Effective Objection Handling
A couple of years ago, I was asked by a senior leader to design a program that would help the sales team qualify more deals. The biggest obstacle to closing new business was how the team was managing customer objections. As the customer mentioned an objection, some reps on the phone would become defensive and start to justify the merits of our company or product. Others just took the objection at face value, hung up and moved on to the next customer on their list. However you look at it, these are missed opportunities.
Objections are inevitable but should never be seen as a door slamming closed in your face. The key is to understand why the customer is objecting – you must take the time to uncover this if you hope to move forward in a mutually beneficial way. While customers may object for many reasons, let’s take a look at few common causes:
• May simply be lack of knowledge: “We don’t need a mobile solution.”
• May be a specific, warranted concern: “Your price is higher than everyone else.”
• May represent a hidden agenda: The customer has a preference or incentive to use a different product but doesn’t say that outright.
• May be a perception issue: “The Cloud isn’t secure.”
• We may not be clear about their interests: “That’s not a priority for me this year.”
Take action: Think about the objections you receive in your line of business. Write down an example for each of the above types of objections. The techniques in this article will assist you with these and many more that you’re likely to face. You may not overcome them every time, but at least you didn’t give up before even trying.
Now that you have written down the most common objections, here are some of the top tactics for handling them:
Tactic #1: Gratitude
Say “Thank You!” Always thank your customer when they put an objection in front of you because this is an opportunity to address it and move on with your deal. In fact, ask them about all of their concerns and objections right up front and you’ll receive even more opportunities to turn the table to your advantage. Don’t forget, an objection is better than a “no” because it gives you some place to begin the conversation. I can’t tell you the number of times a simple thank you has helped to diffuse a situation with an angry or upset customer and get me on my way to solving their problem or getting them back on the happy train.
Tactic #2: Empathize
Empathy is a way to connect with your customer on a personal level, show you care and that you’re listening. All of us have had to say “no” at one time or another, and in business, you’re not always speaking to the decision maker. Often times, they’re just the messenger so don’t shoot yourself in the foot by getting defensive. After thanking the customer for bringing the objection to your attention, empathize in a way that will help further diffuse the situation. For example: I hear this a lot, I’m sorry you feel that way, it sounds like this has been very frustrating, I hear what you’re saying and I think I can help. By empathizing with the customer, they’re more likely to open up and share more.
Tactic #3: Let the Discovery Begin
Now that you’ve begun to diffuse the situation, take your time to uncover what’s really going on. Good customer discovery always focuses on asking open-ended questions. If the customer can respond with a “yes” or “no,” then you’ve got to rephrase your question. This is a lot harder than it sounds and it takes practice to develop this ability. You can test yourself at home or with a friend – have a conversation with someone and only ask them open-ended questions. If you get stuck, just do what every 4 year old does and ask “why?” -- you’ll be amazed at how powerful that little question can be! Building rapport is equally important during the discovery phase.
Tactic #4: Ask, Probe, Confirm
Now that you’ve got the questions flowing, it’s important to keep the conversation moving further and deeper. As the customer responds to your open-ended questions, you should probe further by asking more questions about what they’ve just said. If at any time you don’t understand something, ask them to clarify. A great example of this tactic is when the customer mentions an acronym or other words specific to their company or business process. Experts say that it takes at least 4-5 layers of questions to really uncover the pain or nature of the objection. Take your time and keep asking questions until you truly understand the reason for the objection and they’ve satisfied you’re curiosity. Finally, restate what you heard in your own words and ask them to confirm that you’ve understood them correctly.
Tactic #5: Show Them The Value
To keep your customer around for the long haul, they must see value in your product or service. The purpose of good discovery is to understand what’s important to them, why it matters, and what their business would be like without your product or service. When you uncover a pain, your next step should be to quantify what that pain is costing the business. If the customer continues to object or restate the same objection then you’re not asking the right questions to align your value to their pain. Pain can cost a company in a different ways; lost revenue, wasted time, customer satisfaction, employee turnover and more. By taking the pain point and expanding on it, the rep can then encourage the customer or prospect to quantify the problem in business and personal terms thereby convincing them that purchasing a product/service to resolve the issue is worth the investment.
Tactic #6: Back It Up With Proof & Customer References
Now that you’ve gone through steps 1-5, it’s time to back up your statements with industry research, customer references or customer success stories to prove the value of your product or solution. For research, find out what analyst firms say about your industry or product and incorporate this data into your conversations. I’ve had great success getting new customers interested by mentioning what leading industry analysts say about our products. Customer references are another great tool because those stories often represent a pain or objection that was overcome with success. I challenge everyone I mentor to learn at least 3 new and relevant customer stories a month. Overtime, your stories will set you apart from others and give your customers another reason to trust you with their business.
Managing objections requires practice. Take these 6 rules and apply them to your business. You’ll see very quickly that they do work. We saw immediate increases in qualified leads and higher close rates in a very short time by employing these techniques because we were able to demonstrate how our product can be used to overcome real pain in their business.
Peter Drucker once said that “The quality in a product or service is not what you put into it, it’s what the customer gets out of it.” Think about what’s in it for the customer, take what you’ve learned from your discovery and wrap your solution in terms of values and benefits that will uniquely help them – this is how you delight your customers.
“I’m no genius. I’m smart in spots—but I stay around those spots.”
— Tom Watson Sr., Founder of IBM
— Tom Watson Sr., Founder of IBM
The concept of the “Circle of Competence” has been used over the years by Warren Buffett as a way to focus investors on only operating in areas they knew best. The bones of the concept appear in his 1996 Shareholder Letter:
What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.
It’s a simple concept: Each of us, through experience or study, has built up useful knowledge on certain areas of the world. Some areas are understood by most of us, while some areas require a lot more specialty to evaluate.
For example, most of us have a basic understanding of the economics of a restaurant: You rent or buy space, spend money to outfit the place and then hire employees to seat, serve, cook, and clean. (And, if you don’t want to do it yourself, manage.)
From there it’s a matter of generating enough traffic and setting the appropriate prices to generate a profit on the food and drinks you serve—after all of your operating expenses have been paid. Though the cuisine, atmosphere, and price points will vary by restaurant, they all have to follow the same economic formula.
That basic knowledge, along with some understanding of accounting and a little bit of study, would enable one to evaluate and invest in any number of restaurants and restaurant chains; public or private. It’s not all that complicated.
However, can most of us say we understand the workings of a micro-chip company or a biotech drug company at the same level? Perhaps not.
But as Buffett put so eloquently, we do not necessarily need to understand these more esoteric areas to invest capital. Far more important is to honestly define what we do know and to stick to those areas. The circle can be widened, but only slowly and over time. Mistakes are most often made when straying from this discipline.
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The concept applies outside of investing.
Buffett describes the circle of competence of one of his business managers, a Russian immigrant with poor English who built the largest furniture store in Nebraska, thusly:
I couldn’t have given her $200 million worth of Berkshire Hathaway stock when I bought the business because she doesn’t understand stock. She understands cash. She understands furniture. She understands real estate. She doesn’t understand stocks, so she doesn’t have anything to do with them. If you deal with Mrs. B in what I would call her circle of competence… She is going to buy 5,000 end tables this afternoon (if the price is right). She is going to buy 20 different carpets in odd lots, and everything else like that [snaps fingers] because she understands carpet. She wouldn’t buy 100 shares of General Motors if it was at 50 cents a share.
It did not hurt Mrs. B to have such a narrow area of competence. In fact, one could argue the opposite: Her rigid devotion to that area allowed her to focus. Only with that focus could she have overcome her handicaps to achieve such extreme success.
In fact, Charlie Munger takes this concept outside of business altogether and into the realm of life in general. The essential question he sought to answer: Where should we devote our limited time in life, in order to achieve the most success? Charlie’s simple prescription:
You have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.
If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless—that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline. And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence—which results partly from what they were born with and partly from what they slowly develop through work.
So, the simple takeaway here is clear. If you want to improve your odds of success in life and business then define the perimeter of your circle of competence, and operate inside. Over time, work to expand that circle but never fool yourself about where it stands today, and never be afraid to say “I don’t know.”
Circle of Competence is part of the Farnam Street latticework of mental models.