge copious amounts of money to insurance companies to justify ridiculously inflated sales costs.
Relationship-based sales professionals are easy to spot during the interview process. They’ll ask early on what the T&E budget is because they are used to abusing generous big company T&E policies that are designed to support relationship based sales. They probably have gone over the T&E allocation a few times, have been scolded for it, and as such are particularly worried about how many $100 dinners they can purchase for themselves on the company’s dime. Moreover, they aren’t typically that interested in really understanding the customer’s problems. They are just more interested in being nice to the customer and being her best friend because that’s easy and worked for them in the past. Relationship-focused sales professionals will probably come to the interview with a superficial understanding of the problem the company is solving and how company’s solution goes about solving it. Why? Because they expect the system to teach them what they need to know, and then they expect to go out and just spend time with customers and get customers to like them. They will lack the native motivation to dive deep into the industry and become experts.