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Some Thoughts on Selling, by Victor Niederhoffer

A Great Compliment

Almost nothing in this world happens until a sale is made. Goods get introduced, old goods get sold, factories get built, retail stores get opened, new businesses take hold, accounting transactions start; all beginning with the sale.

In Ziglar on Selling by Zig Ziglar, a man who has sold more than two million books and taught thousands, there is a salesman's credo on page 14. After talking about all the problems salesmen cause, the difficulties they face (living out of cars or hotels), the return on investment they create, the wheels of business they lubricate, he ends with:

With all their faults, they keep the wheels of commerce turning, and the currents of human emotions running. More cannot be said of any man. When you call a person a salesman, you flatter him.

I fully agree.

Buyside and Sellside

Wall street personnel and firms are often divided into buyside and sellside. The sellside offers new stocks and bonds, facilitates mergers and acquisitions, maintains an inventory of securities to provide liquidity for existing and prospective holders, and provides research so that decisions in a customer's interest can be made.

If you're going to understand anything about transactions that emanate from the sellside, which essentially involves all of Wall Street at one stage or another, it's good to know how salesmen are trained, what techniques they use, and how they best gain advantage from their activities.

Indeed, every transaction on the Street involves your own sale or someone else's. What preparations have you made for that sale? How have you achieved the proper balance between price, quantity, convenience and quality? What is the risk of a dud or reward from something new? Do you have confidence in your salesman and the commission you pay him? These questions call out for answers.

Last week I read some good books on sales, like Ziglar on Selling, Magnetic Selling by Robert Bly, ROI Selling by Michael Nick & Kurt Koenig, The Sales Advantage course by Dale Carnegie, Selling Rules by Murray Raphel, Stephen Schiffman's 101 Most Successful Sales Strategies , and The Little Red Book of Selling by Jeffrey Gitomer. This seemed a good start to improving my understanding.

Birth of a Salesman

The best book for a foundation for what's going on in selling is Birth of a Salesman by Walter Friedman, a Professor at HBS. A most informative interview with Walter Friedman about the book was conducted by Laura Linard for HBS Working Knowledge.

In his book Friedman reviews the salesman throughout history and points out that salesmanship is a particularly American virtue. America has traditionally been the most open and innovative county in this field. This and other factors, like a stable currency, a democratic tradition, no established nobility or religion, a proper legal framework and an openness to change, provide a proper foundation for salesmanship. This led to sizable American businesses in the 20th century that needed large sales organizations to sell their products: National Cash Register, Coca Cola, Pepsi, Kodak, Burroughs, IBM, Wrigley's, and the pharmaceutical companies J and J, Novartis and Pfizer.


How do companies perform, relative to the emphasis that they place on sales in their operations? Companies like Ikea, Wal-Mart, Proctor & Gamble, Whole Foods and Apple are generally seen as modern paragons of the importance of sales. The key distinguishing feature is the emphasis they place on providing benefits to the customer: selling what the customer wants, not what the companies produce.

Selling is Ubiquitous

Selling begins at home. You must sell the kids on taking their lessons, the spouse on facilitating your relaxing or watching of the ball game while she types the college applications, the swain on knowing that unless action is taken now you're going to be taken up by a more interested party, the boss on giving you a promotion, the interviewer on offering you a job, the college on accepting you, the co-workers on listening to your pitch, the accountant who must sell the company on keeping the inventory numbers to a reasonable level. These are all situations where good selling is required and the same technique as is used when selling your product. As Ziglar says:

"If you are just beginning to understand the concept that everyone is a salesman, you are new to the field of selling, and by taking some training you'll have enormous advantages."

A Missing Ingredient

As good as all the sales books are, and there a million things to learn and implement from all the above, there is a conspicuous omission in that none have an analytical framework for modeling how much selling should be done. The standard economic analysis is that selling should be continued until the marginal revenue from the additional sales effort equals its marginal cost. The concept of opportunity cost, i.e., how much the salesman's time is worth, or how much an alternative activity besides selling, such as producing a better product, is not adequately covered. Nor is the selling function fitted into the concept of the economics of search and information where the marginal benefits of additional units of prospecting and asking for the order are measured against the associated opportunity costs.

Another area that might put selling into the context of established knowledge is signaling theory, drawn both from animal behavior and economics. The salesman's signals, such as dress and attentiveness, show what the customer can expect from the company and the product,, just as a suitor's solicitude to his swain signals his ultimate performance after the suit has been pressed.

The Most important Lessons

All the books emphasize the importance of constantly improving the frequency and extent of your prospecting. As Zigler puts it:

Prospecting is the key to sales success. Until you have a prospect you don't have a chance of a sale. Without prospects, you are out of business, with prospects you have a chance to change the world.

The key to starting a business is to know whether there's a list available of potential customers who might buy the product. If there is, then you know that at least there's some homogeneous group that can be offered the chance to benefit from your product once you find the right message.

Another common thread in all the books is the importance for the salesman of building up trust. The good customer is generally more interested in the reliability of your product and your company than your selling price. You have to show the customer that you meet your commitments by getting to the meeting on time, dressing as if you care, having clean shoes, shirts and fingernails, asking questions that show you're trying to find out the customer's needs, listening carefully to what the customer wants, and promptly following through on the little details that signal your trustworthiness for earning the customer's business.

Formulas for Success

Many of the books contain formulas for success that provide a framework for the selling process. A helpful one is in Stephen Schiffman's 101 Most Successful Sales Strategies. The formula is to divide the sale into four stages:

  1. Prospecting: getting in front of a customer who might benefit from using your product.
  2. Interviewing:  finding out what the needs of a customer are by asking some good questions.
  3. Presentation: show how your products solve the needs of the customer, give testimonials of past success.
  4. Closing: asking for the order (and then getting a million referrals).

That's a good framework, but I like the practical technique of Murray Raphel, which he first demonstrated to me 32 years ago in an impromptu selling seminar he gave to 15 portable building dealers at Connell in Harlingen, Texas, a company Dan Grossman and I owned.

Murray Raphel's Formula for Success

Every day, choose one of these four options:

  1. Make four phone calls or send out four emails telling your customers of a benefit for buying from you now.
  2. Write four letters a day to thank customers for recent purchases. (If I had enough customers I would do this immediately.)
  3. Give out four cards a day, and make them worthy cards as the Asians often do, that command respect. Of course make them miniature billboards also, and hand them out to waitresses, the person sitting next to you on a plane, or best yet, a fellow Rotarian.
  4. Ask for the order four times a day. Call up an existing client first -- they are the ones 10 times more likely to say yes -- and when you run out of orders and referrals from them, move to the next level of probability.

As Murray says, do one of these options every day and that is 1,200 contacts a year. With a normal 10% yes-rate that's 120 new customers a year.

Hanny Saad comments:

The one thing I would like to add to this great post is that even the trader locked up in an empty room on the other side of the universe from everyone he is dealing with and with no one to even talk to, is a salesman in his own right. Sometimes a deceitful one at that. Let me explain.

When you trade in size, you are expecting/hoping as a buyer to be able to sell your merchandise, (your stocks), at a later date and a higher price than you paid. Sometimes you have to be deceitful in the sense that you use every trick in the book to give the impression that you are buying while your actual intention is to sell what you already have.

It reminds me of the old car salesman trick that every car on the lot is for sale except this one, (the one he actually hopes to sell).

J. T. Holley offers:

One book by the author I mentioned last week, Nick Murray, is called The Excellent Investment Advisor. It has your "missing ingredient" in that it very competently analytically breaks down the art of selling financial services in this century. He is also an Equity Zealot! I highly recommend this wonderful, empirically laid out text.

J. P. Highland adds:

Latin America is a fun place to be a salesman, success depends on being able to develop a good personal relationship with your customers. In countries like Mexico you first get along with the potential customer and then you make business. No matter how good your product is, the price or the service, if Mexicans do not like you they won't make business, while in places like NYC you first talk about business and you later get along.

High level business meetings in Mexico take place in expensive French restaurants, for the first hour and a half you don't talk about business, the key is to establish a personal relationship with the client talking about family, politics, TV shows, soccer, bullfighting, women, (In Mexico people like to talk about feminine beauty in business meetings and no one gets offended). This trivial chat has the purpose of knowing with what kind of person you are dealing. When dessert arrives is when you talk about business, if the first phase is successful you have 75% of the deal done.

A good Mexican salesman reads the whole newspaper every morning, he has to be updated on every subject because he never knows what topic will be of interest to the client. Even the most stupid thing can be a topic during a business meeting.

Ken Smith (a Gentleman) adds:

Of course the Motto of the Ritz "We are Ladies and Gentlemen, serving Ladies and Gentlemen" has helped too.

Good reminder for self, just remember to be a Gentleman. I see young men wearing baggy pants and have pity for them, knowing they are in a peer trap, never going to get anywhere.

Sushil Kedia comments:

A recent Mutual Fund advertisement in India cajoles investors to buy the New Fund Offering such that it will help them achieve their goal of buying a personal jet in the future. Some dream that is selling!

A Word from Steve Treglia

Run a Google search on selling/goal setting/vision and you see the following: Zig, Covey, Carnegie, Suzy, Dr. Phil, Maxwell, Tracy et al. All help readers in thinking of framework for personal success. These days QVC and PBS also have skin in game with Roberts, Suzy and up and comers. All profit well by helping others help themselves. And this is o.k. I wonder if closer look into this field may explore discussion much like your writings re: B.G. or Bearableson?

For me Godfather speaks to trust, likeability, persistence, hope, hard work and ..... use of power. All play important role in development of sales professionals. In terms of power, star personality does impact success along with "power" over your own thinking when dealing with ambiguity. As when a client postpones their decision to "talk it over with the Mrs." or "just looking" or "we've made a change to our RFP."

In working with 100's of sales professionals over the years, likeability/trust/persistence go hand in hand in defining greatness in selling. These are characteristics one respects when found in others.

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