A Tale of Two Salesforces

Early on in my tenure at American Express, I worked on two very different partnerships, both with the same goal: get our partners’ sales force to get people to sign up for our credit cards.

The Partners

One partner was a merchant acquirer — a company that sold credit card processing services to businesses.  The partner employed a huge salesforce that would pop into every restaurant, hardware store, and hair salon on Main Street and convince the owners to switch their credit card terminals to their own offerings.

The merchant acquirer’s salespeople were all stone-cold hustlers, entrepreneurial-types who looked for every possible competitive edge in what was a surprisingly cut-throat industry.  At the partner’s annual sales conference, I was surprised to find a common theme in my cocktail hour conversations: many of the top salespeople had their pilot’s licenses.  For their own planes*.

The second partner was Costco.  While anyone could just walk into any Costco and sign up for an Amex card at any time, a few times per year Costco made an extra big push on their sales effort — for a few days, Costco employees would stand at a table and tell members about Amex cards.  Costco employees were decidedly not stone-cold hustlers.  Their company culture is known for being obsessive about customer service, generous to employees with their salaries and benefits, and an frequently awarded Best Place to Work.  But cutthroat sales junkies, they were not.

The Incentives

For the merchant acquirer, the salespeople would pitch the benefits of an Amex card at the tail end of their sales process and would get a nice little cash bonus with each one.

Costco didn’t allow partners from offering any form of bonus to their employees, so the Costco employees had no incentive at all to offer Amex cards.

The Results

Which do you think performed better?  the merchant acquirer, whose salespeople did enough business enough to buy themselves planes?  Or Costco, whose cashiers hawked credit cards alongside bulk paper towels and 10-gallon mayonnaise jars for $18/hour?

Surprisingly, it was Costco.  By a landslide.

How could Costco possibly be so much more successful than the merchant acquirer at selling

The merchant acquirer had everything in its favor: a clear alignment between our product and their core offerings (it made sense to talk about applying for a credit card during a sale of credit card processing terminals); an aggressive sales team; and an incentives that made it easy to see the immediate value of offering our product.

And yet, we were missing something critical: an understanding of what truly motivated the sales team.  Naturally, we figured that the merchant acquirer’s sales reps would be motivated by cash.  And in a sense, we were correct.  But the sales reps actually made the vast majority of their money from the credit card transaction fees — for every swipe of a credit card at one of their clients’ stores, they took a fraction of a penny per dollar.  Over the years, and with a large base of businesses running their credit cards through them, that could add up to a recurring revenue stream worth millions of dollars per year.

Comparatively, our little cash bonus was pitifully insignificant.  When the merchant acquirer’s sales reps were getting close to closing a sale that could have resulted in another register ringing for them over the lifetime of the customer, they had little interest in risking their deal by offering yet another product.  The risk was too great, and the incentive was far too small.

By contrast, Costco employees were not motivated by cash bonuses or long-term revenue streams.  Pushing credit card applications alongside bulk frozen foods didn’t actually make a ton of sense.  And yet, for years the Costco partnership was one of the most important ones we had.

Costco employees were motivated by one simple thing: they were doing their jobs.  Costco’s culture looked for people who enjoyed doing the job of helping its customers, and provided sufficient incentive for being a productive member of the team.  Cash bonuses weren’t a distraction from a greater incentive – being good employees.  And at the end of the day, all we needed for a successful partnership were Costco employees who were just happy to do their job.

*One pair, a husband and wife team, had a helicopter, too.

Big Sexy Deals

A few weeks ago I went apple picking with my family at a local orchard.  I’d never been apple picking before, so my gadget-loving inner child was delighted to find that the orchard rents out 10’ poles with nets at the end to pluck apples from the upper branches.  While I fumbled around swinging the heavy pole at the treetops, my 4-year old daughter Sasha ran around picking apples off the branches of small trees that she could reach on her own.

“Ha,” I chuckled to my wife.  “She’s literally ‘going for the low-hanging fruit.”  Sasha quickly filled up our bag, and we went home to make a pie.

In Business Development, few people pride themselves on going after the figurative low-hanging fruit.  Instead, we look for the Big, Sexy Deals.  Those are the deals that we can easily brag about.  It’s usually easy to see the value of a Big Sexy Deal, whether it’s the brand value of having a household name attached or the economic value of a major payday. Big Sexy Deals make it easy to impress a boss or build a resume.  Who wouldn’t want that?

The Utility of Small Unsexy Deals

The challenge, of course, is that Big Sexy Deals are big and sexy because they are rare and hard to come by.  If they were easy-to-pick low-hanging fruit, then no one would be impressed.

It’s easy to overlook the value of low-hanging fruit, but sometimes that’s exactly the best place to focus your attention.  Scoring a deal that is smaller, yet easier to land, may provide you with momentum to trade up to larger opportunities in the future that are out of reach right now.

Sometimes Big Sexy Deals will be out of reach no matter how much time or effort you put into them. Perhaps that’s because your product is not mature enough to provide value to a prospective partner’s customers, or because your brand is not well known enough to be attractive.  Big Sexy Deals require a mutual exchange of value and sometimes you’re just not there yet.

Small Unsexy Deals may provide less long-term value than you’d normally think to pursue as a superstar business developer, but racking up small wins helps to build momentum that can accelerate your journey down the path to larger opportunities.  Pursuing smaller deals may requires less organizational buy-in from a prospective partner in order to move forward, and accordingly may have a lower hurdle to leap to get them interested.

Small Deals Have Option Value

The key to turning a Small Unsexy Deal into a Big Sexy Deal is to think of your initial deal as an MVP.  Inviting someone from a company to speak at an event provides an opportunity to build a direct relationship with an advocate within the company.  Scoring an opportunity to syndicate a blog article you’ve already written onto their own blog establishes a connection between your content and their audience. Securing a discount on their product to offer to your own customers can demonstrate the potential an ongoing distribution partnership.

Individually, these may all seem like relatively small deals with little fruit to bear, but each provides more than what’s on their face.  They can provide option value: the time for your own audience to develop into a size that they would want to reach; The resources to build a more customizable product that would appeal to their customer base; an initial contact within the organization to learn about how their business is structured and to establish relationships that can lead to bigger and better things.  None of those opportunities may be an exciting destination, but they are all valuable steps on a longer path.

It may be hard to realize it when you’re standing in the orchard, but sometimes the lowest hanging fruit can become a most-satisfying pie.

The Local Politics of Selling an Idea

A friend of mine recently got a fancy new job as a deputy press secretary for a U.S. Senator.  While congratulating him on the exciting new gig, he modestly demurred and suggested that his boss is the one who handles interactions with the big national news outlets, while he’s mainly responsible for relationships with the smaller, less prestigious local newspapers.  Think The Main Street Gazette rather than the The New York Times.

“Actually,” I told him, “I think your role may be more important than your boss’ role.”

Why would that be?

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He’s Just Not That Into You

Tell me if this sounds familiar: you meet someone at an event who strikes you as a great potential customer or partner.  You raise the notion of working together, and have a great chat.  You both seem excited by the potential deal in the offing, and you part ways with every intention of following up again.  You email the next day, and then…nothing.  You follow-up again: nothing.  And again, and again, and again: nothing.

I’m sorry, but he’s just not that into you.

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Do Things That Don’t Scale in Business Development

The other day, someone named Jordan left a comment on my post about the Value Hypothesis that got me thinking.  Jordan wrote:

In a world of highly automated marketing and business development efforts to hundreds of prospects, how do you suggest we target each prospect individually while maintaining a high level of touches to reach a closed deal? Are there any best practices or tools we can use in both identifying an efficient value prop and do it on a large scale?

Jordan’s comment raises a great question: Is it possible to automate the process of establishing genuine relationships based on a mutual exchange of value?

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The Dangers of the Warm Introduction

“Cold calls are for suckers.”

For years, if you were to ask me what I thought of “cold calling” – reaching out to people with whom you have no existing relationship or connection – I would have quoted that famous(ish) dictum from Keith Ferrazi’s fantastic book Never Eat Alone.

“Find someone who already knows the person you’re trying to reach,” I’d advise instead.  “And ask them to make a warm introduction.”  A warm introduction, the presumed holy grail of getting in the door, provides you with a head-start: by having someone else who already has invested their time and energy into building a relationship with someone introduce you that person, you draft off of their progress and immediately spark a sense familiarity that would otherwise take time to build.

But lately I’ve started to back away from my reflexive disregard for going in cold.  In fact, I’ve come to realize the dangers of the warm introduction.

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Lean Biz Dev: Partner Development

Over the past few years, the teachings of the Lean Startup methodology have become common practice when developing a new product: talk to customers and validate your ideas before you invest too much time in them.  Customer Development, as it’s called, is now standard operating procedure.

And yet when we think about pursuing partnerships, it’s easy for even the most ardent followers of Lean to lose sight of those guiding principles and rationalize an investment of time and energy without any data to back it up.

“Getting out of the building” to talk to prospective partners certainly isn’t as easy as going to your local coffee shop to talk with prospective customers, but the need to test your Value Hypothesis and determine for whom the value you can offer resonates is no less important in Partner Development as it is for Customer Development.

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The Best Deal in the History of Deals – An Interview with The Phat Startup

I recently did a fun interview about business development with my good buddy Anthony Fraiser over at The Phat Startup for their new online course, Secret Society.

In just over half an hour we boiled down some fundamental principles of business development, ranging from exploring “what, exactly, is business development” to how the partnership between Jay-Z and Samsung was “the best deal in the history of deals.”

Check out more of The Phat Startup’s awesome hip-hop-inspired business interviews with folks ranging from Alexis Ohanian to Gary Vaynerchuk at http://www.thephatstartup.com

There’s No Such Thing as Closing

Have you heard about my new full-day interactive business development workshop, GROWPLAN?   It’s on November 16th in NYC and promises to be awesome.  Check out the agenda and get your tickets at http://growplan.co

I was once teaching a class about partnerships between startups and Big Companies, and one of the students came up to me after class with a complaint.

“To be honest, I was hoping to learn some ‘ninja tactics’ for closing deals,” he said.

“That’s silly,” I told him.  “There are no such things as ninjas.”

OK that’s not true.  Ninjas are real, and they are dangerous.  But seriously, there are no such things as secret “closing tactics” harbored by stealth clans of business developers that can suddenly bring a deal from a standstill to a contract.

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The Three Stages of Business Development

I remember how excited I was when I first got my driver’s license.

I rushed to the Department of Motor Vehicles after 9th period calculus on my 17th birthday so I could finally get my New York State-issued pass to teenage independence.  All I wanted to do was drive – it was so freeing and fun!  But even back in the late 1990’s, gas was expensive and even a semi-decent high school job didn’t pay enough to get me very far.  Soon enough I realized that I couldn’t afford to just joyride forever: I had to plan my route before I put foot to pedal.

I also remember how excited I was when I started out in business development – all I wanted to do was jump in the driver’s seat and start heading down the road to sales and partnerships.  It was so freeing and fun!

However, even within a large company, I quickly came to realize that you can easily run out of gas when you start gunning it for sales and partnerships without having a map to your destination.

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