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Addressing Risk is Critical to Selling Technology


Published in the Houston Business Journal in July, 2004.

Authors:
Kevin B. Long, Regional Vice President, Sales, SBC Global Services, Inc. (a subsidiary of the Fortune 50 ranked, SBC Communications, Inc.)
Ravi Kathuria, President, Cohegic Corporation


Long

Kathuria

Selling large or complex technology solutions to businesses is often quite challenging. It is unlikely for a technology sale to close unless the risks involved are sufficiently addressed. The risks involved affect both the prospect and the salesperson.

For the salesperson the risks include complexity risk, competitive risk and sales-process risk.

1. Complexity risk is high because technology is difficult to understand. The primary prospect contact often serves as an internal advocate and sells the solution to non-technology savvy departments and levels in the prospect's organization. The internal selling can be very difficult unless the message is simple and the business benefit is easy to describe.

2. Competitive risk is high as it is difficult for the prospect to compare technology solutions. It leaves more room to be misled. The salesperson must help the prospect identify which aspects of the solution are important to their situation and help them make an informed decision. It is often more important to educate than to impress - it builds trust. Without the benefit of a solution-related education the prospect is more likely to base the decision on price.

3. Sales-process risk is high because the sales-process can be undermined by factors such as the presence of an incumbent. It is difficult to replace an existing vendor even if the client is seeking a change. Consider the example of renewal contracts involved in the case of monthly recurring technology-related services. The salesperson must coach the client to start the sales-process (bidding/RFP process) early enough. Waiting until it is too close to the renewal date can allow the incumbent to put the client in a position where any new deal becomes untenable.

For the prospect, the risks include performance risk, transition risk, integration risk and political risk.

1. Performance risk is of a higher concern to the prospect if the concept is new, the technology is unproven or the vendor has low brand awareness. Helping the prospect become comfortable with the performance risk may require money-back guarantees, pilot projects and pay-as-you-go offers. Smaller successive deals as opposed to a front-loaded large deal may also help the prospect become more comfortable.

2. Integration risk is a factor because technology implementations are not done in a vacuum. In the past, many companies have implemented technology solutions and not integrated them with other existing technologies - a phenomenon often seen in the software space. However, more companies are now recognizing the loss in efficiency and agility due to poor integration. The salesperson can gain an advantage over the competition by highlighting the benefits of integration and developing a prospect-specific roadmap for integration.

3. Transition risk is potentially the biggest business-related risk the prospect faces. A mismanaged incorporation of the technology can distract and possibly disrupt the operations and revenue generation of the organization. Technology-related expenses are typically small compared to a corporation's overall budget and revenues. Therefore, transition issues are always far more critical than the price of the technology. By addressing the transition issues, the salesperson can prevent a decision based solely on price or product features.

4. Political risk is the biggest personal risk the primary prospect contact faces. The primary contact cannot afford to have the solution fail in any phase - proposal, transition, integration or performance. This risk strengthens the prospect's inclination to maintain status quo. The salesperson must act as a coach and empower the prospect with the tools and means needed to make the solution a success in each phase.

Ignoring the risks and hoping to enamor prospects into signing deals often results in lower sales productivity. Keeping the message simple, tying to business benefits and developing prospect-specific roadmaps for transition, integration and performance can help gain the prospect's confidence and business.