The Challenger Sale

world-
class
! 
Everyone
knows their brand! But the competition’s got a world-class
brand too!” Or, “Their service is 
fantastic
! In fact, I’d put them right up
there with the competition!” Sound familiar?
Over and over we found that customers, generally speaking, see
significantly less difference between us and the competition than we do
ourselves. It’s not that they think most suppliers are particularly 
bad
on
brand, product, or service. It’s just that they don’t think they’re particularly
different
. So while we spend much of our time emphasizing subtle
differences, customers tend to focus first on the general similarities.
Does this mean you should stop investing in brand, product, and
service? Certainly not! It’s all still hugely important. But—at least in the
B2B world—the investments we make in brand building, product
development, and improved customer service are not the 
final
step to
winning customer loyalty, but the 
first
. It’s the price of entry to gaining
customer loyalty at all.
In fact, after they’ve had a chance to wrap their heads around this
finding for a while, sales and marketing executives tend to agree, as they
see it every single day in their own business. However, in many cases, their
natural inclination across the last several years, at least, is to explain away
the low impact on loyalty from brand, product, and service as a natural by-

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product of customers’ intense focus on reducing costs. Sure, customers are
loyal, they’d argue. They’re just loyal to whoever’s got the lowest price.
But it turns out, that’s not the case either. Only 9 percent of customer
loyalty is attributable to a supplier’s ability to outperform the competition
on price-to-value ratio. Yes, you might be cheaper than the competition, but
in the eyes of your customer, you likely provide less value as well. So your
lower price may get you the deal, but it almost certainly won’t get you
much loyalty.
If your customer is dead set on buying the cheapest option today, then
chances are pretty good they’ll be dead set on buying the cheapest option
tomorrow as well. And that may or may not be you. After all, there’s
usually little stopping your competition from discounting their way to a
win. In that game, loyalty is essentially irrelevant, as customers aren’t
looking for a partner, they’re looking for a 
bargain
. And that’s not what this
story is all about. This is a story about a customer’s willingness not only to
keep buying from you, but to buy even more over time and to advocate on
your behalf. And if that’s your goal, price is simply a bad way to get there.
Unless your lower prices come with significantly higher perceived value
than the competition, today’s discounts won’t get you tomorrow’s business.
So if only 38 percent of customer loyalty is attributable to your ability
to outperform the competition on brand, product, and service, and 9 percent
of loyalty is attributable to your ability to outperform the competition on
price-to-value ratio, then what about the other 53 percent? What else is
there?
Well, to understand the answer, let’s go back to those customer
conversations we mentioned a moment ago. What we typically heard from
customers, after they told us how little difference they saw between one
supplier and another in terms of brand, product, and service, is that they
saw huge differences in the sales experience itself—the actual sales
conversations they had with suppliers on an ongoing basis.
Customers were painfully blunt on this point. Some reps, they said,
would so thoroughly waste their time that at the end of the sales call they
felt as though they’d just been robbed of an hour of their lives—an hour
they will never get back. And frankly, it didn’t matter how good the rep’s
presentation skills might be. It just wasn’t worth it to have to sit and listen
to an excited explanation of how the new and improved Model XPJ178

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could run three seconds faster while using less energy and requiring less
maintenance, “saving you time and money for the more important things!”
Who cares?!?! Do I want to save time and money? Of course I do! Do I
think that three seconds justifies a 5 percent price premium? Probably not.
On the other hand, those same customers told us that 
other
reps would
take the time to provide information so interesting and valuable that—in the
words of Neil Rackham—the customer would have been willing to 
pay
for
the
conversation
itself
. In other words, while customers found some
suppliers to be horrible in the sales experience, they found others to be
invaluable. Even suppliers that appeared similar in every other way on
paper performed all over the map when it came to the sales experience. And
that difference, it turns out, has a huge impact on customer loyalty.
That’s the real bombshell finding of this work. Loyalty isn’t won in
product development centers, in advertisements, or on toll-free help lines:
Loyalty is won out in the field, in the trenches, during the sales call. It’s the
result of the conversations our reps are having with customers every single
day. The entire remainder of customer loyalty—all 53 percent—is
attributable to your ability to outperform the competition in the sales
experience itself. Over half of customer loyalty is a result not of 
what
you
sell, but 
how
you sell. As important as it is to have great products, brand,
and service, it’s all for naught if your reps can’t execute out in the field.
That said, it’s one thing to say that the sales experience is hugely
important for customer loyalty, but another thing altogether to understand
how. After all, remember, customers were very specific here. Some of these
interactions are desperately painful, others incredibly valuable. So what
exactly needs to happen during the sales experience in order to generate
such an impact on customer loyalty?
Well, this is where the story really gets interesting, because when you
crack open the data inside the sales experience category, what you find is
the exact same Challenger story, only this time from the customer’s
perspective.