Legal Business Development

What lawyers need to know about SPIN Selling – Part 2 of 3

The SPIN Selling system is based on the systematic observations of more than 35,000 sales calls for large and complex products. A team of 30 researchers traveled to more than 20 countries over 12 years to answer the question: what’s the difference between the most successful sales people and everyone else?

When they analyzed the differences between the calls that ultimately led to a sale and those that did not, they found that the most successful sales people not only asked more questions, they also asked certain types of questions more frequently. Researchers ultimately classified the questions into four types – Situation, Problem, Implication, and Need-Payoff. The first group – Situation questions—was by far the most common, and also the least effective.

Situation questions concern simple matters of fact, such as “How is your legal department organized,” or “How many patents did your company apply for last year?” Everyone must ask some situation questions, but most people ask a lot more than they realize, or than they should. And the higher the percentage of situation questions, the less likely a sales call was to succeed.

As one buyer put it (The SPIN Selling Fieldbook, p. 11): “When a salesperson wants to take up my time with discussions about hobbies, or wants me to teach them basic facts about our business, I get irritated. In today’s world, I’m too busy for that.”

To avoid asking too many situation questions, successful sales people learn as much about the client as they can before the call. That way, they can move more quickly to Problem questions that get at the pain that prospects feel, their dissatisfactions and difficulties. Examples for lawyers would include “What’s the biggest problem you face in your business,” or “Do you think the bills from your current law firm are accurate, fair and reasonable?” or “Do you worry about how well your patents protect you from competitors?” Problem questions are harder to come up with, but they are more interesting to the buyer, and more valuable to the selling process. As sales people gain experience, they ask more problem questions, and they ask them earlier in the call.

Implication questions are the next step up in selling sophistication. They take the dialog
one step further, to probe beneath the surface of problems, to understand their full business implications and consequences. In the legal profession, the implications are sometimes painfully obvious. Someone accused of a white collar crime understands the importance of getting the best defense, and a party to a billion dollar litigation understands the economic importance of having the best possible lawyer.

In The Essential Little Book of Great Lawyering, Ropes & Gray CMO Jim Durham calls this type of case bet-the-company work, and estimates that it represents about 5% of all legal work. For this type of work, reputation and track record are everything. At the other extreme, Durham says, about 25-30% of all legal work is commodity work, where price is the only important selection criterion. By definition, the only way to get more of that work is to lower your price.

That leaves the vast majority of legal work – 65-70% - in the middle category which Durham calls important work. It is here that I believe the SPIN Selling model is likely to be most useful to lawyers.

Durham explains: “When you are doing important legal work your expertise and competence must be sufficient (but need not be exceptional), and the billing rates or projected costs for the work must be within the range of client expectations (but not necessarily the lowest). Beyond that… your success will be determined by the actual experience a client has working with you.” (p. 18)

Implication questions may even change client perceptions of how important the work is, by helping a client to think through the business significance of a particular matter

For example, many companies consider their intellectual property work in the commodity category, and shop for the lowest price. Implication questions can help the client dig deeper into the importance of each patent, to consider where taking a strategic approach for the long term could be more valuable than getting the lowest price.

In this example, implication questions could include: Do you think a well written patent could reduce the cost and risk of future litigation? Could it strengthen your competitive position? If your company is acquired, could it simplify the process of due diligence?

This type of question represents a high degree of sophistication. In The SPIN Selling Fieldbook Rackham says that “thousands of experienced but less successful sellers didn’t ask [implication] questions at all… top salespeople tended to introduce solutions, products, or services very late in the discussion. In contrast, their less successful colleagues couldn’t wait to begin talking about what they could offer.” (p. 16).

Next week, I’ll talk about Rackham’s the fourth category, which is even more rare and more valuable: need-payoff questions.

What lawyers need to know about SPIN Selling – Part 1 of 3

I hate the phrase SPIN Selling. It sounds like something that should be used to sell a used car or a political position, by manipulating the facts and ignoring what a client really wants and needs.

In fact, it is just the opposite. SPIN Selling is the ultimate consultative selling technique, in which sales people really listen to buyers, come to understand what they need, and help buyers to find solutions that genuinely meet their objectives.

As legal marketing becomes more sophisticated and lawyers look to learn more about how related professions develop new business, I predict that SPIN Selling will be one of the most influential sources of new ideas. It has already been widely accepted by everyone else. According to the website of the man who invented SPIN Selling, Neil Rackham, “more than half the Fortune 500 train their salespeople using sales models derived from [this] research.”

But why did Rackham pick a name like this, with so many negative connotations? Because it did not have those negative connotations when he created the system in the 1970s. Rackham wanted to summarize the four types of questions that successful sales people ask in a catchy anagram, and came up with SPIN for Situation, Problem, Implication, and Need-payoff. It was only a few years later that people started using the word spin perjoratively, to refer to manipulating political facts (in 1984, after the Reagan-Mondale presidential debates, according to National Public Radio’s history of spin).

These days, the name may put some people off, but the research and data behind it pulls them back in. In a world full of sales gurus who claim to have facts and figures to back up their claims, only one system is supported by the type of systematic data that lawyers and academics will respect: SPIN Selling.

Rackham’s web page calls it: “the largest ever research study of successful selling... supported by major multinationals including Xerox and IBM… The research took 12 years at a cost of $30 million, in today’s dollars.”

So what does SPIN Selling have to say to lawyers? Let’s start where Rackham does in The SPIN Selling Fieldbook, by asking a fundamental question about how you perceive the selling process. When you are talking to a potential client about a new engagement, who do you think should talk more, the potential client or the lawyer?

You’ve probably heard over and over that lawyers need to differentiate themselves from competitors. To do that, you need to talk, so it seems quite reasonable to assume that you should be doing most of the talking.

This conclusion fits comfortably with the standard personality profile of people who go into the legal profession. Peter Johnson, a lawyer himself and a principal at Law Practice Consultants, was the first to tell me that “At any given moment, the average lawyer is either talking, or getting ready to talk.”

But Rackham’s data says that in successful sales calls for large and complex products, it is the buyer who does most of the talking.

The fact that listening is critical will not surprise professional sales people. As I’ve written before, sales pros often quote the old saying that “When you meet with someone, whoever talks the most, will enjoy the meeting the most.” To build a relationship, you want the client to be the one who loves the meeting. Rackham differs from other sales gurus not in this conclusion, but in having the data to prove it, and to go further to analyze the best types of questions to ask.

If in the past you’ve been doing most of the talking with prospective clients, don’t feel too bad. The good news is that to succeed in sales you need to be just a little better than the people you compete with. When you are competing with other lawyers, most of them talk too much too, so you can probably get away with it.

Lots of people talk too much when they begin selling. I certainly did when I started my own company 22 years ago.

Soon after I became an entrepreneur, it became painfully obvious that if I wanted to stay in business, I was going to have to learn how to sell. I thought the hardest part would be getting appointments with the busy people who needed the kinds of custom training programs I was selling when the company started. Once I got in the door, I thought, between the genuine superiority of my company’s approach and my silver tongue, the rest would be easy.

I was right that it was hard to get in front of people, but wrong that I should use that valuable time talking. Mind you, it took me years to learn this. During the years that I was doing it wrong, I made plenty of sales. But not nearly as many as I did after I learned to actively listen, and to ask better questions.

Next week, I’ll talk about SPIN Selling’s distinctions between four types of questions - Situation, Problem, Implication, and Need-payoff – and how lawyers can use them to become better listeners.

Consultative selling for lawyers

Did you see in the news that Pfizer announced “unprecedented layoffs” of 2,200 US sales people, and over 20% of their European sales force (Business Week, 2/5/07, p. 30). It’s part of a trend, the article said, in which “pharma CEOs are questioning whether the hard sell even pays off.” Like many other companies, Pfizer will instead move to a consultative selling approach built around providing more value to doctors.

Why should lawyers care? Because when lawyers say they hate sales, it is the old-fashioned hard sell they are thinking about, the kind of selling that can be seen in the movie Glengarry Glen Ross and at used car lots everywhere.

But the fact is that most Fortune 500 firms have abandoned the hard sell model, because it does not work with large and complex sales. Pfizer has joined the long list of companies that has substituted a kinder, gentler approach which does work for lawyers: consultative selling.

The world is full of self-appointed sales gurus who claim to have invented consultative selling, but in fact the term does not have a single founder or even a well-defined meaning. Instead, it is a group of approaches, all of which emphasize adding value, building relationships, and listening before acting.

In this approach, sellers focus first on helping clients by understanding their true needs and thinking about how, or if, they can genuinely add value. In other words, they work sincerely and aggressively to become a trusted advisor. Which, of course, is exactly what great lawyers and rainmakers have always done.

What’s new is that researchers and sales pros have spent the last several decades studying techniques to increase the speed and efficiency of consultative selling. These techniques are just starting to be adopted in the legal profession, and the lawyers who are adopting them first are taking away business from all the rest.

In the book Stop Telling, Start Selling, Linda Richardson distinguishes between three types of sales people: product, quasi-consultative, and consultative.

Product sales people are generally beginners who believe that selling means telling how good your product or service is. Almost every sales person starts naturally at this point. Richardson (p. 8) calls it “the equivalent of the terrible twos in childhood,” and says “Most of these salespeople either grow out of this stage in about six months or so, or they get out of selling. This is the stage of ‘slammed doors’ and no commissions.”

In my experience, lawyers often take far longer than six months to get beyond this, and a few stay with it for their entire careers. The reasons are simple: most have very little time to work on their selling techniques, and little help or guidance from successful rainmakers or coaches. So many remain stuck at this point, gamely heading to networking events, hoping for an opportunity to explain why their services are better than others, when they should be planning a consultative approach to meet people, listen, help them, and slowly and patiently build new relationships.

The next level up is “quasi-consultative selling,” and according to Richardson, the vast majority of professional salespeople fall into this group. These folks have learned some consultative techniques, but they don’t take them far enough. Although they start out each sales call to explore buyer needs, they jump too quickly to product solutions. The true consultative sales person is a partner who builds a long-term relationship to add value, even if it means talking at length on occasions when there is no sale to be made because the solution lies elsewhere.

To succeed at sales, you just have to be a little better than your competition. So as long as lawyers are competing with others who are “telling instead of selling,” that strategy can actually work. But as more and more lawyers begin to apply state of the art consulative techniques, the bar will go up, and lawyers will need to become more sophistacted consulative sellers to win new engagements.

Over the next few months, I plan to write a number of posts about the classic books on consultative selling, and how they relate to lawyers. Next week I’ll start with the system I respect the most, because it is the only one backed by extensive research data: Neil Rackham’s SPIN Selling.

If you can’t wait that long and want to get a jump on the competition, you can start now by reading my list on Amazon of the top marketing and sales books for lawyers.

A worksheet to create an elevator speech

There’s a story behind this post. A few weeks ago, someone posted a request for advice on elevator speeches on an industry bulletin board (LMA Listserv). I replied that if she wanted a copy of the elevator speech worksheet I use in coaching, she should email me. I’ve made similar offers to this group before, and usually get 3 or 4 takers. This time, over 60 people asked for a copy. Then a client saw the item and asked if we could develop an elevator speech workshop. (We did.) Here is the worksheet I sent out.

When you meet potential clients at a convention or a networking event, you often have very little time to catch their attention and create a good first impression. A strong elevator speech will help insure that you get a chance to create a second impression. The basics are explained on page 146 of my book Legal Business Development: A Step by Step Guide: “The only goal of an elevator speech is to get people to say, ‘Tell me more.’… (This section of the book can be downloaded from the free resources section of our web page.) The best elevator speeches are built around a value proposition which includes not just your capability but also your competitive advantage, and some memorable facts.”

This worksheet will help you to create and improve your “elevator speech,” a 5 to 30 second introduction to you and your firm.

Step 1: Define your audience.

If you network at several types of events, you will need different elevator speeches for each, adapted to the people at the event. The elevator speech you use at a conference of venture capitalists should be at a much higher level of sophistication than the one you use at a fund raiser at your daughter’s school.

Step 2: Review your web page, brochure, and press releases and select a few compelling statements about your firm and/or your personal background.

Examples:

“We represented creditors in the Pacific Gas Electric bankruptcy, one of the largest in US history.” (Milbank)

“We have over 3,300 lawyers in 19 countries.” (Clifford Chance)

“In the last 20 years, we have argued over 60 Supreme Court cases.” (Sidley Austin)

“We represented Credit Suisse First Boston and their partners in financing Oracle’s $9.5 billion acquisition of PeopleSoft.” ( Shearman & Sterling)

“We have the largest IP practice in the world” (Fish & Richardson, according to a September 2006 survey by Managing Intellectual Property)

Step 3. Add a short and succinct value proposition.

A value proposition goes beyond your capability to summarize your impact on clients’ business needs.

Example: The capability statement for a labor law firm might say: “We have represented the five largest unions in the state for over 50 years.” While this establishes credibility, the value proposition takes it one step further by spelling out the implication for clients: “The depth of our experience allows us to identify key issues in contracts, and prevent problems before they occur.”

Step 4. Write something about cost.

You don’t want to use this all the time, but you should have something ready.

Examples:

We offer the same quality of services as large downtown firms at a fraction of the cost. (Many of our partners came from those firms.)

Some of our competitors focus on short-term cost and offer lower hourly rates. We focus on minimizing long-term costs by avoiding problems before they occur.

We specialize in “bet the company” cases, where the legal fees are a tiny fraction of the cost of winning or losing.

Step 5. Pick the three most compelling statements from your list above.

The first is your basic elevator speech, the information you always start with. The second and third can also be used when you have more time.

Step 6. Test and improve.

Try it out as often as you can. Enhance the parts that people respond positively to; drop the parts that don’t work. Prepare stories and evidence to back up your claims.

For a freedownloadable file of this worksheet, and for a more basic reference on elevator speeches, go to the Free resources section of our web page.

Selling and spending in other professions, Part 2

If you’ve been reading this blog since the beginning, you know that I’m fascinated by budgets. It all started when I went to my first legal marketing meeting and heard about ALM’s research showing that law firms spend about 1.1% of gross receipts on marketing and business development. I thought that must be too low. But whenever I saw a new survey, it was always in this general area, including the latest Legal Marketing Association figure of 2.6% of the firm’s gross receipts.

When Kathy Born quoted a figure for architects -- 6% of gross fee income spent on marketing -- the audience gasped. None of the other panelists offered definitive surveys from their fields, but when I had asked Deloitte’s Maria Abernethy the same question before the session, she suggested that I look up the reports of publicly traded competitors, and gave me a list of companies to start with.

When I got back to the office and did the research, most of these companies seemed to be blowing as much smoke as they could to hide these numbers. But Accenture’s report did have the figures I needed to calculate what they spent on sales and marketing: 8.4% of revenue. Two more firms from the list (Bearing Point and Navigant) reported results of 22% and 21% for the larger and more general category of “selling, general and administrative expense.” There’s nothing in their reports to separate selling from general from administrative, but if you assume all three are equal, the selling share would be about 7%, close to Accenture’s 8%. It’s hard to imagine a scenario where selling would be as low as the law firm figures of 1% or 2%.

When panelists discussed this issue at the LMA lunch, several mentioned that there is a big problem comparing apples to oranges. Different firms calculate figures differently, and the accounting treatment of salaries is particularly critical.

But all of these figures are extremely low compared to the world I come from: selling training. According to Don Schrello’s book How to Market Training and Information, in the training business “marketing and sales costs consume one third of every revenue dollar.” (Full disclosure: I first read Don’s book 10 years ago, and was so impressed that I hired him as a consultant. He has since become a member of my Board of Advisors, and a friend.)

Why do I think the high spending in training companies is relevant to law firms? Because there are many similarities, starting with the huge number of training companies that do good work. Customers have many choices, and quality is not a good differentiator. Excellent service is a requirement for success, but growth is based on relationships and building trust. And in order to grow relationships and build trust, companies need to invest in marketing and sales. As Don summed it up in big bold letters: “Good training products are abundant and cheap. It’s good sales and marketing that’s scarce and expensive.” If you ask me, law firms are headed for that exact same position.

In any case, whether you compare to 33% for training, or 6-8% for other professions, 1-2% sounds much too low to last.

Why do I think all these numbers are so critical to the future of legal marketing? Because to win at selling, you just need to be a little better than your competitors. When competitors spend more, you must spend more. Surveys conducted by BTI Consulting, ALM Research and others have shown that legal marketing expenses are already going up. I think they have a lot farther to go. From my perspective, the 6-8% spent in other professions could be seen as a reasonable prediction for the future of law firms.

Now let’s do the math. Suppose we talk about only the 100 largest law firms. In the most recent tally, the total annual revenue for the AmLaw 100 is $50.9 billion. So if average legal marketing expense went from 2% to 4%, these 100 law firms would need to spend an extra $1 billion on marketing. That’s right, billion with a B. And if it went to 8%, they would need to spend $3 billion more every year. Any questions?