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Transactional vs. Consultative Selling

By William Walker

‘What do you teach people in sales training, how to pick up the check at dinner?”

I’m never surprised by this question. Over the course of a career as a sales trainer, I’ve grown accustomed to hearing it and others like it. Critics believe success in sales is largely a function of the right personality. They believe sales cannot be taught or learned, and certainly does not require serious study or careful analysis by real professionals. Ask the critics and most cannot recall a single book they’ve read on how to increase sales effectiveness.

Often, even the best sales people and sales managers have a difficult time identifying what it takes to be successful in sales. When asked, most would attribute sales success to natural talent or hard work. But when asked to describe those natural talents or pinpoint which activities sales people need to work hard on, even the best are stumped.

Let’s shine a little light on the profession of selling. It may help to know there are two primary types or modes of selling: transactional selling and consultative selling.

A transactional sale is one in which the customer’s decision to buy is limited to three issues:

FEATURES, PRICE, AVAILABILITY
Some clear examples of transactional selling are found in the world of retail. As consumers, most of the purchases we make — such as gas, groceries or personal items — are done so transactionally. In fact, in many of these examples there isn’t a salesperson at all, but rather a clerk or a cashier who simply conducts a transaction.

Think back to the last time you went to a mall. You enter the store purposely avoiding eye contact with the sales associate, but within a few moments you are trapped.

“Can I help you with anything?”

And, of course, without a moment’s thought, you put up your defense. “No thanks, I’m just looking.”

God bless retail salespeople. I bet they hear “I’m just looking” a hundred times a day. Why is that? Are customers simply being rude? I don’t think so. The reason customers blow off retail salespeople is because the sale is transactional — that is, the customer’s decision to buy has little to do with the salesperson and much more to do with the product, its price and its availability. In the world of retail, salespeople have little influence over these considerations and everyone knows it.

As a result, retail salespeople have little capacity to bring value to the relationship outside of the product itself. From the customer’s perspective, there is little need to warm up to the salesperson when the decision to buy is based solely upon the product, its features, its price and its availability.

In this situation, as in most transactional sales, the salesperson is actually more of an irritant than a positive influence. As a consumer, you are thinking, “I could buy this product for a lot less if I didn’t have to pay for the salesperson.”

This is not to say all retail sales are transactional. Occasionally, when I go to a Home Depot or Radio Shack, I may actually be eager to talk to a salesperson. But generally speaking, retail sales people offer very little advice on selecting the best products or how best to use them. The relationship is transactional.

Why are we talking about transactional selling? Because transactional selling is not limited to retail sales. Chances are you have a sales force filled with grandmasters of transactional selling: experts on the product, how much it costs and when it can be delivered. With so much focus on the product, the salesperson shrinks to insignificance and the profitability is sucked out of the deal.

On the other end of the selling spectrum is Consultative Selling.

The focus of consultative selling is on value. It has less to do with what the customer is buying and more to do with why. That is, how does your product or service impact the customer’s productivity, profitability, operating costs and downtime. This type of sale, the consultative sale, places more responsibility on the salesperson than simply discussing the product and its price. It requires the salesperson to know more about the customer, the goals they have for their business, changes they want to make within their company and the results they hope to achieve. It requires the salesperson to make connections between the product and the value it creates. It requires the salesperson to make a compelling case for how he or she can create real value and do so more effectively and efficiently than the competition.

Consultative selling is particularly powerful when the customer does not know what their goals are or how to achieve them. In this case, the salesperson is more of a coach who guides customers toward establishing goals and objectives and helps them create action plans that deliver results.

Whereas transactional selling is about the product, consultative selling is about value. In a transactional sale, value lies within the product and price becomes the primary selection criteria. Any salesperson who hears price as an objection is selling transactionally.

In a consultative sale, the salesperson creates value. What does it mean for a salesperson to create value? Let’s begin to answer that question with a definition of VALUE. VALUE is the difference between BENEFITS and COST.

VALUE (V) = BENEFITS (B) — COST (C)

It is a simple definition, but an important one in terms of what consultative salespeople need to do in order to make the sale. According to our definition, there are two ways to increase value. One way is to increase benefits. That is, we can increase V by increasing B, assuming costs remain the same. Benefits are the positive impact a customer receives or realizes as a result of a product or service. In the very real sense, customers will see more value in you or your product when the benefits are clearly defined. Defining benefits is the role of the salesperson.

Examples of benefits might include:
• Increased profitability
• Increased productivity
• Increased throughput
• Increased efficiency
• Increased market share
• Increased consumer awareness
• Increased safety
• Increased job satisfaction
• Improved response time

Benefits always imply change, change in terms of positive outcomes for the customer.

One way to determine whether a benefit is truly a benefit is to determine whether it gives the customer more of what they want. Real benefits deliver a positive change and create a measurable impact on the customer’s business. Understandably, sales people who cannot describe the specific impact that their products have on issues like productivity and profitability are clearly not selling consultatively.

Notice that benefits are not components of the product. They are not manufactured in a production facility or imported from China. They are exclusively defined in the mind of the customer. Without a customer there are no benefits. Unless a customer confirms that a product creates benefits for them, benefits do not exist — at least not for that customer. The role of the salesperson is to help the customer or prospect increase value by realizing, recognizing, determining and discovering more benefits.

The other way to increase value is to lower cost. Just as benefits are defined by the customer, so are costs. Unfortunately, in many cases, reductions in cost are frequently easier to measure than increases in benefits.

Examples of costs include:
• Reducing downtime
• Reducing maintenance costs
• Reducing operating expenses
• Reducing the cost of financing
• Reducing product damage
• Reducing inventory costs
• Reducing labor costs
• Reducing the cost of capital equipment

Any time we reduce the customer’s cost, assuming the benefits remain the same, we increase value to the customer. Any product will be of value to the customer at that point where the benefits offset the costs. If benefits do not offset the costs, the customer sees no value in the product and will not want it. The important thing to remember here is that price is a small component of the consultative sale.

In a consultative sale, the customer is not solely concerned about cost, or for that matter solely concerned about benefits. The customer is concerned about the combination of costs and benefits which together determine the customer’s perception of value.

The customer always wants value regardless of costs or benefits, and will do whatever it takes to acquire it. In fact, everything you have ever bought was because you believed the benefits of owning the product outweighed the cost. That is not to say you may have later changed your mind and regretted having bought something. But at the time you made the purchase, you said to yourself, “the benefits of owning this product outweigh the cost.”

Determining value, creating value and looking for ways to uncover, discover or drive value lie at the very heart of a consultative sale. In a transactional sale, the anxiety over price — a small component of cost — clouds the customer’s understanding of value. And without a clear understanding of value, the issue of price becomes much more significant.

When the customer considers the issue of value, he compares your ability to deliver value to all other value vendors. In other words, your solution is not being solely compared to other solutions found within your industry, but to any salesperson or idea that delivers value to the customer.

Based on what we know about transactional and consultative selling, it should be clear that a transactional sale occurs at the lower levels of the decision-making process — that is, in the warehouse or on the shop floor. Consultative selling takes place in the boardroom or in the corner office. You can be sure if your salespeople are having a difficult time gaining access to key decision-makers, it is because they are simply not prepared to discuss issues that deliver real sustainable value to the customer.

In fact, the idea of talking to a key decision-maker is terrifying to a transactional salesman. Some salespeople eventually convince themselves and occasionally their sales managers that the decision to buy is made transactionally on the shop floor. After all, what they are hearing from the customer is complaints about pricing, with little or no interest in value. Don’t be fooled.

Some buying decisions are made transactionally. Particularly once a precedent has been set for buying the product. But there is a big difference between buying a new set of tires for an existing piece of equipment and changing out an entire fleet of vehicles from one brand to another. The key to winning new business and taking business away from your competitors lies in consultative sales. And although the warehouse foreman or the mechanic or the operator may have some influence over that decision, you can be sure the decision to give business to a new supplier or replace one vendor with another is made in the boardroom.

Many salespeople, particularly those who feel comfortable with selling transactionally, never find their way to the boardroom where real decisions are being made. Eventually they lose their confidence in their ability to call on key decision-makers and convince themselves that the decision is really based on price.

Until your salespeople master consultative selling, prepare yourself for the predictable results of transactional selling: lower prices, a slower sales cycle, shrinking market share and a sales force that has lost the ability to learn and grow.