October 4, 2011 by Chris Nöthling
There has been a bit of chatter recently about moving from transaction based selling to relationship based selling. Sometimes, in the moment, the message is translated as a transactional sale is a flawed approach whilst relationship selling is the panacea that will solve all ills. Let’s be clear about this point: In both cases selling is the desired result and each approach merely reflects a strategy for enabling the sale. Let me use some simple examples to illustrate.
In the first instance, consider that you are on your way home from work and you pop into a Seven-Eleven and ask for milk. The person behind the counter requires little fact gathering about you, or your needs, your circumstances or your ability to pay. The seller does not need to know your name and does not of necessity have to engage in any relationship building with you. This is essentially a simple transaction. The seller hands over the milk, you in turn hand over your cash, and the seller moves on to the next client.
Now consider a second scenario: You have purchased a block of land and you want to build your ideal home. You approach an architect. On meeting with the architect you engage in some social pleasantries, she offers you and your partner a coffee, and then begins to ask you some questions: How many people will live in the house? What are their ages and do any have some for of disability? Do you entertain at home? What is your lifestyle about? How much can you afford to spend? And so on.
Clearly there are two different scenarios unfolding here, each entirely proper to the circumstances. Transaction selling is often involves commodity items that the buyer know he needs or wants but there is little in variance from supplier to supplier. There is little need for exchanging of information or developing a relationship. By contrast relationship selling involves more complex solutions where the delivery of the solution is intimately related to the seller, where trust plays an important role in the transaction and where the transaction takes place over an extended period.
Transaction relates to the act of conducting or performing business. It is the exchange or trade of money and or goods. A transaction is an agreement, communication, or movement carried out between separate entities, often involving the exchange of items of value, such as information, goods, services, and money. A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or people.
In such situations the focus is on conducting the business deal. The salesperson’s job and focus is to make the sale and to aid you with the business exchange. Frequently the transactional sales person is termed an order taker.
In the transactional approach the focus on the actual sales transaction. It is about closing the order expediently and typically involves negotiation with the buyer on price. The sales person has a short-term focus and energy is directed at getting the deal done and quickly moving over to the next customer. This approach lends itself to mass commodity shop, or where floating traffic is very high and you need to make the best use of the time to cater to as many customers as possible within the time frame. Typically the customer knows what they want and have a general idea about the price. Selling in this case is purely transactional. The sales person is required to focus on one need at a time and is less aware of the customer’s overall situation. Sales are made on a quantitative or volume basis.
Transactional sales are very much still alive and well. Consider the rise of self-select and self-checkout facilities in supermarkets. The internet provides a fantastic shopping portal for the transactional buyer.
By definition relationship has to do with the way two things are associated or connected. It is the condition of being related. An interpersonal relationship is an association between two or more people who may range from fleeting to enduring. This association may be based on love, business interactions, or some other type of social commitment. Interpersonal relationships usually involve some level of interdependence. People in a relationship tend to influence each other, share their thoughts and feelings, and engage in activities together. Because of this interdependence, most things that change or impact one member of the relationship will have some level of impact on the other member.
Relationship selling can be defined as the process of developing a comprehensive understanding of the customer’s business and industry, defining needs at a strategic level and offering solutions that will help the customer address their unique goals. Someone who follows relational selling puts a great deal of emphasis on building a relationship with their potential client. They focus on creating feelings of trust and comfort with the people they work with. It’s often called “solution-based selling” because the salesperson spends their time uncovering the needs and challenges of their prospects.
Relationship selling requires the seller to understand the buyer’s need and see the relationship between the need and the solution. In relationship selling the buyer and seller are partners in the process of finding the right product or solution that will solve a problem or otherwise benefit the buyer. This usually pertains to higher priced goods and services or those that also need a long-term relationship between the buyer and seller. The process of relationship selling results in a strong relationship that the salesperson can leverage because of strong feelings of “know, like, and trust”.
Which strategy is right for financial advisers?
Each approach is a legitimate sales strategy based which suits a specific set of situations and criteria. See the following table as an example.
|Short term||Lifetime or at least long-term|
|Once off transaction||Multiple interactions over time|
|Appropriate for commoditized products||Appropriate for more complex solutions|
|Product push – focus on product features||Focus on client goals and values|
|Emphasis on sales||Emphasis on providing solutions|
|Emphasis on enabling the transaction||Emphasis on reason for transaction|
|Limited consequences for client||Significant consequences for client|
When I started out as a planner I was provided with a method and script to give comprehensive financial planning as per the relationship selling approach. When I met with a prospect I had no idea what solution I would ultimately give to the client. I followed a “process” through which I was able to find out the client’s goals, their commitment to their goals, the gaps in achieving these goals, and their affordability. Only once I had done all of these could I give a solution. As you can see these actions fall squarely into the realms of relationship selling. Every once in a while I would meet a prospect who would tell me that he had purchased a house and required life assurance of X amount. As a new adviser, schooled in a particular approach, I was always thrown by this question. I would inevitably try to steer the prospect away from their request and encourage them to look at the big picture. More often than not the would-be client got frustrated with my long-winded approach and would go down to the local bank planner who would happily oblige them. I have no criticism of bank planners, past or present, in South Africa or Australia. I simply want to illustrate that there is a place for both transactional and relational selling in the financial planning space. Both approaches are appropriate. As a planner my role is to understand which arena I wish to take participate in and to refine my strategy appropriately.