Long Cycle Sales Explained

Warren Buffett once admitted: “My greatest errors are being those of omission rather than commission”.  If you can avoid the errors of omission identified in the following paper, you will be more successful in long cycle sales.

Research shows that up to 70% of business comes from long-cycle sales [1].

The majority of corporations generally pursue a large number of sales leads at any given time.  This effort is often expended on immediate term opportunities since these are likely to give a quick return.  Unfortunately, not all such activities materialize. Leads that fail, actually cost businesses a lot of money, due to time and effort spent on what eventually just becomes a dead lead. But let’s face it-the true cost of these “fail” cycles is often at the expense of missed  opportunities for the company on other types of sales such as long-cycle sales. It is imperative that due attention is paid to long cycle sales despite the inherent uncertainty, since these can often generate higher volume sales

Successful long cycle sales management is an important strategy that often gets ignored making it an error of omission. 

ROLE OF REGULATIONS AND SPEC CHANGES IN LONG CYCLE SALES

Regulation changes or industry driven spec changes, by default, are long cycle sales since these are usually announced several years in advance. If you participate in a business that is impacted by such factors, you need to be on top of the anticipated changes, you need to prepare your customers but be careful you are not crying wolf. Lastly and most importantly, once such a change becomes defined, you MUST make every effort to ensure that you can meet the deadlines for such changes well in advance (you CANNOT miss the boat on this!). It is also important to keep customers updated and ready for the transition to the new products or services.

ROLE OF CUSTOMER IN LONG CYCLE SALES

1. Customer is undecided
2. Customer is decided but the purchase is extended for transactional or other reasons

1. Customer is undecided

This can be for many reasons – there is a competitor involved and the customer cannot decide, the customer lacks all the information to make the decision or it is often not clear to the customer what they exactly want.  If you want to make a sale, it essentially involves partnering up with the customer, understanding and defining customer needs and developing compelling solutions is the key.

A compelling solution may involve more than just product sales to tip the scales in your favor.  Ideas include extending terms, carrying inventory, just-in-time delivery, free shipping, volume discounts, exchanging field test data, post-sale technical support, training staff etc….  Before you offer these, you need to understand what value proposition in these offers excites the customer the most.

2. Customer is decided but the purchase of product is extended for transactional or other reasons

Again- there are many reasons- let’s look into five of them, I am going to use the lubricants industry as an example:

1)Tender based sales

Tenders can have long life cycles, because the time to approve a tender can be long and the actual installation or supply date specified in the tender can be months away even after a tender bid is won.  It is extremely important not to become complacent just because you won a tender. You need to get a firm commitment from the customer for the purchase of the product and then be prepared to deliver product as needed. Yet beware of fine print and cancellation clauses – sometimes the tender award can be cancelled for very simple reasons and you could end up sitting on large volumes of products without a purchaser.

Tenders often have upfront pricing commitments – beware of uncertainty beyond your control – currency effects, raw material price increase etc. Try to work in safeguards and contingent penalties and be willing that the buyer can add other clauses as well such as liquidation damage clauses. 

2) Sales which are pending on to be completed contract negotiations or an existing contract with a supplier that is expiring

In this day and age many large companies initiate a contract as a matter of protocol before a sale occurs. Negotiations can take months, delaying a sale to indefinite amounts of time, resulting in a long cycle sale. This can be addressed in at least a few ways (aside from negotiating quickly).  The most important is a candid discussion with the decision makers – is such a contract really necessary?  You may be surprised that the customer may actually look into this and be willing to buy without a contract or may consider buying on mutually agreed Terms and Conditions of Sale, similar to a one-time sale.

Another situation is where the customer finds value in your offering, but cannot switch due to a contract with an incumbent supplier.  If the contract cannot be cancelled without incurring penalties, the supplier may have to wait it out.  In these situations, you need to be in constant touch with the customer, if the product needs to be tested do your best to get it into the test cycle so the customer approves your product in advance.  Also, discuss the value you bring, have the customer visit your plant and personnel if you feel that you have a truly good story.

3) Sales which are contingent on completion of a project, where the product will be installed at the last stages.

This usually pertains to initial fills in newly constructed plants.  In this situation one should ensure that all necessary steps to deliver the product are complete.  Often people wait till the last minute to manufacture product and then, despite the long wait, a new delay occurs for not thinking carefully.

4) Sales in which product is not available due to supply situations

This type of situation leads to the highest risk of sales loss and the only way to address this is to first be aware of the timeframe when the customer wants the product and plan your raw materials accordingly. However, the delay could be from internal inefficiency, force majeure or other reasons. This gets very tricky and again constant communication is the key and note that internally the ‘squeaky wheel gets the grease’ principle must be exercised. You need to convince internally why your customer should be serviced above everyone else.

5) Sales in which a product lasts in the system for a long time

Some products can last a long time in the system. The chances of getting full volume sales on a repeat basis for the same system are low. There are two possibilities here.  First offer some sort of monitoring program, which will indicate if the current product continues to be acceptable to use.  Demonstrate why other products won’t perform the same or why mixing with a third party product can be deleterious to the system performance.  In another case, see if the customer plans to replicate the plant elsewhere and use the demonstrated field performance of your product to get the sale for the second and other systems. Challenges again, involve the fact that personnel at your customer may change, so it is important to be in touch with the customer.

ROLE OF THE COMPANY ORGANIZATION AND CULTURE IN LONG CYCLE SALES

• Company commitment to a long cycle sale is essential. In many big companies, personnel moves are frequent and while one person is a champion of such a sale and spends the time developing the relationship, their replacement may have no interest in this.
• Corporate strategy can change. Suddenly there may be a short term focus or change in ownership leading to dropping of efforts on long term possibilities.
• This is usually the biggest challenge – “we tried this for years and it didn’t work, you aren’t going to be successful, spend your time somewhere else”.

Remember if you have invested time and effort in developing a customer, you are the best champion and also have to be the best internal salesperson to keep the momentum alive within your company.

 HOW TO MANAGE THE LONG SALES CYCLES?

1. Provide a steady stream of quality experience, related to your industry. Most b2b products and services require an education process/training. Use this fact to your advantage by becoming a resource for insight and information. Help customers learn about the industry and product category as a whole, by producing a regular stream of quality knowledge. 
2. Carefully identify your target audience. Clear and targeted messaging that lets the focal customers understand your value, how it will benefit them and why they should choose it over the competition. This will generate demand and produces successful sales. 
3. Create compelling offers that provide incentives for your customers to take immediate action. 
4. Set specific goals for each and every interaction with your contacts. Examples: scheduling a second meeting before the first meeting is over; identify other key decision-influencers who need to be part of the sales process. 
5. Demonstrate the Value of Your Products and Services to their Current Priorities. You could help your customers reduce their costs by speaking up and not passively accepting their “not yet” responses.

6 RISKS:

1. No Game Plan 

Being organized with a clear game plan is imperative as there are so many details and variables in a complex sale and the deal can easily get side-tracked.

2. No Focus

If you do not have a clear idea of who your focal customers are (80/20 rule) then you can be spending a lot of time, prospecting the wrong companies and opportunities.

3. Not Understanding the Purchasing Process/ Timetable

Too often you may push your own agenda, causing your own demise. Spending time probing, asking questions, and researching is critical in helping you understand the likelihood of landing a deal. It also ensures that you do not miss critical pieces of information and steps that are important to the customer.

4. No Background Info

You need to gather information from multiple sources to make sure that your approach is in line with the values of the key decision makers within your company and at the customer.

5. No Qualification Process for Tenders

Just because a big company sends you a Request for Proposal (RFP), does not mean you should apply.  Know that you can really do it before participating.

CONCLUSION: BUILD RELATIONSHIPS WHILE YOU WAIT

One indirect benefit of longer sales cycles is that you have more time to build relationship with customers. Whatever techniques you use to close the sale, make sure you don’t harm the partnership with your customer for the long-term. Repeat business is where the major profit is. The first purchasing order is only your starting point.

THE MOST IMPORTANT PART OF THE LONG SALES CYCLE PROCESS IS COMMUNICATION: BOTH EXTERNAL AND INTERNAL!

Make everyone aware of what you are doing, don’t overpublicize a very large $ sales and try to project a rosy timeline internally. If this happens, you lose credibility, so be realistic in setting expectations internally. Internal communication and convincing is often harder than external.

It is absolutely critical to maintain communication during the process to avoid last minute surprises on both sides. 

What is your own long cycle sales experience or tips? Please share in comments!

 References:

1. Chariton, C. (2011). Don't settle when it comes to generating leads. B To B, 96(6), 8.
2. Picture credit: grandbrand

DISCLAIMER

Opinions expressed are solely my own and do not express the views or opinions of my employer. Information presented is publicly available.

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Sincere Regards,

Yulia, M.B.A

Doctoral Student