The Three Rules (A Sales Perspective)

Whenever we find ourselves in a competitive sales situation, it never fails that we find ourselves competing on price. Our dream clients ask us to sharpen our pencils and, in an attempt to win, we sharpen it (sometimes down to a little tiny nub). But instead of sharpening our pencil, we should be sharpening our value creation. I’ve written about these ideas here since late 2009.

Now let me offer you some additional evidence by the way of a new book by authors Michael Raynor and Mumtaz Ahmed. The book is titled, The Three Rules: How Exceptional Companies Think. I’ve already added the three rules to master slide deck. Here they are:

1. Better before cheaper – in other words, compete on differentiators other than price.
2. Revenue before cost – that is, prioritize increasing revenue over reducing costs.
3. There are no other rules – so change anything you must to follow Rules 1 and 2.

The authors studied the results of over 25,000 companies over a 44 year period. But in your heart of hearts, you know these ideas to be true because you’ve experienced them, haven’t you?

What’s interesting to me about point one, Better Before Cheaper, is that companies that sustained exceptional performance always competed on non-price differentiators. Even when the economy went through recessionary periods and they lowered their prices, they were still priced higher than their competitors. It’s their consistency here that makes the difference.

The second point, Revenue Before Cost, is interesting to me for two reasons. First, I continuously see companies that try to shrink their way to greatness. They focus on cost cutting to the detriment of revenue growth. I’ve even seen some cut the salesforce instead of non-revenue generating employees. The evidence points to the fact that greater revenues are more valuable than lower costs when it comes to generating exceptional performance–and differentiation is the key to gaining those higher revenues.

But second, and perhaps more interesting for us in sales, is that we don’t do enough to translate the value we create into a return on investment. During price discussions we allow the decision-criteria to turn to cost cutting and “savings” when we should be helping our clients make the proper investments necessary to the outcomes that they really need.

If you are in sales leadership, this book should be on your nightstand (and you should provide copies to the rest of your leadership team). If you’re in sales, you should read this book to acquire a greater understanding as to how you can really help your clients succeed–and why you aren’t competing on price.