Transactional selling and solution selling are two of the most popular sales strategies that companies use to increase sales. However, they are vastly different and as a result, lie on opposite sides of the business spectrum today.
Where on the one hand, Solution selling is becoming increasingly popular because companies believe that it can support their complex business models more effectively.
Transactional selling, on the other hand, is losing its value since many businesses are moving towards e-commerce that works on a much-reduced salesforce model. Plus, as more and more transactions become automated, the need for salesmen to pitch a product to customers is diminishing.
But which of the two strategies is right for your business?
What is Transactional Selling?
Transactional selling is the benchmark of how companies have been selling their products for decades. It involves a salesperson who is responsible for scoping out potential customers, building relationships with them, then pitching the product and closing a sale.
Transactional selling works for companies that don’t need to rely heavily on recurring business. Their goal is to sell their product to one customer once and not worry about whether they’ll come back for a second purchase.
It’s a short-term sales strategy that does not rely on product knowledge or probing into the customer’s needs. The customers already know what they need and will purchase your product if it fits their requirements and is available at a low cost.
At a glance, transactional selling looks something like this:
- Short-term sales goals: it’s a great way to meet a company’s sales targets month on month.
- Relies heavily on human connection: a sales representative is responsible for finding customers and selling the product to them. The process would not work without the relationship between the salesperson and the customer.
- The salesperson doesn’t have to be a specialist: any salesperson can sell the product as they don’t need to have in-depth product knowledge.
- Does not account for customer’s needs: the company or the salesperson does not need to probe into what the customer needs. The customer is already aware of it and buys the product to resolve their problem.
- Low pricing: the company faces stiff competition in terms of product pricing. There are competitors in the market who may offer the same product at a lower price. Customers are likely to choose the product with the lowest cost.
- Needs flexible pricing: the salesperson needs to draw out the highest price the customer is willing to pay and compare it with the lowest price the company can offer. They are responsible for closing the sale at a price higher than the company’s lowest possible rate and sometimes a little lower than the customer’s highest possible rate.
What is Solution Selling?
The key feature that separates solution selling from transactional selling is the involvement of the customer in the process. This type of selling focuses on understanding what the customer is looking for and creating a product to cater to their problems.
The involvement of a salesforce is considerably lesser in solution selling than in transactional selling. It suits complex businesses or companies relying on e-commerce and automation for sales. Even with the involvement of an active salesforce, solution selling focuses on the customer’s pain points rather than closing sales.
The salesperson will make an effort to understand what is troubling the customer. This will enable him/her to match their prospective client with a product or service that will provide value to them. However, it is very different from what is known as ‘benefits selling’ where the focus is still on the product and the benefits it can offer to the customer.
At a glance, solution selling looks like this:
- Customer-oriented: the strategy is focused on what the customer needs rather than what the product or company offers.
- Longer-term sales goals: the sales process is longer and more time- and effort-consuming. But, the ROI is also that much greater. Solution selling is good for companies seeking repeat business.
- Customer is not aware of the solution: they only know the problem they have and are looking for effective solutions. The salesperson will understand their problem and explore how the product can best resolve it.
- Focuses on the end goal: instead of selling the benefits of the product to the customer, the salesperson should focus on the solutions that the product provides. They will explore how the situation will look when the customer’s problem is resolved.
- An effective combination: solution selling focuses on creating effective combinations of products and services to meet complex customer demands. It’s the right choice for businesses with multiple products and services and complex business models. They can combine multiple products and services from their existing portfolio. This can be done to provide a holistic or complete solution to the customer.
Transactional Selling Vs Solution Selling
Let’s take a look at all the differences between transactional and solution selling, with a couple of examples:
|Transactional Selling||Solution Selling|
|It’s product-oriented. The focus is on selling the product.||It’s customer-oriented. The focus is on understanding the customer’s problem and finding the right solution for them.|
|The goal is short-term sales (meeting sales targets month on month). Transactional selling does not rely on repeat business.||The goal is to retain customers for a long time. The strategy relies heavily on repeat business and retainers.|
|The sales depend on the price point. The salesperson has to negotiate a price that is lower than what the customer wants but is higher than the company’s lowest possible price.||The sales depend on the right mix of solutions offered to the customer. They might be willing to pay a premium price if the mix of products and services the company offers is better than the competition.|
|The customer knows exactly what they are looking for.||The customer knows the problem they want to resolve but doesn’t know which solution will resolve it. They may not even be aware that a perfect solution exists.|
|There are competitors in the market who offer the same product at higher or lower price points. The customer selects a seller that offers the lowest price.||There are competitors in the market with different price points, but the sale still depends on the right product mix rather than a low price.|
|The customer is interested in the ease of buying and wide availability of the product. They can approach multiple sellers to crack the best deal possible.||The customer is interested in resolving their problem, even if it takes slightly longer. They may not approach multiple sellers because they don’t know the options that exist.|
|Involves a high volume of transactions, often small ones. Since the customer knows exactly what they want, they want to get it quickly. So, the sales cycles are shorter and do not involve long conversations about the product or promotional packages.||The volume of transactions is lower than the transactional selling approach. It depends heavily on the salesforce finding the right customer since customers are unaware of the solutions offered. Due to this, the sales cycles are longer but also bring a higher ROI.|
|Transactional sales strategies work best for simple businesses such as retail stores or food outlets.||Solution sales strategies work best for complex businesses or companies that offer multiple solutions, such as a digital marketing agency.|
|Transactional selling works in B2C settings and relies on discounts and promotions.||Solution selling works in B2B settings and relies on product value rather and discounts or promotions.|
|Example: ordering take-out. The customer knows what they would like to eat. They can walk into a fast-food outlet or call them, place their order, pick it up, pay for it, and leave.||Example: creating a beautiful and functional website. The customer may not know what all goes into building a great website and making it profitable. The website agency contacts them and explains the various processes involved in creating and maintaining a website. They also explain how their bundled services, such as designing, content writing, and SEO, will help the customer earn revenues. They close the deal when the customer is happy with the predicted outcome of using the company’s product mix.|
Applying Solution Selling to Transactional Sales
Since transactional sales are usually one-time, it is often assumed that you cannot apply solution-selling strategies to transactional business. However, that’s not quite the case.
Applying a solution selling strategy to a one-time sale process can still be extremely beneficial, it can help in building long-term relationships with the customers and finding the right product for them.
Let’s consider a real estate business. It works on a simple business model and relies heavily on one-time property sales rather than a lot of repeat sales. The salesperson does not need to have in-depth knowledge of the industry or the property. They can simply show it to the customer and close the sale using a transactional approach.
Using a solution-selling strategy here may not be necessary. However, it can certainly be helpful for both the business and the customer.
If the agent invests a little time in understanding the customer’s exact requirements initially, the showing process can be accelerated. When the customer can find the right property and close the sale quickly, it’s great for the business, too. That is because now the agent can take on a new client much faster, all the while maintaining a long-term relationship with older clients.
It may even result in referrals or repeat business from old customers if they were happy with the solution provided to them!
Some benefits of using solution selling strategies for transactional sales are:
- Closing the sale faster by providing the right solution to customers early in the process.
- Many businesses, such as real estate and other service providers, can profit from selling the right product rather than offering heavy discounts.
- The customers will be happier with the sale if the salesperson is involved in the process and considers their needs.
- Happy customers are willing to give you referrals and sometimes even repeat business.
- Higher Return on Investment in the future, even if the process takes longer than a transactional sale.
Other Sales Strategies
Apart from transactional and solution selling, there are two more types of sales strategies that you can consider for your business. Let’s understand briefly about each one:
1. Consultative selling:
This is similar to solution selling in that it focuses on the customer’s needs rather than the product to be sold. However, it is a little more difficult than solution selling because you need a skilled salesforce that is exceptionally good at holding conversations.
Moreover, they must know how to intuitively open and engage in a conversation with customers to understand their exact needs and pitch the perfect solution to them.
Furthermore, it is also important for the salesforce to have domain expertise since this type of selling usually happens in a consulting environment rather than on the field. This strategy works for high-ticket solutions where the customer may not acknowledge the severity of their problem until they are convinced of the right solution.
2. Provocative selling:
It focuses on bringing the customers’ attention to a problem they didn’t they had. The typical customer for this strategy will be someone completely unaware of their problem. So, the goal of your salesforce will be to “provoke” them to see it.
Once they see the problem, your salesforce needs to convince them that your product is the solution to their problem. Your salesforce needs to establish that not paying for the solution you’re offering is a greater loss than paying for it.
Furthermore, the focus in provocative selling is on the outcome after the customer makes a change rather than the product or their problem. You have to show them that their way of doing things is not the best anymore.
Transactional and solution selling each have their respective benefits. Which strategy you should opt for depends entirely on the kind of business you want to build and the kind of customers you expect. However, you may even choose consultative or provocative selling if they seem like better options for the kind of product mix you offer.