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The Sales Cycle: Taking the Risk Out of the Deal

When it comes time for your prospect to make a final decision, one factor that will carry extra weight is the amount of risk involved. Risk comes in many different flavors: it could be a new process and they don't want to be the guinea pig, or it could be the length of a contract, or the fact that your company is new to the market, or whatever other risk they perceive.

The key to making more sales is to eliminate the buyer's risk. We have seen risk minimization everywhere for years in consumer products. They come in the form of money-back guarantees if you're not completely satisfied. Of course in this economy people are just afraid to spend any extra money because of the "uncertainty risk" that looms. They are not certain if they will even have a job, or how low the value of their home will be, or if their 401K will be worth anything.

Now imagine trying to sell a car to a prospect like that. The risk factors are high: long-term-debt, big-ticket item, and primarily the future uncertainty. One company that has recognized these primary risks is Hyundai. If you have watched any TV over the last 30 days, then you have viewed their advertisements that are focused on removing major risks from their sales process.

The Hyundai guarantee goes like this: If you lose your job you can return the car without a ding on your credit or continued liability. They even went one step further; they will let you use the car for 90 days after you lose your job to help you find a new job. That certainly addresses the primary risk for their prospects!

The quality of their product was a risk factor for some but they also address that concern with the best warranty offered by any car company. Price was another risk, and they addressed that with some of the most aggressive pricing in the industry. And it's working. The perception of Hyundai has shifted in the minds of Americans; it's not just a cheap car with questionable quality. In fact, it is now perceived as a feature-rich, quality car, offered at a great price. It has become "a good value." You may have also noticed that now the other guys are offering similar risk removing deals.

So what's the risk for your buyers in your deals? How will you overcome the risk barrier? Well, you could always start with a money-back guarantee. The key here is it works well for consumer products like soaps and toothpaste, because very few people will bother to go through the hassle to get a couple of bucks back. If you're selling a $200,000 piece of equipment, the money-back may be painful for you. If you do offer "Money back," it should be based on a specific product's performance claims.

Another version of the "money-back guarantee" that's popular in our industry is the "try before you buy" approach. This, of course, is where an equipment supplier will let you use a piece of equipment in your factory before you agree to pay for it. The pricing structure is usually agreed upon before the equipment is placed. Though the buyer still has some risk, it is greatly minimized to perhaps a learning curve and some installation costs. If the equipment supplier has great faith that the performance claims made in the selling process are true, then this model can work. The onus is really on the company selling to make sure they are not overselling features and that the equipment really meets a real need for the customer.

What if you are selling a service like spindle repair? The risk is relatively low for a prospect to give you a try. You could go one step further and eliminate all risk by rebuilding the first six spindles for free. Sounds crazy but if you truly believe that you can win a customer over by simply having them "experience" your service and the quality of your work, then what do you have to lose?

Perhaps you're selling printed circuit boards. What's the risk here for your customer? Maybe it the delivery date, the concern of quality, or price. Whatever the perceived risk is, you must identify it and remove it. If it is delivery date then they must believe that you are capable of consistently delivering on time. Perhaps a string of testimonials will alleviate the risk. If it is quality, perhaps a third-party audit would do the trick.

Don't be fooled into thinking price is your major obstacle when it comes to risk assessment. Price alone is typically not a risk factor; it's more of a value point. But you could always offer some sort of price guarantee. That eases fear of spending too much (not usually a risk, but a point of buyer pride). 

I'm sure the above strategies are not any great revelations, but hopefully they re-energize the risk elimination brainstorming process on your team. However you remove risk from your deals, you must be able to live with the consequences. The key is knowing your true capabilities (without over-selling them) and your prospects' true needs. If there's a match, move forward. If not, don't make the deal. You don't want to end up taking back equipment, issuing refunds, or working for free.