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Sales Start Up

Using psychology in sales

Many of us grossly underestimate the effort, skill and persistence it takes to sell something. The theory of “Build it and they will come” applies to a small percentage of products and is usually serendipitous.

A sale is an exchange of value. It is also a persuasion. You are influencing someone to make a decision to buy your product. Since it involves people and emotions, psychology is therefore involved. Understanding the psychology of compliance (someone is complying by buying your product) should provide a distinct advantage in your sales process.

Recently, I read this book “Influence – The Psychology of Persuasion by Dr. Robert Cialdini” He is both a Distinguished Professor of Marketing and Regent’s Professor of Psychology in Arizona State University.

He lays down the “Weapons of Influence” as the following

1. Reciprocation
2. Commitment and Consistency
3. Social Proof
4. Liking
5. Authority
6. Scarcity

In reciprocation, there is a give and take. A small give is offered by the influencer as a strategy to take from the buyer. The author cites the now defunct practice of Hare Krishna devotees “giving away” flowers to strangers at public places to incentivize them to donate to their cause. The author states that the impressive aspect of the rule for reciprocation and the sense of obligation that goes with it is its pervasiveness in human culture.

In today’s digital and social world, influencers actively build a following by actively liking pages, tweets, and blogs of other people. In the physical world, a dinner, a golf outing etc. create opportunities for using reciprocation.

Another variation of reciprocation is reciprocal concessions. This is when the influencer steps back from an initial request that gets rejected to a backup request that has a higher chance of compliance. An example would be when your push for an Enterprise or Premium Edition of a product gets rejected and you come back to sell the Pro Version of the product. This needs to be structured well to be successful.

In Commitment and Consistency, the psychology being used is that Human beings want to stay true to their commitments. Psychologists see that consistency as a powerful principle, according to the author. So, if you are able get an early commitment from someone, it is a wonderful thing. The odds are that they are going to keep that commitment. In a public setting, it is even more powerful. When fund raising, CEOs should try to get commitments really quickly from individuals, however soft.

Social Proof is a powerful tool used by influencers to get people to comply. The laugh track in TV sitcoms is cited repeatedly as a tactic to get audience to comply. It seems highly effective. The principle applied here is that we determine what is correct by finding out what other people think is correct. Modern media has used this effectively by publicly displaying product reviews, likes, shares, comments and much more. There are some really astounding case studies of influence of one’s behavior based on observation of other people’s in similar settings.

It has been proven time and again that people tend to comply with requests from people they like. The Liking principle is used by Sales Professionals to enhance their likability factor with customers. Acting on referrals from friends is one classic example. Endorsements and recommendations from people that you like influence you to repeat their actions.

Authority or “directed deference” is a powerful tool used by advertisers. Companies spend a ton of money on celebrity endorsements, because it has been proven to work. We have all at various points of time complied easily with authority. As a sales professional, it would help a great deal if you can identify and get endorsements from specific authorities or entities.

As the final weapon, scarcity relies on the psychological principle that if something is thought to be scarce, it is deemed very valuable to possess. There is lots of case studies for this.

As a sales professional, it is very important to understand the psychology of your buyer. Some of these techniques can be abused, so one has got to use them ethically. It should be realized that the other person may be aware of the persuasion principles and is actively resisting you by saying no.

Overall, I found this book to be a very good read, chock full of case studies and real life examples. It can be a fast read as some of the many studies can be skipped.

Happy Selling!

Featured Image Credit: study.com

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Uncategorized

What should be in your Channel Partner agreement?

What should be in your Channel Partner agreement?

A startup company (other types of companies as well) may enter into an agreement with partner companies for purposes of reselling its software and services. Such agreements are typically executed for the purpose of geographical expansion without taking on a burden of creating a large sales force and account teams. In most cases, the channel partners provide integration and support services and act as the first point of contact with customers. This is applicable to boxed software and SaaS. Partner relationships are more common in B2B SaaS.

If your company is thinking about getting into channel partnerships, here are some things to consider in your agreement. Usual aspects like term/termination, confidentiality, indemnity, liability limitation are assumed.

Territory

This stipulates geographical areas that your channel partner is allowed to sell your software and services. It could be a state, a region (example: South Eastern USA) or any custom locations.

Non exclusivity

You would want to reserve your right to do business yourself or appoint other partners in the same territory. This could be used if the partner is too busy to take on new requests, is not performing or you think that a direct relationship with that customer is vital to your interests.

Training

You should set a deadline for training to be completed by the channel partner. You would also have a mutual obligation to be ready with the training materials. When you prepare training materials, make them generic so it can be applied to new partners. When your software or SaaS changes significantly, there should be a mutual obligation to complete the updated training.

Marketing

While you are going to focus on marketing globally, the channel partner should be encouraged to conduct its best efforts to market your product in their areas. You would also actively share your marketing collateral with your partner, so they are clued into your efforts. Writing this into the agreement ensures that both sides take it seriously.

Pricing and Discounts

This is the most important aspect. The agreement would clearly state your list prices for software, services, hardware and support. The terms should specify the discount that the channel partner gets from your list price. The channel partner would be free to quote their own price to the customer. Since you may change your prices, the agreement should always reflect the current prices, which could be maintained in a partner portal.

Business Plan

It’s a good practice to request a business plan from your partner after you have worked together for a few weeks. While you can do that informally after the agreement, I find that requiring in the agreement makes it clear that you are taking this seriously and so should your partner.

Support

Tiers of support need to be well defined and agreed upon. Make sure to address any integration that the partner has provided to the customer on top of your platform.

For channel partnerships to work well, establishing a formal agreement off the bat is important. It could be painful to deal with issues once you have gone ahead without a proper framework in place.

Happy partnering!

Originally published at www.carabiner.io on October 12, 2015.

Categories
Agreements Business Development

What should be in your Channel Partner agreement?

channel

A startup company (other types of companies as well) may enter into an agreement with partner companies for purposes of reselling its software and services. Such agreements are typically executed for the purpose of geographical expansion without taking on a burden of creating a large sales force and account teams. In most cases, the channel partners provide integration and support services and act as the first point of contact with customers. This is applicable to boxed software and SaaS. Partner relationships are more common in B2B SaaS.

If your company is thinking about getting into channel partnerships, here are some things to consider in your agreement.  Usual aspects like term/termination, confidentiality, indemnity, liability limitation are assumed.

Territory

This stipulates geographical areas that your channel partner is allowed to sell your software and services. It could be a state, a region (example: South Eastern USA) or any custom locations.

Non exclusivity

You would want to reserve your right to do business yourself or appoint other partners in the same territory. This could be used if the partner is too busy to take on new requests, is not performing or you think that a direct relationship with that customer is vital to your interests.

Training

You should set a deadline for training to be completed by the channel partner. You would also have a mutual obligation to be ready with the training materials. When you prepare training materials, make them generic so it can be applied to new partners. When your software or SaaS changes significantly, there should be a mutual obligation to complete the updated training.

Marketing

While you are going to focus on marketing globally, the channel partner should be encouraged to conduct its best efforts to market your product in their areas. You would also actively share your marketing collateral with your partner, so they are clued into your efforts. Writing this into the agreement ensures that both sides take it seriously.

Pricing and Discounts

This is the most important aspect. The agreement would clearly state your list prices for software, services, hardware and support.  The terms should specify the discount that the channel partner gets from your list price. The channel partner would be free to quote their own price to the customer. Since you may change your prices, the agreement should always reflect the current prices, which could be maintained in a partner portal.

Business Plan

It’s a good practice to request a business plan from your partner after you have worked together for a few weeks.  While you can do that informally after the agreement, I find that requiring in the agreement makes it clear that you are taking this seriously and so should your partner.

Support

Tiers of support need to be well defined and agreed upon. Make sure to address any integration that the partner has provided to the customer on top of your platform.

For channel partnerships to work well, establishing a formal agreement off the bat is important. It could be painful to deal with issues once you have gone ahead without a proper framework in place.

Happy partnering!

Categories
Uncategorized

Dandelions – a follow up post on Effecting change

I am planning to cook some dandelion greens today.  Yes, the same dandelion that I’ve “rounded up” countless times every late Spring and Summer from my backyard or swore loudly trying to pull them off the driveway.

Five weeks ago, I shared the start of a diet plan called the TQIDiet. Its sole focus was to identify and eat inflammation free foods to see if that makes a difference to my chronic ankle pain.

I’m please to report successful completion of the 5 week plan. The re-introduction phase provided me quick insights – Dairy is a problem, Gluten not so much, but avoiding it could be beneficial.

You wonder – “Krish, what’s all this fuss about? I would’ve told you to focus on those two first without going through all the rigmarole.” You would have been partially right, but that would have not given me a framework for proper and thoughtful eating.

Has the pain substantially reduced? No. I think it’s going to take time. May be, there is still a trigger good. It’s going to be difficult to identify it. Regardless, it has been beneficial to focus on nutrition and understand bio chemistry of food. I completely believe that High schools must offer such Nutrition courses as electives.

Many people have reached out to me about the plan as well cheer me on. Thank you! I have shared freely the details. I would recommend you get the book here at TQIDiet. No affiliate commissions for me 🙂

When writing earlier about effecting change, I advocated to do it fast and do it completely, without trying to ease into it.  There are scenarios like exercise intensity that one has to ramp up, but exercising 5 times a  week is change that should be started immediately.

Coming to Dandelions, they are the scourge of every gardener. However, this freely growing weed (“crop”) to some, has 7% Magnesium, 6%, Potassium and 32% Vitamin C in one cup. Next time, you see one in your garden, don’t toss it into yard waste. Toss it onto your plate after cooking. Beware of false dandelions.

Happy eating!

Categories
Entrepreneurship Sales Start Up

Wisdom from a startup veteran

Samir Bodas is the CEO of iCertis a Bellevue WA based company providing SaaS based contract management software.  Recently, he gave a talk at a TiE event on Scaling a Startup. The interactive questions took us to areas other than scaling.  Few of my observations:-

  1. If you want to do a startup, just do it. 9/10 people don’t even start despite having an idea. 9/10 people who start something don’t succeed. Don’t be in the former camp. You will learn a lot by doing, even if you fail.
  1. Try to create a wave or ride one. Creating a wave is tough and requires the likes of Bill Gates, Steve Jobs, and Mark Zuckerberg. If you are riding a wave, get onto it early. Have a reasonably good idea that it will be a big wave. iCertis bet early on the cloud in 2009. Betting on Azure was pivotal in getting into the Microsoft ecosystem.
  1. Serendipity plays a crucial part in startup success. Many talented folks have not succeeded in building a successful company and many hardworking folks have failed too. Going back to #1, you will not know until you start something.
  1. Focus your startup by going deep in an area. In the original theme of “ERP Surround Software”, his company tried other areas such as transportation logistics but decided to focus on contract management. Once they did that, it was easy to raise money from VCs.
  1. In enterprise sales, respond to RFPs. Common wisdom is that this is cumbersome and costly process for startups, but could be an extremely valuable opportunity.
  1. It’s not necessary to have a full product before starting sales. Project confidence in your abilities and do the demo. The customer has likely not checked your competitor’s full capabilities.
  1. During early stages, have the Engineering team work extremely close with the customer. They were able to have 6 week turnaround time from customer ask to delivery.
  1. A sign of scale is when you can sign deals without seeing the customer. Their last 2 deals in Europe was signed, all via remote interactions.
  1. Getting your early customers into a customer advisory council is powerful. They are usually your strongest advocates and want to see you succeed.
  1. A company’s culture is captured in its values. Values need to be written down and adhered to across the board and consistently for true scaling of the company. Don’t get surprised if your customer asks you about your company’s values.
  1. Keep sales folks hungry. Compensate them enough to survive, but not enough to give them luxury of waiting for next year. Be maniacal about targets and don’t be wimpy about firing people that don’t meet it.
  1. Samir gets invited to all sales calls. His calendar is full of sales calls. Important thing is to listen for tone from the customers. As CEO, don’t be afraid to engage at the level of each sales call.
  1. With SaaS, it is not necessary to build a large remote sales force or have Satellite offices, unless situation demands it. Due to lack of skilled sales people in Seattle, iCertis has offices in Dallas, Philadelphia and Bellevue.
  1. If you can pull it off, having relationships with Industry Analysts is invaluable. Usually, analysts will look for you to have at least 20 customers, unless you are doing something completely differentiated in the space. They are a great source of leads.

These stood out for me. Overall, great stuff from Samir and thanks to TiE for organizing the Startup on TAP event.