Interest Rates, Inflation, and Selling… Oh My!

Speaker: Andy Olen

| 00:02 | There’s a Sales Warrior within each of us. My name is Andy Olen and I’m here to help you discover and empower the Sales Warrior Within. Hello, sales warriors. This is Andy Olen, and welcome to another episode of the Sales Warrior Within Podcast. I hope all of you are doing well as you start the fourth quarter of 2022. Where is the time gone? It always goes so fast.
| 00:28 | What’s the saying that when you have young kids, a lot of parents will say this, that the hours and the days seem to take forever, but the years go by super fast? Something like that. I think I’m paraphrasing a little bit. Nevertheless, in sales, time always moves very quickly. And here we are celebrating the beginning of another fourth quarter. I hope your third quarter, if it ended at the end of September, was outstanding for you.
| 00:52 | I’ve had a couple of interesting weeks was the last five weekends was on the road visiting five different universities across the United States as a part of my daughter Audrey’s swim visits. So official swimming visits to a bunch of schools ranging from my alma mater, Wisconsin, which I knew quite a bit about, to other schools out there as well across the Big Ten, SEC and the ACC conferences.
| 01:19 | And each one was a really interesting experience for me to watch salespeople and the selling of these schools, not only to the athletes, but to the parents as well. And after she makes her decision on where she’s going to go, I don’t want to podcast too much on this before she actually makes the decision and works her way all the way through the process. And I’ll have some final thoughts and comments as well. There are a lot of really interesting sales lessons that I learned from going through this process with her.
| 01:50 | And absolutely the programs have to cater to not only the student athlete, but also to the parents. There are multiple stakeholders that have to be sold to before, during and also after these visits. So some really interesting stories that I can share with you from my five weeks on the road. And I’m also going to add in a series of university stops that my oldest daughter Ainsley and I made along the east coast of the United States a little bit different.
| 02:17 | She was there for academic visits, but some really great schools and their tours and who did it well and who didn’t, and just some good sales lessons that I picked up there. So stay tuned for some upcoming fall episodes of the Sales Warrior Within. That talk about that. What I wanted to talk about today was to sort of zoom out and talk about the macroeconomic landscape and some of the challenges and opportunities that sales people face selling into a much tougher economic environment.
| 02:47 | So let’s talk a little bit about inflation, let’s talk a little bit about interest rates, and let’s talk about ways that salespeople have to accommodate or adjust to this different environment that you’re selling in today than you were selling a year ago. So in terms of interest rates and inflation, let’s go back a year and think about the sales environment we were in. We’ll call it post pandemic. I put that in quotes because I could argue the pandemic is still going on today and will be going on as an epidemic.
| 03:17 | But nevertheless, let’s go into the reopening phases of 2021 that most of the country, if not many parts of the globe, were opening up after the pandemic had really sort of roared through. And across the globe, there were still sort of flare ups and different issues that were popping up. But overall, interest rates were very low or interest rates. And why is that important? Well, an interest rate signals how much is it going to take to borrow money and how much do I have to pay to borrow money?
| 03:50 | So in our personal lives, if we have a mortgage on a house, interest rates this time last year might have been two and a half percent for a 30 year mortgage. So if I look at how much my monthly payment is going to be two and a half percent interest, that’s going to the bank. That’s the cost of doing the mortgage. The principal payment that I make, that’s going to be going back basically in my pocket, or I’m going to be owning more of the house for every payment that I make. That’s pretty cool.
| 04:16 | But when interest rates go up, that means I have to pay the bank more and more to secure that loan. A year ago, interest rates for not only homeowners, but for all of us buying cars or doing projects or building businesses or running businesses, interest rates were low. So what were businesses doing during this low interest rate time? They were taking out loans. They were taking out loans to build their next manufacturing plan, to build some new capital or to build a new factory somewhere.
| 04:48 | They were looking to expand into new geographic markets, maybe by distributors overseas. And when you can borrow money at a very cheap rate, two, three, four, 5%, if you’re a business, maybe even a little bit more than that, but still, arguably and historically very cheap, you can get your what’s called cost of capital at a very low rate. And you can deploy that money in order to grow and expand your business.
| 05:16 | So if you’re a sales person selling products into a business that’s growing, that’s expanding, that’s able to borrow at low interest rates, obviously the competition is going to be high for that sale because other competitors see the opportunity. But your customers are investing. They are buying and they are expanding or deploying capital and cash to grow their enterprise because they can borrow at such a low rate.
| 05:45 | And so many times, if you’re the vendor of choice, they can say yes to you because they have the funds and the balance sheet or the financial strength to be able to do that. That’s a good environment for salespeople to be in. It’s a good environment for business in general as well. The other thing that was going on a year ago and even all the way back to when the pandemic really hit, is that the government and I’ll use the US. As an example, the Federal Reserve lightened monetary policy that’s called, or you may have heard the term, quantitative easing.
| 06:18 | And basically what they did is they went out to debt markets and mortgage markets and they said we the government or the taxpayers, we’re going to buy a lot of the bonds that are out there. And by doing that it does two things. One, it really secures those bonds because now the government owns it. They’re going to make the payment on those bonds. They’re going to be the ones backing up those things. So they’re not going to fall apart. The second thing that it does is when the government buys bonds, they buy it with cash.
| 06:47 | And so they put that cash then into the US economy. There are more dollars flooding the economy, more money in the money system, more money, low interest rates. That’s a lot of buying power. And so as we saw as buying power went up for customers and consumers and companies and the interest rates are really low, that we also saw a lot of demand. People were buying a lot of stuff and the supply chain tightened.
| 07:15 | There wasn’t enough supply in order to fulfill demand. And we think about cars, carbine, it was really hard to find a new car. It was hard to find a used car. There weren’t enough cars. But everyone had all this money. And the cost of getting money or the interest rates on loans was really low. It was really favorable market. But high demand, low supply, price goes up. And that’s inflation. When there’s high demand, there’s a lot of money out there, there’s a lot of incentives for people to buy.
| 07:44 | Then demand goes up. But there wasn’t enough inventory. There wasn’t enough capacity in the supply chain. And the supply chain got really stretched in all markets. And that low supply, high demand created high price. That high price is inflation. And so now as we look at year over year inflation, or what inflation is this year versus 2021, all of a sudden you see seven, eight, 9% inflation. That’s the impact of that high demand.
| 08:13 | That easy money that’s been out there and the low supply, that 9% inflation is not sustainable. And so the Federal Reserve in the US. And along with the US. Markets started to say, look, interest rates have to go up. They have to go up from low rates to much higher rates in the Federal Reserve now for many months in a row has increased the interest rates. And you can see it because a year ago a 30 year mortgage might have been around two and a half percent to 3%, maybe 3.25% in the fall.
| 08:48 | It is now in the high sixes. Even hit the low sevens. Corporations and businesses, your customers, if they need to go get a loan, it costs them a lot. Moreover, to get all of the raw materials and the goods and the cost of labor to manufacture in a high inflation environment, it means it costs more to build products as well. And so you have all of these forces of higher interest rates, higher inflation squeezing businesses.
| 09:18 | And so businesses and companies might turn to you now and say, oh you know what, we were going to make this big investment in your products, but we’re going to wait a little while. We got to manage cash or we got to manage our income statement, or we just got to hold back a little bit because of inflation and interest rates. It’s because the cost of doing business has gotten that much more expensive. And you may be feeling some of those pressures and forces, I certainly am. Some of my really strong customers, they’re tightening right now. They’re holding back on spending and deploying money.
| 09:47 | They’re looking at all of their expenses and saying, all right, with costs up, with interest rates up, and it costs us more to borrow money from banks, how do we save money? Well, let’s maybe reduce something here, or let’s hold off on this investment for a little while. You may be facing the same situation. So I want to give you some advice on how to overcome these things. The first piece of advice is it is important as a salesperson to understand what’s going on in the macroeconomic environment.
| 10:16 | Doesn’t mean you have to be an economist, doesn’t mean you have to go get your PhD in economics, but it is worthwhile to just be aware of what’s happening. Here are a couple of ways to do that. Podcasts there are a lot of really good investment and business podcasts out there. Wall Street Journal has a good podcast, motley fool has good investment podcast that talks about these topics. There are a lot of good podcasts out there where you can just listen to a few and sort of get an idea of what’s happening.
| 10:43 | Look at the titles of these podcasts and you’ll be able to find and navigate towards the right ones. If you search for inflation or interest rates selling into a tough environment, that’s what this podcast is talking about. You’ll probably find many of them out there that could be good references for you. Be aware, stay on top of the dynamic and that little bit of investment you make in time and energy to stay informed should pay off for you as well.
| 11:11 | So as I talked about, the next thing you have to do is you have to be aware that when you’re engaging and talking to your customers, especially more senior customers that you call on, CEOs, business owners, that when you talk to them, you might want to even probe and ask them, hey, how are interest rates and inflation impacting your business? There’s a wonderful sales question right? There a leading question just to get an insight on what the impact is.
| 11:40 | And maybe that business owner, your customer says that really isn’t because of X, Y and Z factors. Okay, that’s good for you. Or they might say it really is. It’s really becoming a challenging environment. Here’s why you can follow that up by asking a question around hey, what does that mean in terms of your outlook on making investments in products like mine? So you get a sense from them of how they’re connecting or not necessarily connecting the macroeconomic environment or the economic environment that’s impacting their business and how they’re thinking about you and your products and your solutions.
| 12:14 | Once you do some of that discovery, what I would then pivot to or be ready to talk about is the kind of economic or financial benefits that your products bring. If you’re selling something that is of benefit to another company or to the person that’s buying it, there’s usually a pretty positive return on investment. If you’re selling a software product, for example, that creates greater efficiency and could save money or time in someone’s business, you want to highlight that.
| 12:44 | You want to highlight the time saving, you want to highlight the financial benefit of using your product because they’re looking for solutions that can help them ease some of the economic pain. So this is a moment where you really have to understand the financial and economic value that your products offer customers. Really important right now to have that talk track ready. So start with questions. Understand how everything in the world or the macroeconomic environment is impacting your customers.
| 13:13 | It’s as easy a question is this hey, how’s the macroeconomic environment impacting you as a business? And if they ask, well, what do you mean by that? All you have to say is hey, how are interest rates and inflation impacting your business? And then as you get talking about I really want to figure out a way to share more about my products. I want to start with the economic and financial benefits because that might help ease some of the pain that you’re suffering with inflation and interest rates.
| 13:42 | If you get into that conversation, I think you’re in really good shape. Next and final piece of advice here is really extend yourself not only as a salesperson delivering a unique product or service that maybe your brand and maybe the products that you have, the company you work for, but also that you are a financially minded partner with your customer.
| 14:07 | Not only do you bring really good product and service benefits with what you sell, you yourself are casting your approach and your value add as a salesperson into an economic partnership. A lot of salespeople are often seen as, hey, they represent company XYZ and the products that company XYZ handle. I want you to not only be excellent in that area, I also want you to be seen as, you know what?
| 14:36 | When Andy comes around, he is going to be someone that can help me think through some of the economic or financial challenges I’m facing with all the things that are going on around us right now. So if you can achieve that level of credibility and partnership, that puts you in a very competitive and differentiated space and I think gives you the and I believe gives you the opportunity to navigate this tough moment very effectively. So a couple of thoughts, best practices and a call to action to go ahead and jump into that space with your customers.
| 15:10 | Talk economics, talk financials, talk about the business impacts, try to have your customers share some of the financial pain points he or she is having and then craft your solution and craft your value proposition as a salesperson behind that economic goodness, financial insight, financial partnership that you can gain. I think in good times and tough times, that’s a really good place for a salesperson to be. Those are my thoughts for the day.
| 15:39 | On inflation, on interest rates, on some of the tougher moments we face right now. I have confidence you’re going to do a great job out there. And don’t let a challenging moment not be seen as a great opportunity to go out there, shine and succeed, build some new skills and differentiate yourself from your competitors. So I love sales, always changing, always good stuff to get after, always success at every turn as well. It was great talking with you today. You can always reach out to me.
| 16:09 | I can be found at my website, https://andyolen.com/ or andy@andyolen.com, if you want to eat, email me. And in the meantime, and as always, I wish you good selling, good leading and good living.