But how do you "successfully sell a solution" – indeed what is a “solution”? Why does McKinsey and Co report that 3 out of 4 organisations that attempt to sell solutions fail?
What do we sell when we sell a “solution”?
Many companies think that, by bundling together various “hard” products with “soft” services that they’re offering a “solution”. Often, however, this combination of products and services is indeed “just another product”.
Think about McDonalds: a “meal deal solution” may comprise a burger, fries and a drink but – instead of being able to sell this “solution” for a premium, McDonalds has to discount the offering on the basis of volume. The bundling together of separate products actually creates no additional value for the customer – and this is the essence of what makes a true solution.
A true “solution” exhibits a Gestalt aspect – “the whole is more than the sum of the parts”. By integrating together various product and service elements – and by customising these for the customer – the customer receives additional value compared to what they would have received had they broken down the solution into its component parts.
An example solution
In my IT sales days I was responsible for developing a fixed cost, desktop outsourcing solution. The focus was on maximising the productivity of each user – so we provided regularly refreshed PCs, competency based training, maintenance, repairs, telephone support, asset management etc. By providing these as an integrated whole, however, we were able to charge significantly more than we would have by providing each product or service element separately.
Our customers bought the “totality” of the product – a single source solution for improving users’ productivity.
When prospects asked us to break down the pricing into component parts – we refused! It was the “wholeness” of the product that provided the real value – the whole was much more than the sum of the parts.
McKinsey and Co reports that companies adopt a solutions approach for 2 main reasons.
Firstly – ambitious companies look for ways to deepen their relationships with key customers, achieve more margin, and reduce competitive threat.
Anxious companies, however, can see that their core product offerings are moving towards “commodity status”, with increasing competition and much more sophisticated buyers.
Why do some firms fail?
It appears that there are 3 main reasons why 3 out of 4 companies fail to successfully develop and sell solutions.
First, some firms suffer from delusion: they believe they’re selling customised, integrated solutions – but they’re really just selling bundles of products and services. If a customer can disaggregate a solution offering – if they can “pick it apart” – then it’s not really a solution at all (think McDonalds value meal – easy to purchase the component parts separately).
Secondly, some firms underestimate the difficulty in selling solutions: solution selling has longer sales cycles, and requires a much more intimate knowledge of customers’ businesses. Sales people expert in products need to transition to become expert in customers’ businesses.
Thirdly, some firms sell solutions the same as they sell products – same sales teams, same KPIs, same approach to dealing with customers etc.
Steps to successful solution selling
The McKinsey research points to qualities exhibited by firms that have made a successful transition from selling products to selling solutions.
The most important quality of firms that have made a successful transition is that they rethink their approach to sales. They realise that the solution path prescribes a longer sales cycle, with the need to influence many more people, most of whom are very senior in the prospect organisation. In the IT sales world, for example, the majority of sales people are comfortable selling to the IT department. A solutions approach, however, will fail unless senior business managers outside of IT are consulted and persuaded.
Many successful firms replace up to 75% of their sales force, often preferring to hire industry specialists capable of intimately understanding target prospects’ businesses. They structure account teams around a customer relationship owner, and target small pools of prospects that have similar business needs. A different type of “market research” is required – how can we identify prospects suffering from business problems that our company is good at solving?
This “new look” sales team is often bonused differently: certainly revenue achieved is tracked and rewarded, but so to is the degree of additional business value that has been provided to the customer.
Does your organisation profess to sell solutions? Are you sure you're not just selling product bundles?
(The article referenced in this newsletter is entitled Solving the solutions problem Juliet E. Johansson, Chandru Krishnamurthy and Henry E. Schlissberg The McKinsey Quarterly 2003 Number 3)