Fundraising's Lessons for Solution Sales

Transcription

1 the napa review Fundraising's Lessons for Solution Sales

2 IF THE STRATEGY IS TO DEVELOP LIFETIME CUSTOMERS BASED ON VALUE-ADDED SOLUTIONS AND LOYALTY, THEN THE SALE IS JUST THE BEGINNING. Recently, while preparing for an assignment with a sales and marketing division in a publicly traded company, I was struck by the notion that the solution sales objectives for this company were not much different than the donor relationship objectives in philanthropy, especially university advancement. Although disdained to be compared to sales organizations, the sophistication that abounds in university fundraising today certainly has merit for their for-profit neighbors. Several important lessons for business solution sales immediately come to mind: ó Know your customer and the market. Be knowledgeable about your products when you engage the customer or prospect. Be able to monetize the value proposition. ó Lasting growth and profits can be correlated to customer loyalty, but they are also tied to business practices. Understanding pricing and margins is essential in creating the successful relationship. ó Customer loyalty and retention involve a strong customer bond that is both rational and emotional. ó Use smart tools to size the market and to target the right customers. Let s start by drawing the parallels between nonprofit organizations, such as universities, and forprofit businesses. Engaging the Customer Encountering the term solution rather than feature sales suggests that the successful salesperson needs to know not only the product, the collateral products, and how to bundle them, but he/she must also know what the market will buy and how to engage the customer to assess the solution opportunity. Understanding the need provides the platform for defining the solution, which defines the product mix and the monetized value proposition. Once determined, the solution must be articulated, and collaborative, facilitating, two-way information sharing must be established and maintained with the customer. After the sale is made, the delivery and the account management occur. If the strategy is to develop lifetime customers based on value-added solutions and loyalty, then the sale is just the beginning. Customer stewardship goes hand in hand with product functionality and excellence. But why care about customer loyalty? In his book The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value, Frederick Reichheld shows that making loyalists out of just 5 percent more customers would lead, on average, to an increase in profit per customer between 25 percent and 100 percent. He also demonstrates that the The Napa Group 1

3 cost of acquiring a new customer is 5 times the cost of servicing an existing one. Similarly, in assessing giving patterns in university advancement, The CORE Group has found that donors who participate early and more frequently increase the amount of each gift. Another interesting note is that successful advancement has at its core the emotional relationship with the prospect and donor. Building customer loyalty is much more complicated that just making the sale. It involves seamless customer interfaces that influence integration across the back end units for example, technical support and account management collaborations with customers to constantly refine the customer experience, sharing and easy retrieval of CRM data and information, and effective and ongoing product development and marketing with definitive customer input and feedback loops. It also means providing the customer something that is valued and unique to him/her, such as a naming opportunity for a major donor or in the case of the private sector, making a customer s brand synonymous with a competitive feature differentiation. Gallup researchers have found that if you seek to engage customers and not just sell them (something at the heart of university advancement model), customers need to be viewed not only from the marketing perspective, but also from the customer s viewpoint. In other words, learn what truly matters to the customer. In order to successfully accomplish this, companies must add to their customer behavior databases indicators about what their customers are truly feeling. Dismantling Unit Silos The notion of integration is a key for this analogy. In observing the for-profit entity, the more siloed characteristics of the units were evident. Each group sales, marketing, delivery, and operations presented clear scenarios for each function, but what was missing were the integrated view and the notion of the company win. What was more prevalent was the notion of I ve completed my part and made my contribution, now sales must sell. Collaboration begins at the top with functional leaders personally involved in working sessions to develop best practices, solutions, and delivery processes rather than portions of the solution discretely developed by each functional link and then handed off to the next (functional) link in the chain. To further confuse things, often these discrete solutions are jammed together with each group s discretely developed component. This mass production or assembly-line approach to delivering solutions undermines customer engagement, solution relevance, and efficacy. The collaborative approach, however, allows for the development of a universal architecture that allows generic pieces to be combined in a semi-cus- The Napa Group 2

4 tom manner to deliver the best solutions for customers. It includes defined, repetitive customer engagement loops. The support for developing this framework has to originate at the top, as the capital investment in people and internal practices requires a strategic initiative that is supported and driven by senior leadership s buy-in and understanding of the long-term possibilities. This can be tricky and risky in a publicly traded company, as the shareholder and analyst drum beat that drives quarterly performance does not provide the time or permission for reforming existing systems that currently support the feature philosophy. Using Smart Tools THE ADVANTAGE OF THE NON-PROFIT WORLD IS THE ABSENCE OF SHORT-TERM THINKING DRIVEN BY QUARTERLY ANALYST AND SHAREHOLDER CALLS. In our for-profit example, the focus was on sales revenue and total numbers rather than a strategic breakdown of the number and size of sales needed, or a sales prospect pyramid. In fact, several critical questions had not been answered: How many sales at each dollar level are needed to meet the annual goal? Certainly not all sales will be $10 million, so how many sales are needed at various dollar levels to successfully meet forecast? Does the market support these numbers? How is cultivation strategized, and how are time and effort weighted and prioritized? How is the sales force educated and trained to ensure that they are able to ask the right questions, define the customer needs, and develop the appropriate solution proposals? In other words, how are your knowledge workers developed? How does the sales force qualify their prospects before too much time is spent in non-revenue activity? All critical questions After all, the better trained the sales force, the better qualified the prospects, the more targeted the proposal and the more profitable the sale. Another critical influencer comes in the ever-present quarterly cycles that drive for-profit entities and are quantified as shareholder value. Fundraising programs in higher education and non-profit foundations have understood for a long time the need for practices, systems, and tools to facilitate performance. Prospect qualification and screening, predictive modeling based on past performance and market opportunity, professional education and training, definitive prospect targets and prospect engagement, and defined prospect cultivation and solicitation have all taken on new science and rigor. The advantage of the non-profit world is the absence of short-term thinking driven by quarterly analyst and shareholder calls. This situation also provides the platform for realistically paced infrastructure development and integration using the following tools: ó Market research-driven goal setting ó Analysis/predictive modeling/road mapping ó Professional development, which becomes a feedback loop for ongoing learning, focus on developing self-sufficiency, coaching, and ongoing support models The Napa Group 3

5 ó Execution tools discovery templates, sales process, qualification tools (addressing specific points in time as well as ongoing needs) The essential question then is: Can the lessons from the non-profit world be viable for for-profit business? The answer is yes! Lessons from Fundraising Some of the more compelling outputs from university advancement offices that seem to be absent (and detrimentally so) from for-profit businesses are operational and support integration, commitment to the enterprise mission, and the institutional win. I ve always enjoyed my assignments in university development because it mirrors a for-profit environment with the added elements of clearly defined mission and values. In any case, delivering successful fundraising requires: 1. A solid understanding of the donor base and the feasibility of this base s capacity to give. 2. Accurate forecasting based on giving patterns and feasibility. 3. A strategic approach to donor engagement, cultivation, and solicitation, which requires a good understanding and knowledge of the donor and his/her key philanthropic interests as well as the needs and opportunities of the university. 4. Effective marketing and collateral material defining the case for giving. 5. A robust donor management database supported by the appropriate technology, user-friendly software, and state-of-the-art hardware. 6. Ongoing market research identifying trends in prospect capability and capacity. 7. A well-qualified staff of fundraisers with defined goals, fundraising objectives, and retention mechanisms to keep them focused and in place. 8. Integrated operations, gift processing, donor stewardship, and administrative support. Now, let s take this list and make a few small changes. In the for-profit sales organization, the following might be considered important in making a solution sale: 1. A solid understanding of the market and the feasibility of the market s capacity to buy. 2. Accurate forecasting based on buying patterns, capacity, and market needs, and the selling organization s ability to serve the market. The Napa Group 4

6 3. A strategic approach to customer engagement, cultivation, and solicitation, which requires a good understanding and knowledge of the customer, his/her needs, how he/she buys (process, stakeholders, etc.), and the value proposition proposed by the purchase. 4. Effective marketing and collateral material defining the product suite and the value proposition. 5. An effective customer relationship management database supported by the appropriate technology, user-friendly software, and state-of-the-art hardware. 6. Ongoing market research designed to maintain the relevance and compelling nature of solutions in the face of evolving customer demands, capacities, and capabilities. 7. A well-qualified and educated sales staff with defined sales goals and retention mechanisms. 8. Integrated operations, delivery, account management, and customer advocacy. Interesting? You bet it is. Now for the lessons... Solution sales can be the catalyst for organizational integration. First of all, the harried pace of meeting quarterly numbers and the rush derived from customer-facing sales activities most likely inhibit the for-profit sales function from dedicating enough time to the front end planning. Their energy is usually devoted to sales forecasts that originate in marketing, sales compensation, and hitting the road to get in front of customers. The downside of this is that: ó Systems and practices don t change. ó Interventions focus on short-term wins, and thus are usually not sustainable. ó Resources are not devoted to developing a truly informed knowledgebased sales force. Secondly, in non-profit fundraising there is usually a commitment to and value for the planning phase. It s readily understood that a relationship sale requires a relationship, which is built, not made. The last several years have seen the emergence of increased sophistication and science in market feasibility and fundraising predictive modeling in university advancement. These efforts have lead to the development and deployment of dedicated tools, such as the donor/client gift pyramid (which drives focus and strategy and validates the monetary targets), prospect lists ( pipelines ), fundraiser accountability grids, and technology-supported customer relationship management systems. Interestingly, this occurs in an integrated environment with donor stewardship (account management), research, gift processing, and operations all as partners in the process. The Napa Group 5

7 The view of the lifetime relationship drives all activities with the donor through a seamless set of interfaces and engagements in which fundraisers develop a deep knowledge of their prospects as well as each relationship s value points with the institution their product. The quarterly call of the analysts in the private sector is a significant driving factor for sales performance. Yet without that cyclical 90-day calling-out, the more calculated approach of non-profit fundraising produces significant return and yield in the long run. When mapped with a low cost of funds raised, the actual percentage of the dollar (profit) returned to the institution is significant and well justifies the front end work. With university campaigns beginning to gear up to the $5 billion levels, clearly their efforts are on par with the enterprises of the private sector. Conclusion THIS IS NOT A CRISIS SOLUTION, BUT RATHER A PROACTIVE EVENT IMPLEMENTED DURING TIMES OF STABILITY, PERFORMANCE, AND LONGER-TERM FOCUS. Developing and implementing a model that incorporates the components of integration, predictive modeling, and planning, but is condensed into the timelines demanded by the for-profit performance drivers can produce the solution sales results desired. But it requires the discipline of taking the time to perform the thoughtful (non-adrenaline fueled) front end effort that is often eschewed by for-profits. This process positions sales to be a catalyst in integrating the back end delivery, support, and operations by driving the planning, collaborations, discussions, and follow-up activities that ensure the customer solutions, satisfaction, and loyalty for repeat and ongoing sales. Since customer satisfaction, loyalty, and retention often fall on sales watch, developing and integrating the back end partners are critical to successful performance and to formalizing the long-term relationship and the opportunities for reoccurring revenue from downstream sales. Implementing this process requires temporarily running parallel practices that sustain reasonable levels of performance during the ramp-up phase of instituting new sales tools, sales force education and training, and divisional philosophies. It also requires the leadership savvy, discipline, and tenacity to engage the organization as a whole to garner support during the period of transformation in which flatter sales cycles evolve into the longer-term wins. Critical Success Factors 1. This is not a crisis solution, but rather a proactive event implemented during times of stability, performance, and longer-term focus. 2. It requires healthy-functioning teams with common objectives and ground rules. 3. Secure and strong leadership at the top is essential. The Napa Group 6

8 The Pay-Off Once the initial set-up costs are incurred, the ongoing activities focus on measurement and updates, annual planning with quarterly updates and reforecasts, the delivery of solid sales performance, the integration of the support units, and ongoing customer engagement. For national sales organizations with staff deployed across the country, quarterly sales conferences provide splendid opportunities for integration activities. Rather than devoting time to short-lived motivational and recreational events, a more sustentative agenda providing integrated solution team activities will produce greater collaboration, camaraderie, and eventually customer satisfaction all critical aspects of sustained sales performance. These new practices supported by a smart process for educating and training the sales force will produce knowledge workers with the capacity to diagnose needs and to suggest the solutions key assets for any solution sales organization. RJ Valentino, July 2005 With thanks to Guy Hart for his contributions to this article. For additional information or copies please contact us. 39 Pearl Court, Novato, CA Phone: (415) Fax: (415) info@napagroup.com Web site: The Napa Group 7