Is Korea Heading into a Recession? A Winnowing out Process by Tom Coyner

Here is an article from Tom Coyner that appeared a few years back in one of the Korean papers.  I think it has more relevance, today, than when it was fist posted.  I am going to be posting some of Tom’s articles of the next couple of weeks.

A winnowing out process among businesses is taking place . . . New, more competitive methods need to be implemented, often for sheer survival. Tough times have arrived. And they will be with us a good deal longer than most of us have experienced.

Regardless, business must continue. Among all the increased challenges business managers face, perhaps the toughest of all is in sales. Given the brevity of this space, allow me to focus on this one aspect for business survival.

During the past years, most Korean sales people have relied on “relationship selling,” based on personal connection and prior introductions. Much of selling has been schmoozing so as to be among the first to learn of buyer intentions. Usually, the buyer has determined on his own what he needs. The Korean salesman has been there to best understand the pre-determined needs and ultimately negotiate the price of the order.

In other words, Korean sales people have been more like field order takers than true sales professionals. But we cannot knock success. The approach has worked reasonably well for the most part. But we all are now faced with some radically different circumstances.

Due to layoffs, networks of personal connections are crumbling. Increasingly it is becoming less important whom you know and more critical how one’s daily performance can justify continued employment. Meanwhile, other stresses build up.

Customers have reduced budgets. Sales people are quietly murmuring that sales calls are becoming a waste of time. Sales managers are cajoling and threatening their subordinates to work harder or else. Some companies are dealing with major morale problems within their sales forces.

Since selling starts with customers, consider how the current economic situation is affecting them. In Korea, the real decision makers generally are the middle managers. They have the toughest jobs of all. And their jobs have suddenly become even more demanding. They are being ordered to cut costs while maintaining, if not improving, their departments’ functions. If they cannot achieve this, they may find themselves in the next round of layoffs.

So the first tactic for most buyers is to demand price concessions. But at best, this approach in sharing the pain can only last medium term. Ten years ago, during the financial crisis, price concessions worked.

But many business planners believe this recession is going to last substantially longer than then. In other words, drastic price cutting can only be sustained until either the recession subsides — or the vendors go out of business.

In the case of the latter, the buyers may find themselves in even worse circumstances should the discontinued goods and services be critical to business operations. As a result, we can see the marketplace initially hardening as most buyers demand lower prices.

But in time, we may expect the market to soften as buyers realize vendors can no longer reduce prices. It is at this point buyers will need to look at new solutions that offer greater value for the price.

In short, desperate times can create desperate buyers who are more open to new solutions from untried vendors. To take advantage of this market shift, new sales strategies may be needed. Specifically, sales teams need to focus more than ever on customer needs at both the buyer’s corporate and personal levels. While it is always important to have good personal relations with buyers, especially during tough times successful sales professionals help buyers better define their core needs.

In other words, many Korean sales people need to learn to elevate themselves from being lowly order takers to becoming more consultative in solving buyer needs within a business solutions perspective. Now, this approach is very Western. And I have heard Koreans say that Korea is different when it comes to selling. I have also heard the Japanese say the same thing about Japan.

But I have witnessed the positive difference in sales when Korean and Japanese sales people learn how to apply consultative selling to their personal relationship skills. During tough times, the market can become more of a level playing field. Special personal relationships are still to be valued, but these connections are more vulnerable than in the past.

A winnowing out process among businesses is taking place. Some traditional business practices need to be re-evaluated — and even jettisoned — if they have become more of a hindrance than a help. New, more competitive methods need to be implemented, often for the purpose of sheer business survival. In this essay, I have focused on sales. But much of the same can be applied to accounting, marketing, logistics, manufacturing, and so on.

For highly skilled business professionals, regardless of the discipline, tough times offer these individuals and their companies the best of opportunities. In the face of a paradigm shift, should a company have the raw talent but lack sufficiently competitive expertise, this is the time to educate employees on more effective business skills. But that may require reviewing conventional priorities. When times are good, many businesses are “too busy” for professional development.

When times are tough, education is among the first budget items to be deleted. But remember the old adage of “working smarter, not harder”? That principle was certainly applicable during good times. During tough times, the same takes on an even more critical meaning.
By Tom Coyner.  Senior Advisor to IPG.

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