The following is part one of the transcript of a presentation given by Dale Houle, General Partner of the Avraham Y. Goldratt Institute, at the Jonah^SM Upgrade Workshop/TOC Symposium in May 1998 in London, UK. It is available on video (JUK-13).

Part one of this transcript is available in the AGI Website Library.

Persuading the Customer to Buy
Part Two

If you look from the shop owner's point of view, the retail shop, what's their objective? They want to run a successful shop. In order to run a successful shop they have to have cash available and they have to have profitable sales.

In order to have cash available, they have to buy in smaller quantities.

In order to have profitable sales, they have to buy in larger quantities so they can get the price break and have better margins. Okay? Can you go back one slide (referring to overhead slide).

If you think about that dilemma, can that be what's responsible for the fact that their squeezed for cash? Can it lead into the fact that as a result of it they have difficulty meeting payments? And that they have high inventory? A lot of obsolete products?

So you start to see that this generic cloud underlying it is what can start to explain why they have these problems.

If we were to put it all together so the picture's clear, then it would show up as a Current Reality Tree (referring to overhead slide).

If you're starting with this and you take #100 which says, "We want to run a successful shop," do you think they'll argue with you? No. Okay? And a profitable shop, #106, is a successful shop (referring to overhead slide), which means we must have profitable sales.

Brand companies offer free freight only for orders above a certain worth which means they have greater pressure to buy in larger quantities to get a price break.

On the other side, cash availability is an essential factor in running a business which means they must have cash available.

Brand companies in this case are unwilling to give their baggage on consignment terms, which means they feel more pressure to buy in smaller quantities.

And then how does this lead into basically all of their problems? What you see here (referring to overhead slide) is a number of UDEs: #130 - the shop's profitability decreases; #132 - their available credit is limited; #125 - they're squeezed for cash; #128 - they have difficulty making payments; #142 - is the sale of new products is negatively impacted. All of it ties back to (referring to overhead slide), all of it is coming out of this basic core conflict. It says instead of working here, and here and here, everything ties down into an agreement on "that's the real problem we should address." Solve this and it will allow us to solve all of the other UDEs, all the other problems they're dealing with. And through using a tool like this you can bring them to more clearly agree "that's the real problem" - solving this conflict in terms of buying in large, buying in small. That's good for layer 1, that's good for getting agreement on the problem.

How do we start to get a better agreement on the direction of the solution? Can we tell the shops they should learn how to manage themselves better? Yes, but if it's offered to them it means who's going to be the one to do the most changes, them? Or us? Us. If they're saying solutions to their problems, and it means we're making the changes in order to more effectively solve their problems.

So sometimes this (referring to overhead slide) helps when we want to look at how can we start a better discussion about these types of issues? And it's just an extract from the Current Reality Tree.

So it says things like (referring to overhead slide) in order to have cash available, we must buy in small quantities because brand companies are not willing to give us their baggage on consignment terms.

If your offer has to do now in this case that says, "Good, we're really going to give it to you on consignment terms. Maybe we'll give you the freight for free, and a number of other things that really address your problems" is the perfect place to start the discussion. Because now it says you as the prospect or the potential customer don't have to change, we are causing your problems. And it's not only us, who else who provides luggage operates on the same kind of policy. Everybody else who's providing it to them. Okay?

On the other side, in order to have profitable sales, we must buy in large quantities because Brand Companies offers free freight only for orders above a certain worth. So where what we might be offering is "good, we'll give you the freight for free whether you buy one or you buy 10, so you get the price discount, and as a result of it you can start to buy the small quantities you need and have much more profitable sales," which starts to open it into how it really addresses their problems.

Now, what happens if you come to somebody. They've been living with this set of problems and they understand their problems, and they even understand where they all come from and now you talk about, "What we're willing to do is we'll give you the freight for free, we'll give it to you on consignment, we'll give you more frequent delivery so you can even replenish you shelf stock more readily." Will they immediately say "yes"? Or will they respond any differently than we do when somebody comes with an idea, because that's basically an idea? What are all the ramifications of it? How is free freight really solving my problem? How much of an impact will consignment have on my problems as a shop? Will you explain it and clarify it for me? Or will you wait for me to figure out all of the ramifications and what does it mean?

If you wait for me (customer) to figure it out it might take longer, which means we figure it out in a trance. So what will be the benefits to the retail shops if we give them that kind of offer of free freight, consignment, and so forth? Will it allow them to have more available cash? Yes, because they don't have to use their cash to buy their luggage now.

Will it increase the profitability for them? Yes, on the other side, if they get the freight for free whether they buy one or they buy ten, the margins on their products will go up.

Will it give them an increase in sales? In some of the cases they didn't have merchandise. Now will they have more merchandise if we are giving it to them on consignment? Yes.

Will their financial expenses be reduced? Yes.

Will they have less obsolescence? Yes, because they're not buying in such large quantities, and so forth.

Will their inventory go down? That's all the benefits they will get out of this offer.

If we want to make the logic of it clear, what's the real ramification, why will it happen? Then the tool we make use of is called the Future Reality Tree (referring to overhead slide). That starts with: #110 - no more freight charges, that's part of the offer. #100 says whatever you need for a proper visual display you have it on consignment, which means as a result of it, they don't need cash now to buy our product in this case.

Into #124, it means they'll always hold enough goods for visual display, which means availability of product increases, and so forth.

So how does it really go to their bottom line? It's important to bring it clearly to their bottom line and quantify it. Say "this is the real value to you of this offer." Okay.

Once you have this, this is basically taking you through the third layer. "We do agree it will solve the problems."

What you've heard also is there are concerns that exist. There are concerns from both sides. There are the concerns of the customer in terms of what that offer means. They should be addressed. How are we going to deal with them? Many of them we'll be able to think about, figure out and determine ahead of time, which means we should have already prepared for them. So when they do arise, good, we understand the logic of it, and what's the ramifications from it, and we are prepared to address it.

At the same time there's the other side that says the Negative Branches that also have to be addressed from your side when making the offer. Like for example, that's what some of these (referring to overhead slide) are that say things like #122 - that the shop doesn't need cash for purchasing Best Baggage Company's goods as a result of this, right? And the shop has more available cash, which also came out and they also offer brands that don't give consignment, so it might be that these shops will use their cash surplus to do what? Increase their offerings for other products.

And if they'll use this cash now to increase their offerings of other products and the real constraint they have is limited display space, then we might, as a result of this offer, end up totally decreasing our space. This starts to say these are the things you want back in return also for the offer, so that it is a win - very good for the shop, also a win for us.

So there are Negative Branches that have to be addressed here from both sides. It has to be clear to them also, what's in it for you.

Once you've addressed these, the only thing really left now standing in the way is (referring to overhead slide) "what prevents us from implementing it or from buying it?"

Now if you have an Unrefusable Offer, it is easier for you to put down the list yourself that says, "Good, now I know you really would like it. I know you understand exactly how it's going to solve your problems, but there's probably this reason, this reason, and this reason why you won't be able to buy it."

If it is really an Unrefusable Offer, who will be the one to erase most of the obstacles? You as the salesperson or them as the customer? Them as the customer, right? Because if it really is clear to you that it solves your problems and its real benefits, things that you see in the way that you can handle, you'll erase.

If it's clear to you that it doesn't really solve your problems, those little things that might have been obstacles that you would have erased are exactly why you say "You're right. Thank you very much. I shouldn't buy it." Okay?

Now what will happen in some cases with it, depending on the type of product or service, some of the obstacles will be erased. "I can take care of it."

Others will be "You're right. In order to really move forward on this, I need you to help me persuade my boss or somebody else in order to remove the obstacle, because I really do want it."

And it's here in this area that the closing part is done. Closing means what? The prospect or the potential customer really wants it. Now there are things standing in their way that prevent them from moving forward in acquiring it.

If you don't help them address it, but you push them to try to make a decision, what do you think happens? Do you think it builds more trust with them? Or do you think this starts to erode the trust you might have built so far? I really want it, I'm blocked, you don't help me deal with the part where I'm blocked, but you push, push, push to make the sale. Sooner or later you get the push back that says thank you, but no thank you. Does this make sense?

This is the framework for dealing with the sales process. Now as you've heard earlier, selling is not just external. You want to solve also the problems internal in the company, you still have to sell the people in the company.

The thing you find with regards to Unrefusable Offers is generally who's doing most of the changes - you or the customer?

If you're going to sell them a solution to their problem, the solution is not that they change what they're doing. The solution is you're changing what you're doing to affect their problem, which means you're the one making most of the changes.

They don't make so many changes, which means they will have less resistance from that side. Internally you will have to sell it so that the organization makes the appropriate changes, so what you have is an offer that you can really sell. Okay?

This is the framework. This six layers. And, again, in the majority of the cases, if you've dealt correctly with the first five, which means we agree on the problem, we agree on the direction, we definitely agree it will solve the problem, all of our concerns and negative side effects have been addresses, and we've clearly removed all of the obstacles, what stands in the way of the implementation? There's only one thing left that can and sometimes stands in the way, which is unverbalized fear on the side of the individual. Then sometimes what you have to do is sit and work through it with those individuals.

Otherwise everything else that is an area to be concerned about has been addressed. Has it not? Clear is the problem; we agree on the direction; it's obvious now how it's going to solve the problems and its impact. All of our other concerns have been addressed and the obstacles have been removed.

This is the framework of the process for selling. This is some of how the tools can work in facilitating that process.

This is the end of part two of the transcript of the video JUK-13 - Persuading the Customer to Buy.