Book Review: The Challenger Sale [Podcast]

June 6, 2016 Iris Maslow


The Challenger SaleWhen it comes to sales, it makes sense that relationship-builders perform better than others, right? In The Challenger Sale, Brent and Matthew Dixon Adamson argue that the sales people who challenge and educate their customers have more success than relationship-builders. Jim Young and Dallas Wells review the book and discuss how it relates to the banking industry.



Jim Young: Hi, welcome to the Purposeful Banker Podcast, a podcast brought to you by PrecisionLender, where we discuss the big topics on the minds of today’s best bankers. I’m your host Jim Young, director of communications at PrecisionLender and my co-host today is Dallas Wells, EVP of banking strategies at PrecisionLender. Thank you for joining us.

Today we’re going to change things up and do a bit of a book review. Speaking of changing things up that’s the main message of the book called, “The Challenger Sale, taking control of the customer conversation.” It’s a book that a lot of us at PrecisionLender have been reading and talking about in the last couple of weeks. Let’s start things off broadly Dallas, can you give me sort of your elevator pitch/cliff’s notes version of The Challenger Sale?

Dallas Wells: Yeah sure, and I assume this is cause you just didn’t read the book and wanted me to catch you up before we started here.

Jim Young: Bingo.

Dallas Wells: Yeah, I’ll do that for you.

Jim Young: No, I read it, I read it, I just think you’d be better at it.

Dallas Wells: Got ya. The Challenger Sale, we started reading it for a couple reasons. Number one, for in our own business. Number two, because in dealing with lenders this is one of the topics we talk most about, how do we sale more, how do we interact with our own customers better. Meaning banks, how can they interact with their customer. We feel like this is something that we need to be well versed on, and anything that we can learn along the way to help them will be beneficial. The Challenger Sale is basically talking about the evolution of the sales process, and how much it’s changed in recent times, and comparing the profiles of kind of how people used to be taught to sale versus what’s actually working now.

The short version is there’s really two big elements that are kind of converging. Number one is that there’s data and information everywhere. Being a sales person used to mean that you were the source of knowledge. In a sales transaction your job was to talk about features, and specifications, and give the buyer the information that they couldn’t otherwise get. Well now that stuffs everywhere. If all you’re doing is quoting from a spec sheet, you’re essentially wasted space there. There’s that on one side. On the other side you’ve got organizations that are really changing how they buy things, because that information is out there, also because we’re coming off of a really nasty financial crisis/recession that started in 08 and 09. That left some pretty deep scars in a lot of organizations. They are very risk adverse, they like to buy by consensus, they like to form committees and be really slow moving and cautious as they buy stuff, especially from technology vendors, there’s more choices than ever, there’s more information than ever.

The whole process has gotten slower and more cumbersome, more difficult from both the buyers and the sellers perspective. This book is really talking about how do sales people in organizations that need to sell their product, how do they navigate those two big things that are happening at the same time.

Jim Young: Not bad, not bad. It might have been a bit of a length elevator ride for it but I’ll give you a B plus on that for a review.

Dallas Wells: Okay, we’ll consider it a tall building, how’s that?

Jim Young: Now, the Challenge Your Sale is based on research, a company called CEB, the Corporate Executive Board did into sales. Basically saying, “All right let’s take a look here,” as you mentioned the landscape is changing tremendously, let’s say he’ll look in and try to figure out, if we can identify what traits are out there that make up the most effective sales people. In their research they ended up grouping sales people into five buckets. The hard worker, the challenger, the relationship builder, the lone wolf, and the reactive problem solver.

Now if I’m being honest Dallas, if I didn’t know what the title of the book was, which is going to give away a little bit of this, I would have assumed that relationship builder would have been the top performing group. I mean heck, you and I go on here every month and talk about our book that’s talking about building your banks brand one relationship at a time, we’re all about relationships. I would have assumed that would have been the top performing one, but obviously that wasn’t the case. In fact it was just the opposite. Were you knocked off guard as much as I was when you saw that?

Dallas Wells: Yeah, I think the initial read, it is surprising. Coming up through the banking world and then eventually selling to banks, relationship building is what you’re taught. That’s the way you’re supposed to do it. Every bank in the world, that’s what they hang their hat on is we have great relationships with our customers. That’s deeply ingrained in everybody’s brains, that’s how you do it. I think that really what the results say is that building that kind of superficial relationship, again is just not good enough. You have to have that rapport with somebody, but it’s so you can go deeper, and you can fall into that challenger bucket and really dig deeper into the conversation. It’s not about, “Hey what’s the weather like? How are your kids? Let’s go to lunch or play golf.” That kind of stuff, and we talk about that a lot, how that’s not enough anymore. Again, it’s not enough to just know the basic information, and provide basic answers. They can find that. It’s that deeper insight, real expert knowledge and being able to have, sometimes uncomfortable conversations with your customers or with your prospects.

It’s taking that relationship and using that as the platform to do much more with it. When you think about it that way I think it makes sense.

Jim Young: Yeah, one of the quotes that stuck with me was they had one of the people responded and said, you know, talking about a relationship builder, “I really like that guy. He’s great, but I’m not going to buy from him.”

Dallas Wells: Exactly.

Jim Young: It’s a bit disturbing if you’re all about relationship building. Let’s talk then about the group that’s the namesake of the book. You sort of touched on this a little bit when you said, “The ability to have some uncomfortable conversations.” I think that’s built into the name, “The Challenger.” It is a group that statistically out performs the rest. What is it then that makes a sales person a challenger? I guess I’ll add the caveat, does that mean that they have to be confrontational?

Dallas Wells: Yeah, that’s the tricky part really. A lot of these conversations have a confrontational kind of feel or telling to them. A challenger is exactly what it sounds like, you’re supposed to be challenging somebody’s way of thinking. Really what’s happening is that organizations that are the buyer, they’re not looking to buy a piece of software, or they’re not looking to buy a loan from a bank. They’re looking to buy a solution to a problem. Organizations and businesses, they’re complex, there’s lots of moving parts so finding that right solution a lot of times means they have to change something that they’re doing, change the way they’re thinking about something. Especially since they’re coming to this buying process pretty well informed, they feel like they know exactly what they need and exactly how to go about buying it. Those sales people that are really out performing, and those organizations that are really out performing, what they’re doing is they’re challenging that thinking process and saying, “Yes the things you’ve researched are applicable, but here’s three things that you didn’t think about. We do this all day everyday, we are the experts.”

You challenge them on that thinking, you provide deeper insight, and a lot of times you say, “Hey, here’s some things about the way you are doing business that you need to change.” Those conversations can be uncomfortable, but they don’t have to be confrontational. That’s really the fine line that you have to walk and why it’s a difficult thing to pull off, is that you have to challenge without ticking off your customer. You can’t just tell them what they want to hear, that’s not going to get you the sale anymore.

Jim Young: Yeah, and a little bit later we’ll get to sort of whether you can, nature versus nurture sort of argument when it comes to being a challenger. For now, you touched on this a little bit in the beginning, take me back to your days when you were in banking school, and then when you were going through lender training yourself, how much your training was based on challenger principles versus maybe something from the other four groupings. I doubt anyone trained you to be a lone wolf, but relationship building, hard working, or another one that I think is pretty familiar to a lot of people, the reactive problem solver.

Dallas Wells: Yeah, when I was going through this we had moved beyond the kind of always be closing kind of sales approach, we figured out that didn’t work.

Jim Young: Cough up for closers, Dallas.

Dallas Wells: That’s right. A lot of the guys that were teaching me had learned that method, but they had figured out that wasn’t work anymore either. This is an evolving process. As far as what challenger principles were taught, none. There was nothing that was formally taught that was about that. Now what was interesting is you could see it sometimes in those, what we call, “Alpha Lenders,” those really top producers, those folks that have been doing it for awhile. When you do kind of ride alongs with them you’d had your way that you’d been train to talk to customers, and how to handle loan request, and how to talk through the process. Then you go actually ride shotgun with somebody who’s been doing it for awhile and doing it well. Their conversation sounds very different because they could have those frank conversations

A borrower would say, “Hey I’m looking for a ten year fixed rate loan to do this.” Instead of saying, “Great, I’d love to help you with that,” and going through your spiel, these folks would say something like, “Well I don’t think that’s the right structure for what you’re doing.” Then they lay out their years of expertise, and the hard knocks that they’ve gone through with this, with other customers. They’re providing real insight there and it was always kind of like, “Wow, I wonder how you get to that point.” Frankly it felt like it took some mileage on the odometer, maybe even some gray hair to get that kind of authority and respect from your customers. It wasn’t taught, but you could see it in action from a few.

I think still in the interactions that we have with banks, it’s still not being taught. The skills that are being trained on are still the same old things of building relationships, reactive problem solver. What are you looking to do and then I’ve got my list of things that I respond to that with, the kind of standard out of the box answers. That’s not what the top producers are doing.

Jim Young: Yeah, you know I thought of the old adage which you get on ever level from my days working the popcorn machine at the movie theater, all on up through my career which is, the customer’s always right. The challenger flies in the face of it, the challenger basically says, “The customer doesn’t actually know enough to make a decision sometimes as to what’s right or wrong in the situation.”

Now you touched on a lot of this stuff about this shift to solution selling, and about the rise of consensus purchasing, increased risk aversion, greater demands from customers for customization, more frequent involvement of third party consultants. They’re talking a lot when they say this in terms of actually the kind of selling we do at PrecisionLender. Software as a service, that sort of stuff. Let me play a little bit of devil’s advocate here, do bankers face? I mean we’re talking about, most of the time loans and stuff like that. Can you apply those lessons there when maybe what you’re selling is different?

Dallas Wells: Yeah, I think all those same trends are still intact. Certainly if you’re selling financing to larger borrowers, and you’re doing twenty five million dollar financing packages for big companies, or bigger, then you know this is true, you’ve seen it for quite awhile actually. We’re starting to see this all the way down even to small business lending, a million dollar real estate transaction even if you’re just dealing with the sole proprietor, the one guy or whoever on the other side of the table. They’re always very risk adverse, we have to remember that banks got burned during the financial crisis, just as many if not more borrowers have some deeply embedded scars too.

Jim Young: Yeah, good point.

Dallas Wells: They’re very cautious about taking on debt, what it’s structured like, they’re pretty sure that the banks are out to get them and that there’s something hidden in the details. They show up with some risk aversion, they want things very customized, especially given how the industries gone over the last several years. The good borrowers know that they can lean on the banks, that the banks are desperate, they’re drowning in liquidity, they want to get loans out the door, it’s very competitive. You can ask for some pretty crazy stuff and somebody will give it to you. There’s absolutely those same trends of risk aversion, consensus purchasing, they’re wanting customization, and we see more and more third party consultants. I work with a few former bankers where they now, their job is to go around and basically help borrowers interact with banks. They put together the package for them, they look at the term sheets, walk them through what the details mean, so they’re asking for some expert help too.

Again, that goes back to our principle we talk about all the time of we may do these million and two million dollar real estate loans all day everyday. For that borrower, that’s the transaction of a life time and they want to get it right. Banks absolutely face these same obstacles, those commercial lenders, I’m sure you’ve seen it, you’re feeling it, and I think that trend is only going to continue.

Jim Young: Okay so you’ve made a good case there, let me play devil’s advocate another time here. Let’s go through and look at that lending process then through the lens of the challenger method. Now, they focus on something called commercial teaching and one of the first steps of that is to identify your companies unique benefits. Otherwise you become a commodity, and then the sale is always going to be about price at that point. Now, my bank offers a variety of products that are pretty similar to the ones that your bank offers. I would imagine that would be the case quite frequently, so how is a bank supposed to really set itself apart with a unique value proposition than?

Dallas Wells: Yeah, I think this is where it’s important to go back to that concept of folks are buying solutions to problems. Again, they don’t come into a bank because they want a loan. Nobody wants to owe you a million bucks. What they’re looking for is a solution to a problem. I have this big capital intensive project that I would like to do that I see a positive ROI on but I need the capital to do it. They’re looking for solutions to business problems. That’s what banks need to figure out is how are you better than everyone else at solving those problems? It might be a very similar end product that solves that problem for them, but how do you execute it, and what’s the experience of that customer, and how do they walk away with their problem solved, versus did they get it an eighth cheaper? That’s really what they care about is, did I get the right structure, did I get it quickly, was the process transparent to me?

At the end of the day did I get the money on time for when I needed it at reasonable terms? That’s the real solution, and banks are pretty bad about executing on that part of it. That’s why it does come down to price. What’s interesting is even within the same bank, if you ask lenders how their conversations about pricing those transaction goes, the top lenders will say, “Prices always last, that’s the thing we just figure out when the deal is already kind of figured out. Right when we’re just kind of documenting the transaction, that’s when we figure out the price.” For a lot of other lenders it’s the first thing they talk about, and if that’s what you’re leading with, then that’s the only lever you have to pull and the only way you’re going to win that deal is by having the lowest price. That typically is the difference between your awful lenders, or your folks that have, like we talked about before, that experience and knowledge to be able to be a real challenger type sales person.

Jim Young: Yeah, it’s one of the things they talk about and it is that, you mentioned sort of leading with the price and the idea, is sort of the same thing as leading with the tool versus if you’re having this conversation correctly in the challenger method, you’re having a conversation about benefits, and needs, and it’s only the end that you bring them to. They say, “Okay, now I get it, what’s going to help me solve that problem?” Then you bring in, “Well here is the product we have, and here’s the price that we charge on it.”

Dallas Wells: Exactly.

Jim Young: A big part of that is to develop commercial insight that challenges a customers thinking. They do that actually right away in the book, what we just discussed. Right away in the book they say, “By the way, you probably thought that relationship building was the way to go, it’s actually the worst way,” boom, they’ve got you hooked in the book. Now you want to know what am I supposed to do next, and how does this work? Can you think of an example of what that might look like than for a lender with a customer? What’s sort of an example of an insight that might challenge a customers thinking when they come into your bank looking for, say a commercial real estate loan?

Dallas Wells: Yeah, we touched on one example earlier which was just the structure not matching up. One of the conversations we have with lenders a lot is just the way you frame and present the options to a borrower. For example if you just ask a borrower, “Hey do you want a fixed rate or a floating rate?” Well, that’s kind of like asking somebody, “Do you want to be fat, or perfectly fit?” Of course they want the fixed rate. The question is though, are they willing to pay the additional premium to get that rate fixed? Floating rate can be and has been over the last several years with a pretty steep yield curve, been much, much cheaper. If we’re matching the financing to the project and it’s a short enough term to where we’re comfortable about the end life of that, maybe floating is the much better structure. Those kinds of conversations are the real basic ones.

There’s also some bigger ones that we’ve talked about, this story came up at our BankOnPurpose conference. We’ll probably come back to this story again but, somebody coming to the bank to borrow money and the bank actually telling them, “That’s a bad idea, what you need to do is not borrow the money,” which is a difficult thing for what often times is a quota carrying lender to say to a borrower. It’s challenging that preconception that they came in there with which is, “The best thing for my business is to come back to you and borrow more money.” For the bank to turn around and say, “No for the long term health of your business that’s not the right thing, here’s a better plan.” You go from maybe winning a transaction to winning a life time customer.

There’s kind of two ends of the spectrum of down in the nitty gritty of the details of one negotiation. Those kinds of conversations happen all the time, but all the way out to the bigger picture of not just what type of borrowing is best, but should you be borrowing at all? Then beyond that into, “Okay, is this the right investment for your business? Should you be expanding your factory at this time given what your business, what your financials look like, what the industry looks like, what the economy looks like?” Those are the real kind of expert partnership, those kinds of things that again, banks tout as their benefit, why they’re different, that they are experts, they will be partners in your business. It’s easy to say, it’s really hard to do. That’s what it takes is having those conversations about, “Hey you’re the expert about running your business, I’m the expert in financing. Let’s combine our knowledge and come up with the right game plan here.”

Jim Young: Now another part of this and you kind of mentioned, you touched on this a little bit with that quota pressure here. A big part of the challenge or method requires the sales person to be able to stand firm when push back comes from a customer. That’s something, it’s likely to happen because they probably come into the discussion thinking that they know what they need and now you’re basically saying, “Actually this is probably what you need.” What are some of the push backs that a bank would likely get from a customer. Honestly, how hard is it for a lender to stand firm in that situation?

Dallas Wells: Jim, I think it’s gotten really hard. It goes back to the statement from earlier which is, “You can ask for some pretty goofy things and somebody will do it.” It’s pretty easy to kind of stand up to your customers when they don’t have other options, but when they’re asking for something and you’re telling them that, “No that’s a bad idea. I think you should either not do it, or do it a different way,” and they go, “Fine, I’ll go back to the bank down the street that I just had the same conversation with, they were tripping over themselves to do it.” I think it’s harder than ever for lenders to stand firm. It’s everything from, is it right for the customer, to is it right for the bank of a borrower to say, “I don’t want to personally guarantee this, I want this to be a non recourse loan.” The bank down the street will do it, and the lender knows it’s a bad deal. The risk, reward scenario there for the bank is just all out of whack.

It’s hard, but those conversations again, are apart of that longer term relationship building a lot of times, and having that reputation in the marketplace. Challenging someone’s thinking and offering them different solutions to their problem, if you do that the right way they may still go do that transaction somewhere else but they will respect you for the knowledge and the way you presented it, and frankly for sticking to your guns. Down the road there will be another opportunity for that with that same customer, from someone they know, or whatever the case may be. It’s really about a complete brand image, but for you an as individual, lender/sales person, and for that whole bank of, “We look out for our customers, and sometimes that means saying no, or having difficult conversations. We don’t just say that and then later bend to what you want.”

It’s gotten harder and harder, but the banks that we see doing really well really stick to those kind of core values, and stick to their guns in all of those conversations.

Jim Young: Yeah, the section towards the end is about sales managers. It had some findings there that really resonated with me, in particular because of some of the stuff that we’ve been writing about in our book, “Earn It.” The finding was basically that they surveyed a bunch of sales managers, and almost none of them felt that, quote, “Leadership empowers managers to set their own course of action.” Then in another question those same managers said, “That they believe that empowerment, or the freedom to make decisions was the most important factor in their success.” Basically they’re saying, “We think that empowerment is the key to our success, and then we also think that our company doesn’t empower us.” Which is a pretty disturbing finding to get. Why do you think so often that we hear that sort of thing from banks? Sort of the credit doesn’t trust lending, and then in turn lending managers a lot of times don’t trust their lenders. The survey says, “Empowerment is the key,” but a lot of times what we hear from banks is just the opposite.

Dallas Wells: Yeah, this is where you really start to see banks start to differentiate themselves. Those that are struggling, struggling both in performance and just with the basics of, “How do we buy and implement things? How do we changes processes, and how do we get new regulations kind of figured out and implemented?” Just the basic blocking and tackling, they’re really siloed. You have the finance team, versus the credit team, versus the loan team, and you have managers that don’t trust those producers. It’s usually because the processes are kind of sloppy and it’s not real clear who’s supposed to be doing what, so that breeds a lot of fear of somebody going out of bounds and doing something they shouldn’t. That’s one end of the spectrum.

At the other end you have the banks that are really good at all those things, and keep putting more and more distance between themselves and the competition. Those are the banks that have put some clear out of bounds lines in place, and then once they have that framework down they just trust people to execute within that framework. The trust your lenders, it’s again a thing that is easy to say and it seems to be hard for a lot of banks to actually execute. Put what the expectations are very clearly for your lenders. What are they allowed to do, not allowed to do? What’s the basic framework with which they can be creative to solve problems, and then let them do that. These are well paid professionals that are experienced, they’ve been doing this awhile, they do have the closest connection to that customer base, trust them to execute for those customers and do what they need to do.

Again, with that authority comes some accountability, that’s closing the loop for it. You have to have clear processes on one side, accountability on the back side. If you have those two things, trust your lenders to do what they’re supposed to do. That’s exactly what they’re saying in this book is everyone feels like they need that empowerment to do what they’re supposed to do, you’ve got to find a way to give it to them. If there’s reasons you’re uncomfortable with it it’s probably not them, it’s probably that you have messy processes that you can clean up.

Jim Young: Speaking of processes that kind of brings us around to final question here, it’s something I touched on the very beginning. Some sales people are natural challengers, they’re comfortable with being uncomfortable, they’re comfortable with confronting people and having people push back on them and standing firm, and that sort of thing. If this is going to work you’ve got to be able to spread this system out beyond just the natural people. A matter of fact, a lot of times the natural people don’t even have any idea they’re doing it because it’s natural to them. This book argues that this is a skill that can be taught. You were just talking about processes, do you think when it comes to banking that you can put in a process that basically can turn your lender from relationship guy, or problem solver … not problem solver, helping out the customer, reacting to the customer to challenge their guy? If a bank decides they want to go all in on it, how would they do that?

Dallas Wells: You’ll of course have folks that are better at it than others. It is a skill that can be taught, and we see banks that do teach it. They seem to get the results and they seem to get the lenders that are able to go do that. I think there’s really two key points for banks to think about. If you believe this, if it makes sense to you, if it’s something you want to actually go do, number one, you’ve got to actually train for it. All of that relationship building stuff, you’ve kinda got to throw that in the scrap heap and rethink that. That’s yesterday’s version, and really train for challenging those conversations, those insights. Now the second part is that to actually be able to provide those you have to have people who are experts at what they’re doing. My question way back at the beginning of my career was, “How do you do that? Does it actually just take some gray hair and having seen the ups and downs to be able to do it?” That certainly helps, but you can shorten that learning curve by quite a bit.

The way you do that is you’ve got to specialize. Even if you don’t do that as a bank, and most community banks are still all things to all people, they’re covering a geography rather than some niche specialty. Asking your lenders to do the same puts them in a really impossible situation. If you’ve got a lender who’s doing an AG line of credit on one day, and then a real estate loan to a medical group on the next day, and then a home equity line of credit that afternoon, they can’t be an expert in all of those things and all those conversations. Let them specialize a little bit, let them put in enough hours and enough conversations, and see enough of those things to where they can be the expert in their little niche. Again, let the business owners be the expert in their business, and then help your lenders get to the point where they can be the expert on the financing.

Then it’s pretty clear who’s the expert, and what … you talk through those things, you challenge them on the way they’re thinking, now you’re providing real value. Now, like we talk about in our book, now you’re actually earning those higher returns, and the pricing discussion can come last, instead of you have to lead with that to even get a shot at it.

Jim Young: Yeah, it makes sense. Like we said though, it is an easier said than done process but one that we believe is worth it. As you can probably tell Dallas and I could probably talk about this for a lot longer as well. That’s all we have time for today, thanks to all of you for taking the time to listen. One thing I would also recommend, if you haven’t read the book, “The Challenger Sale,” we highly recommend you do so. There will be a link to the books website in the show notes of this episode. You can always find those at If you like what you’ve been hearing make sure to subscribe to the feed on iTunes, Sound Cloud, or Stitchr. We’d love to get ratings and feedback on any of those platforms.

Thanks again for listening, until next time. I’m Jim Young for Dallas Wells, and this is the Purposeful Banker Podcast.

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