Facilitating Buying Cycles Creating New Revenue Streams RiskCALM₄^®

Facilitating Buying Cycles Creating New Revenue Streams RiskCALM₄

It is an interesting dichotomy in our consumer culture that while we typically enjoy buying things, we typically dislike being sold things. A ready example can be found in buying a new car. Imagine your excitement when you decide it’s time to buy a new car and start test-driving your options. Now imagine your irritation as the car salesman approaches and starts his sales pitch…

When you are “buying,” it’s a pleasure. When you are being “sold to,” it’s a hassle.

Yet even in full awareness of these opposite paths to the same transaction, most businesses continue to market with a mentality of selling aggressively to customers. We foist our products and services on prospects, trumpeting our wares as solutions to their presumed issues. In a multimedia world, we clamor for customers to find our messages in the competitive forest of search engines, ad banners, TV commercials, radio spots, billboards, and print campaigns in what has traditionally been defined as the “selling cycle.”

On the other side of the table, however, is the quiet buying cycle. The “buying cycle” is the process a buyer goes through in identifying a purchase need, investigating their options to meet the need, and making a purchase (or not). From cycles as mundane as noticing that you’re out of toothpaste and need to buy some more, to as exotic as realizing you want a heliport on your super-yacht and must have one installed, buying cycles are personal — unfolding mostly in the mind of the buyer — and vary greatly depending on what individual need is being met by what purchase.

When it comes to financial services, the buying cycles are inevitably “where to put my money” and “where to get some more.”

So, what’s the value of buying cycles to financial institutions? Quite simply, facilitating customer buying cycles yields better customer relationships and sales.

How? Because:

SELLING CYCLES CREATE ADVERSARIES, BUYING CYCLES CREATE PARTNERS

Selling cycles tend to put participants in opposite corners: Market dynamics typically result in either the buyer pursuing the seller (if the buyer has completed his/her buying cycle and chosen the seller’s goods), or the seller pursuing the buyer (if the buyer has not completed the buying cycle and the seller is trying to induce a transaction).

As sellers, we relish the first scenario where the power of pricing and distribution is in our hands, but that is exactly the scenario that makes buyers dislike the sales process: Buyers need something, but know they are at the mercy of the seller regarding pricing and availability. So even when the market dynamics benefit the seller, the customer relationship skews negative.

Alternatively, when the seller is trying to increase sales or woo new customers, the balance of power is shifted to the buyer. As sellers, we dislike scenarios where the power of pricing and availability favor the buyer. It is inevitable that sellers feel negative towards buyers who resist awareness, force competition, negotiate lower pricing, and perhaps even reject the deal despite the seller having met all the buyer’s expressed requirements.

In the end, no matter who has the market advantage in supply-and-demand selling cycles, the dynamic is inherently adversarial.

However, when working with buying cycles, buyers and sellers can escape the selling cycle’s field of combat. When sellers cross over to buying cycle processes — helping buyers to buy — they build implicit partnerships out of customer relationships. By exploring the customer needs and helping to define those needs, by exposing market options and helping to clarify those options, by aligning products specifically to customer needs and contrasting them to other options, the seller joins the buyer in his or her buying process. Yes, there might be times when the prospect chooses an alternative solution (a famous example might be when someone uses Progressive to learn about auto insurance, then chooses a different provider that Progressive helped them find), but even than a relationship has been created. And the trust established by helping a prospect through his or her buying cycle becomes the soil from which loyalty and future sales opportunities can grow.

SELLING CYCLES ENCOURAGE HOARDING, BUYING CYCLES ENCOURAGE SHARING

Another latent problem emerging from the selling cycle’s adversarial dynamic is information hoarding. Because the selling cycle puts buyers and sellers on opposing paths to a transaction, it is to each party’s benefit to withhold information from the other. For example, as a buyer, it may be to your advantage to withhold your true budget or spending expectations to sellers competing for your purchase. Alternatively, as a seller, it is to your advantage to withhold true costs to buyers, and perhaps even to withhold your market pricing until you have defined your value proposition to prospective buyers (unless price is your market differentiator).

When the market dynamics favor the buyer, buyers can be very selective about what they share with potential sellers, and even sellers will become cautious in disclosing features, costs, and differentiators when they fear such information may become fodder for their competitors. Similarly, when the market dynamics favor the seller, sellers hoard information that could decrease their profit margins or extend the sales process. And once again, the selling cycle tarnishes what could otherwise be a constructive relationship.

By engaging the buying cycle, however, buyers and sellers can avoid much of the maneuvering necessary to get the best deal from a selling cycle. When facilitating the buying cycle, sellers work with buyers to define budgets, estimating the ROI on particular purchases and comparing to clarify the best deal. In buying cycles, it is actually to the buyer’s advantage to disclose true budget and cost expectations, as those are limiting parameters that frame the buying-cycle evaluation process. And for sellers it is advantageous to be forthright about price points and value propositions.

The buying cycle then becomes a series of smaller transactions — exchanges of knowledge and suggestions — that build trust and create alignment between need and fulfillment, desired solution and purchased solution. Any compromise in honesty (e.g., dishonesty) during the buying cycle collapses the cycle, probably ending that particular transaction and most likely terminating any opportunity for future transactions. The risk/reward of buying-cycle management is that it enforces the genuine sharing of information.

SELLING CYCLES END WITH A SALE, BUYING CYCLES LEAD TO THE NEXT SALE

Finally, successful selling cycles typically end with just a single sale. The structure of a selling cycle is built upon a single transaction, and while multiple selling cycles are the goal of most businesses, there is nothing in the selling cycle itself that facilitates additional sales. There may be some goodwill built up between the buyer and seller (despite the process) when the solution truly fulfills the need it was purchased to address, but having focused upon and met that need, the seller has usually played all his or her cards.

Cross-selling and up/down-selling, however, are the fruits of well-facilitated buying cycles. By focusing on customer needs — often before a solution has even been defined — the seller who facilitates customer buying cycles gains tremendous insight into the larger goals and needs of the customer. Even when some of those goals and needs fall outside the solution set of the seller, outside business partners can be brought into address those particular issues. And because the buying cycle has created a relationship, the seller has the precious opportunity to continue the discussion or circle back to other goals or needs defined in the buying cycle. In all of the ways that cross-sales or up-sales can be introduced, the knowledge and trust gained during the buying cycle become the pathways to ongoing success.

VERY NICE FOR THE BRANCH, BUT WHAT ABOUT THE INTERNET?

Acknowledging the advantages of buying cycles — especially for financial institutions whose success is dependent upon building strong customer relationships — the “trick” then becomes crossing the chasm from facilitating selling cycles to facilitating buying cycles.

Good sales and customer service people often find themselves (even if unconsciously) working on the buying cycle side of their customer’s purchase decisions. It might be, in fact, the trait that makes them good at selling or providing quality customer service. But such relationships are inevitably built on real-time, person-to-person communications such as telephone conversations and face-to-face visits. The ongoing “trust transactions” necessary to facilitate buying cycles typically require the charm, reciprocity, and tact of direct human interactions, and learning those skills becomes an exercise in how-to-listen more than how-to-sell.

But with so much customer service now being delegated to the Internet, how can a financial institution hope to emulate buying-cycle management online? Three key ingredients become necessary:

• Mirror the dynamic communications of face-to-face interactions in an online environment.
• Keep the emphasis on the customer and his/her goals, not the financial institution and its products.
• Personalize the cross-selling process.

The first requirement is for dynamic communications. Just as person-to-person buying cycles are facilitated by advancing through a series of individual trust transactions, so must an online portal guide a visitor through a series of open information exchanges. Even if such exchanges are automated by the online process, they must incrementally educate, answer questions, exchange information, provide status, and keep the focus on the customer’s need (not the financial institution’s products) to mirror the trust-building steps of a face-to-face cycle.

For financial services customers, an online buying cycle can be initiated by providing some useful purchasing guidance that transcends any specific financial products. Whether or not the specific services are delivered by the financial institution is irrelevant, as long as the financial institution is providing a way to keep the transaction moving forward (ongoing education, partners who provide that service, etc.). By engaging customers via their purchasing needs, the financial institution’s site is “giving” the customer information from a buying-cycle approach, instead of just listing products in a selling-cycle approach.

For example, if the financial institution supplies vehicle loans, it might localize the purchase information to display nearby vehicle dealerships (in partnership with the financial institution) who might serve the customer, perhaps even letting the customer view those dealers’ inventories or latest pricing specials, specific to the financial institution’s customers. It could then allow the visitor to pre-qualify for a loan, so they understand how much they can afford to borrow, and perhaps include some understanding how much vehicle they can afford to purchase.

The point is, by providing value and information to the customer long before the loan application, the financial institution is proving its worth — building trust that can engender some degree of customer loyalty before the loan application is even presented.

Furthermore, by keeping the financial institution’s website focused on the purchase instead of just the loan, the financial institution greatly improves its opportunity to win that particular loan, as well as cross-sell additional products. For example, perhaps opening a deposit account and requesting direct payments might discount the loan’s interest rate to some degree. If that discount appeals to the customer, the financial institution has just increased its deposit accounts as well as its loan portfolio.

Maximizing cross-sell opportunities during the buying cycle requires a degree of analysis to be included in the financial institution’s site. For example, if the customer is applying for a mortgage or home equity loan, opportunities for re-financing credit cards, auto loans, and other consumer loans become possible. With the right information analysis of the customer’s finances, mapped to the financial institution’s available products, it becomes possible to cross-sell personally to that customer, even in an automated online environment.

SUMMARY

Having a larger pool of loyal customers, actively engaged with several of your financial products, is the goal of all financial institutions. And facilitating customer buying cycles, as opposed to simply your own selling cycles, is a way to achieve both that loyalty and wallet-share.

While hiring and training practices can change a branch’s focus towards facilitating customer’s buying cycles, mirroring that effort (and success) on the Internet is a significant challenge. The solution is RiskCALM₄!