How Pricing Can Support the Challenger Sale
I recently read The Challenger Sale by Matthew Dixon and Brent Adamson, both of CEB, a global insights company that was later acquired by Gartner. This book is highly regarded among those in the field of B2B sales. However, I can see how these collected best practices for salespeople could also be adapted and utilized by pricing professionals.
The Shift to Solutions Selling
Before I get to the pricing takeaways, let’s set the stage. CEB began their sales research in early 2009 to determine how companies could weather the Great Recession. The sales research is based on a sample of 6,000 respondents from 90 companies (which is a substantial sample size for sales research).
Executives found that during this difficult selling environment (in which B2B sales seemed to stop entirely), there were sales agents who were still selling well. CEB learned that these agents did not have a magic formula for selling during a downturn. Rather, they had traits that made them more likely to succeed in a complex sales model (also known as “solutions selling” or “solutions approach”).
Over the last few decades, solutions selling has become more popular. Generally, companies have moved from selling single products in discrete transactions to focusing on selling broader consultative “bundles” of products and services that competitors cannot easily replicate. The authors argue that this evolution in selling requires a similar evolution in sales training.
Using factor analysis on their data, Dixon and Adamson were able to identify 5 distinct salesperson profiles: the Challenger, the Hard Worker, the Lone Wolf, the Reactive Problem Solver, and the Relationship Builder.
Their research separated star performers from core performers. Star performers were defined as the sales reps in the top 20% of their team (as measured by performance against goal).
While the distribution of core performers was approximately the same across the profiles (i.e., an average sales agent was equally likely to be categorized as any of the five profiles), 39% of the star performers were Challengers. Lone Wolves made up 25% of the star performers. Hard Workers, Reactive Problem Solvers, and Relationship Builders came in at 17%, 12%, and 7%, respectively.
These results came as quite a surprise for anyone expecting their Relationship Builders to lead their star performers (and the company overall) to victory. Additionally, the research uncovered that the more complex the sale became, the better the Challengers did. (Also of note, the more complex the sale became, the worse the Relationship Builders did.)
Dixon and Adamson identify a Challenger based on 3 abilities: they teach for differentiation, they tailor for resonance, and they take control of the sale. And they do all these things while maintaining constructive tension with the customer. Challengers know when to push back on a customer request.
And these 3 abilities reinforce each other. Challengers consistently teach customers new and valuable information about how they can improve their businesses. Customers quickly learn that a Challenger can be a veritable fount of profitable insights. Then, Challengers can customize these insights to different customers (or even different stakeholders within their customers’ organizations) so that the insights stick. Finally, Challengers can be assertive in discussions about pricing and influence their customers to speed up their decision-making cycle.
The Pricing Challenger
So, how can pricing professionals apply these Challenger learnings? It seems like these learnings could be applied by a pricing professional to both internal customers (during support of a pricing project) or to external customers (to support your sales team).
One item that I appreciated from the authors was that they consistently emphasized identifying the value of the solution to the customer and clearly communicating that value to the customer. Pricing professionals should have experience trying to get their customers (internal or external) to evaluate pricing through a value-based lens: what is the differential value over (or below) the closest comparable alternative? Likewise, a Challenger is consistently getting the customer to keep an eye on the value being generated (whether through higher profit, lower cost, less risk, etc.). And if the customer begins insisting on a discount, a Challenger will steer the conversation towards acknowledging the value that is being generated for the customer.
Additionally, Challengers know how to tailor their message for resonance. They demonstrate an ability to always keep an eye on how to customize sales messages to the customer’s specific needs, including considering the specific industry of the customer’s company or the specific role of the individual they are speaking to. Likewise, a pricing professional should be prepared to speak to a director of sales in a different way from the CFO, because both of those roles are generally looking for different things from a pricing professional. Tailor your messages accordingly. And perhaps help your sales team tailor their messages to external customers.
Finally, Challengers demonstrate a real ability to consistently generate novel insights for their customers. Usually, these insights involve a reframing of the customer’s challenges to link them to either a bigger problem or a bigger opportunity, especially one that the customer has not considered thus far. I should note that these insights that are generated are not typically generated on the fly. Rather, these insights are thought-provoking ways of reframing the challenges that help lead the customer to your company’s unique solution. If you wish to apply this to an internal customer, consider pricing practices that your company could adopt or eliminate to immediately increase profitability. For an external customer, you will need to learn more about the industry or company in question. But the bottom line is to show them the potential cost from an issue that they didn’t even know was an issue until you enlightened them. Perhaps create an ROI calculator, not to show the return on your company’s solution, but to first show them the cost of not taking any action at all.
Dixon, Matthew and Brent Adamson. The Challenger Sale: Taking Control of the Customer Conversation. New York: Penguin Group, 2011.