Betsy Westhafer and Tony Bodoh continue to discuss ways to reduce risk mitigation in Part 2 of their discussion with business growth strategist Mark S A Smith. In this episode, Mark breaks down the eight ways businesses can reduce perceived risk to ensure they are the safest choice. He shows how customers experience purchase risk and helps salespeople understand how they can make the essential pivot in the way they sell. Being safe is the new science of selling. Follow Mark’s eight ways as well as the five Rs of ROI to create wealth for your customers and, consequently, for yourself.
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Making Your Product The Safest Choice, Part 2 With Mark S A Smith
8 Ways To Reduce Perceived Purchase Risk
Let’s proceed and talk about the eight ways that we can reduce perceived risk so that we ensure the safest choice. The first way to reduce perceived risk is proof. Proof that we are going to do what we claim we’re going to do. We’ll do that testimonials, case studies, assessment tools, customer reviews, paid proof of concepts. We have to make sure the proof is contextual to their scenario and context. For example, if you’re working business-to-business, you can’t use a finance example to sell somebody in transportation. People can’t make that leap. Even though it’s identical, they can’t make the leap. We never want to generalize our customer’s needs.
The worst thing possible you can do is when somebody says, “Here’s what I’m looking for.” You said, “I did that ten years ago for this other company.” Don’t ever say that. They stopped feeling special. Instead you can say, “I think I have some experience that we can apply to this. As I’m thinking about this, yes, I have a solution.” You always want to make people feel special. It’s got to be relevant up to the decision chain because if other people are going to be looking at this, it has to meet their criteria for a yes.
You can prove your company viability with a client list. Who else have you worked for? If it’s in the same industry, that is proof because your new client knows that. The client you’re quoting does due diligence. When I tell people, “I have done 500 events for Hewlett Packard worldwide.” They go, “Really?” Because they know the process HP put us through to even do one event. Use your buyer’s list in a contextual sense as a proof that you can do it. We want a lot preponderance of proof. Proof is the first one. What can you add to that, my friends?
One of my favorite things about talking to you, Mark, is the nuance phrasing. I’m a word person. I was a Journalism major in college. Going from, “We did that for another client five years ago,” to, “I think we have some experience we can apply to this,” it’s a totally different vibe that they’re going to get from that. It’s about them. It’s not about, “We have this cookie-cutter solution that would probably work for you too.” I think that’s super valuable to hear.
Two things come to mind as I listen to this. Number one, I want to point out to the audience if they haven’t picked up on it, are you realizing that everything Mark is talking about is experience? It’s how people feel and how they think. That’s what creates experience. The second piece that strikes me here is we’re talking about the proof. You said the preponderance of proof. That is one thing that I see many companies failing to do well. You pull up their website, you look at it and they’re talking about themselves. They don’t make their past customer the hero. The customer wants to be the hero. You are simply there to be the guide. They want to be Luke Skywalker. You are Obi Wan.
The next P is Process. Show them how you work together. Do a demo about the relationship, do a demo about the experience. The key reason why is because an executive will never agree to a project they don’t know how to manage. What that means is we need to include a project management timeline and milestones as part of the sales process when you’re selling something complex. Even for something simple, “Here’s how it works. You take a look and we make sure it’s perfect for you. You placed the order and we deliver. Our team shows up and installs it. We’ll make sure it works perfectly. We have somebody available for the next twelve months standing by, ready to help you if you have any issues whatsoever.” As simple as that.
As a sales person, you go, “That’s stupid. Everybody knows that.” No, they don’t. You have to articulate it and for them to go, “Okay.” It’s for them to reduce that, “I don’t know how this works.” The first time you’ve ever rented an Airbnb, what’s that like? “How do I know how to get in the house? What if there’s no hot water? I think I’ll just stay at a hotel because they always take care of those things for me like they hand me a key.” You have to have that check-in sequence that describe for somebody. Ideally, a video demo of how that looks and how that process works for them to reduce their perceived risk.
Along the same lines, if you’re selling something that’s very complex and very expensive with multiple decision makers, you have to use a phase deployment approach because that limits the perceived risk. Let’s go back to the HP example. We started with HP with a single pilot that was within the signature authority of the person that hired me. Once that pilot was successful, we had all of the proof from the people that participated, including proof of performance. We had a 100% increase in sales for the people that went through the program initially. We double the sales of everybody else. They’ve never been through it.Trust is the covert reason why all purchases are made. Click To Tweet
He was able to take that evidence and take it up to his boss and say, “We need to expand this program,” and we got 10X the funding. We did ten programs, and we took that set of proof up to their boss and got 100X the funding. We went through this at a phased deployment. We didn’t start off selling them in 500 days. We start off selling them 1, then 10, then 50. That’s how that ended up rolling out. It’s that phase deployment. It was a process that we took.
What strikes me about that is thinking about when people hear the word demo, they think feature function. You made the comment about doing a demo of the relationship. I’ve never heard that concept before. I love it because that’s what you need to demonstrate. It’s not about the features and functions because who cares. It’s about the relationship and how they’re going to ultimately get their needs met.
Another idea alongside that, in my experience in working with software companies, 80% of the features are never used by the customer. If you do a demo, they don’t care about 80% of what you’re going to talk about.
It creates friction because in their limited cognitive capacity, they’re having to process things that don’t matter, which keeps them from processing things that do matter.
If they say four “I don’t care” for every “Wow,” that’s a problem.
There’s another aspect to this that I like. You didn’t say it so I’m going to call it out. You alluded to it. The pilot that you did was paid. Many people think that they have to offer a free demo, a free pilot, etc., and honestly setting yourself apart. As Betsy pointed out the demo of the relationship, that’s a higher order of things and you ought to be paid for that. I know you’ll talk about, what do you do to reduce the risk of that payment later? I know that’s coming down the road here. That’s something people need to be aware of. Even in an economy that’s tight, if you have a paid pilot or a paid demo, it’s okay. It puts you in a different category.
There are a lot of ways of handling that. First of all, commitment. What we create, we support. Through that payment, you support the outcome. It’s a way different mindset if somebody has skin in the game than if they have no skin in the game. I want to talk about that for a moment because it’s an important concept. Reciprocity, which is one of the six influence factors talked about by Robert Cialdini’s book, Influence: The Psychology Of Persuasion. Reciprocity is one of those powerful tools that we have in sales.
Reciprocity is the concept that if I do something for you, you feel compelled to do something back. It’s wired into our brain and that’s the way the tribe works. A hundred brings back food, those at the camp are going to take care of the hunter. They’re going to cook the food, they’re going to give them sexual favors, whatever it happens to be. They’re going to be taken care of. The same thing happens that the camp takes care of the hunter. The hunter goes out and gets food for them. There’s this wonderful reciprocity that allows the world to work well.
Humans work extremely well on reciprocity. It also works the other way. If I do something to injure you, you’re going to feel like you want to get revenge. Tony, in your work, you see that all the time in reviews. There’s a celebration of the reciprocity or there’s a desire to get revenge. If we do something extraordinary for somebody for no charge, their reciprocity circuit kicks into gear and goes, “How am I going to pay him back for what they did for me?” The only way that they can handle that as recontextualize what you do as low value or undesirable. We do psychological damage if we do free large demos. If we’re doing a group demo, no big deal. If we’re doing a one-on-one type of large engagement, without the opportunity for them to reciprocate, they will devalue what we have done. It does damage to the relationship.
That’s a critical piece of understanding. We look at the five-star reviews versus the one-star reviews and that’s exactly where you see it. A five-star view is, “They were so amazing. I want to reciprocate and tell everyone about it.” They can’t help it. “I’ll be back. I’ll bring my friends back. We’re going to all comeback.” There’s a reciprocity in play. On the one-star reviews, it’s like, “I’ve been robbed.” I usually talk about it this way, “I’m either going to save the rest of the world and tell them how bad you are or I’m going to punish you myself.”
What’s the third step?
The third P is Progress. We have to illustrate progress. What we want to do is illustrate that every time they have an interaction with us or our materials, there’s an ever-expanding understanding about their solution. They are smarter than they were after we’ve had interaction and before we’ve had interaction. What we have to do is point out the progress that they’ve made from their conversations. One example of that is start meetings with, what would make this a valuable meeting? I want to use the word valuable because by generating value, we set up the reciprocity that we’re worth paying for. “What do you think would be good?” No. “What would you find interesting?” No.
What do you find valuable? Because that’s what we trade for, money. The reason why the nuance here is important is because I’ve made this mistake back in my career where I didn’t use the right words and they didn’t want to pay me. Once I understand what they find valuable, that’s where I’m going to put my focus because that’s where the value exists for them. I want to end the meeting with, “What was the most valuable idea you got from our conversation?” That where it cements and illustrates progress. They feel that every time we have a conversation, they have value. I positioned myself against all the other competitors that don’t do anything like this. We have to illustrate that progress. We can illustrate progress with education, insights, thought leadership, and also things such as how-to guides and white papers. It helps to illustrate that we indeed are making progress towards our goal that progress reduces the perceived risk along the way.
The fourth P is Position. Change how they view your offering. Connect to an existing commitment. This is like something you’ve purchased before. Only it fills more of your desired outcomes. How does this contribute to multiple desired goals? If you can show how they can solve multiple problems simultaneously with what you’re offering to them, that’s a position that puts you into strength and decreases the perceived risk. Remember that all purchases have to fulfill the desired goals of the scorekeeper.
Whoever is keeping score, whether it’s a spouse or a boss or a boss’s boss, it doesn’t make any difference. We have to make sure that we are going to fulfill their goals or it’s a no go. We have to illustrate that all involved are going to win. That’s a positioning. Show them how it’s evolutionary versus revolutionary. The reason why is because revolutionary is dangerous to most decision-makers. Revolutionary is dangerous to everybody except for the top leader who was looking for radical change. Everybody else is trying to fit within the system so they don’t get fired. That’s the concept of position.
The next P is Preference. What have they bought in the past that’s similar? This is the whole idea behind branding. If you purchased a can of Campbell Soup, you know what to expect. You’re probably going to buy another can of Campbell Soup. If you’ve eaten a McDonald’s anywhere on the planet, you know what to expect. You can walk into any McDonald’s and know what to expect. That’s around a preference. What do they like best about this? That illustrates preference. How does this align with our identity?” All purchases are in support of a person’s current identity or desired identity transformation.All purchases have to fulfill the desired goals of the scorekeeper. Click To Tweet
Tony, you and I have spent some wonderful conversations discussing transformation of identity and supportive identity in purchase cycles. It is important to understand what this P preference. We have to bring along another factor. How does this align with their scorekeeper’s identity? Interestingly, I work in the world of real estate and finance. We do a lot of work using these same fundamental principles in helping to sell investments. When a private investor places money, who do you think is the ultimate decision maker in that investment decision?
The spouse is the ultimate arbiter of the decision. They are exceptions to the rule. The spouse is usually the least informed in the investment being made. That said, the spouse is going to look at this investment and say, “How does this make me feel about myself? If I talk about this with my friends, how are they going to perceive me about making this particular investment?” I work with companies that do this to come up with specific spouse messaging content. The investor can talk with their spouse the right way to get ideas. That’s preference.
Something that strikes me years ago, I worked with LexisNexis on their law school advisory board. In that world, their metric is preference. Their number one metric between the top two dogs mostly at that time, which solution has the most preference in the market? it’s interesting to look at preference as an actual metric.
It’s a reducer of risk because people will buy what they prefer. The next P is Price. I don’t mean that you’re the cheapest. That’s not the intention whatsoever. It’s that you can radically lower the cost of how they’re currently accomplishing their objective. That’s what I mean by price. You can charge them more than they’re paying if you can help them accomplish multiple things simultaneously so their overall cost is reduced.
The way you do that is by simplifying their life, eliminating things they don’t need, and automating things. All of those things allow us to reduce the cost of what we’re doing. Show them how they can increase their cashflows with this investment. Draw a line to the money. Show them how they’re going to pay for it and they’ll buy. That’s the advice of one of my first boss who was director of sales for that division.
We have to take a look at the ROI. Tony helped me with this one. It’s revenue relationship, reputation, research, and relevance. Those are the five elements of ROI. We have a revenue return, relationship return, a reputation return, a research return, and a relevance return. Those are all price elements that are non-monetary. Remember when we create wealth for our customers, we create wealth for ourselves. You have to talk about price not as cheapest, but as most valuable. Tony why don’t you to talk about the five R’s for a moment. That would be valuable if you’d be willing to do that.
I’ll talk about the first four because I think you do a much better job with the fifth R, relevance. What we find in all of our research and we don’t just look for what’s the best NPS score or CSAT score. We always say, “What metric do you want to move? What’s going to get you a return on an investment? The first R of the return on investment is revenue. What I mean by that is people buy more. They pay a premium per transaction, typically. The second R is the relationship. That’s where you get into people buying additional product families. They may stay longer tenure, etc. It’s all about the relationship. They trust you so they’re going to expand the relationship. It goes back to a lot of what you said earlier in the show, Mark. The third R is about reputation. That’s where they’re making a referral, they’re making a recommendation, they’re writing a review online, they’re picking up the phone and calling a friend and say, “You’ve got to work with this person.”
I used to teach the three R’s and then a couple of months ago, I began looking at sync. There’s actually a fourth R here. Whenever we have a good relationship with our customer, they’re willing to let us do research. That is a huge one. I’ve built my career on doing research of customer feedback and I didn’t even realize that that was the fourth R. That was an eye-opening moment for me. The element there is when you can do research, you can ask your customer questions. Betsy does it at the CAB level with the client advisory boards. I do it at the consumer level, asking the consumers what’s going on. You could do focus groups. There are all kinds of ways that when you have that relationship, they want to reciprocate to use your word. I’ll pass over the fifth R for relevance to you.
The whole idea behind relevance is that it substantially reduces friction. All of us want relevance in our life. That relevance is being brought to us more and more. For example, Amazon making recommendations or Netflix making recommendations. That relevance makes us sticky. It keeps us engaged and therefore, it amplifies everything else that we do. That’s the return on relevance.
What is number seven?
Number seven is Prestige. Want and need are indistinguishable to the ego. If we can position what we’re selling as a prestige element, what somebody now wants becomes a need. Tony and I have talked about wants become needs over time. That’s the Kano model. Many years ago, smartphone was a luxury. Now, everybody has one. The point is that if we can position something as a prestige item, therefore we’re starting to tap into the ego component. The ego ignores risk. “Look what I can do.” We can engage the ego. When we do so, we reduce perceived risk.
The idea here illustrates the value to their career, to the relationship. I like to call out directly, how can we prove through performance so that you can get your next promotion? I ask customers in complex situations, “How can this contribute to your career advancement? In your boss’s career advancement?” It blows their mind because I’m talking about the elephant in the room, because that’s true. When that happens, we have a frank conversation about what must happen and what must never happen. When that happens, the risk drops to almost zero because they know I’m sitting on their side of the table. How can this increase the personal power? How can it increase the power of their position? How can we create desirable uniqueness? How can we create PR value for them? How can we create the opportunity for them to illustrate to the rest of the world their prestige? Anytime that we can implement a prestige play, this rapidly reduces perceived risk because of the ego’s involvement.
I want to jump in on this one. I love what you said that it reduces risk when you’re sitting on the same side of the table. It’s a nuance thing, but when you are able to create that relationship where you’re not trying to sell them, but you’re on the same side, on the same team, on the same side of the table, I think that’s so critical to any and all relationships, but particularly in business. When you have an offering that you’re wanting someone to purchase, that’s a key insight.
When you’re selling something that’s mission critical, that is very important to the long-term health and wellness of the organization. The only way you can successfully sell those is to be on the same side of the table because trust is the covert reason why people purchase from you. They will buy whoever they trust the most, which is the safest choice. All mission critical decisions are based around trust of the vendor. It’s not about price, not about anything else, but given the fact that we can accomplish the mission that we desire.
The eight P is Parachute. It illustrates that their career will not be damaged if something goes wrong. If the plane goes bad, they survive and they’ve got a story to tell. The idea here is we guarantee everything that we can control and the test to find out if this is a potential risk factor is asked, “What do you need to be guaranteed to agree to this?” That doesn’t mean that you have to guarantee it, but what this does is it reveals if there is an issue that they have a concern about, but they right now don’t think can be mitigated.
Can you repeat exactly how you phrase that?Remember that when we create wealth for our customers, we create wealth for ourselves. Click To Tweet
I will and I’ll take it apart. What do you need to be guaranteed to agree to this? I don’t say, “What do I need to guarantee?” or “What do we need to guarantee?” I am not inserting myself into this guarantee process. What I’m doing is uncovering the unmitigated risk that they are currently holding in their mind that is stopping the sale. Once they reveal to me what the mitigated risk is, then if at all possible, I can come in and mitigate that in some fashion. It could be through a guarantee. It could be through a warranty or it could be by purchasing insurance. Remember, insurance is a way of reducing perceived risk. There are a lot of interesting strategies around insurance. We can ensure a practically everything. For crying out loud, Davis’ legs were insured for $1 million. That was a PR stunt.
The parachute offer should scare your team, “We can’t do that.” It should relieve your prospect, “You do that?” It should confound your competitors, “How can they do that?” Let me give you an example. Let’s say that you’re selling computer systems. This parachute offer could be something along the lines of, “We are so certain of our process in evaluating your issues and selecting the right solution. After we install this and it doesn’t perform as we have described, we will at our expense remove the equipment, hire a third-party consultant of your choice, and pay their fees and the replacement equipment.” That should scare the team. It should relieve the prospect and it would confound the competitors.
Tony, the reality is every vendor would do that anyway. If a customer complains, they’re going to fix it. The only thing that I do is add to this concept of, “We’ll pay a third-party to do it, to figure it out for you.” The reality is the number of times that would have to happen is approaching very close to zero, but the number of sales you’re going to close more rapidly because you’ve reduced that risk to zero is worth every part of the risk that you are taking on.
Applying the parachute idea in my business when I first talked to you was a game-changer for me. It was because at that point in time, there was a change in my business in how I was selling and who I was selling to in that. I don’t have to guarantee the work I do because I know what I do, no one else can compete with. It’s just a different approach to things, but I can guarantee various things in the process that are going to go right because I know how they’re going to go. I’m in control of them. When I put those guarantees in there, it’s amazing to see how fast their mind shifts like, “You can do that? You’re willing to do that?” Absolutely. It’s fascinating to watch how that changes the conversation.
I even guarantee my work. I guarantee my summit. I guarantee you’re going to make five times back the money that you invest in the summit in the next 180 days or I’ll work with you until we do. Part of it is the process that we go through. This is the eighth summit coming up. I’ve been doing this for a very long time. I know that when we agree on a particular outcome, we can make a difference. That’s also the reason why I interview everybody before they come to summit because I needed to make sure that I can fulfill my guarantee. Somebody that’s making a few thousand dollars a year, I can’t guarantee you that. If you’re doing a couple million dollars a year, I can guarantee a 5X return on your investment because I know exactly what levers to pull to move the needle fast.
That’s a key point that Tony and I spoke about a little bit earlier. It’s about the qualification and making sure that that fit is indeed there, and why that matters so much.
Remember Parachute is the final P. It’s not the P that I lead with and the reason why is because until they understand Proof, Process, Progress, Preference, Prestige and Price, what we use the Parachute for is to mitigate the remaining concerns in risk. This is the cleanup, not the lead. Don’ t lead with your guarantee because then you’ll attract people you don’t want to do business with. I’ve created this list in roughly the correct psychological order, Proof first, Process second, Progress third. The reason why I don’t lead with Preference is because what I’m offering may not be their preference yet.
Does this apply in what you’d call low consideration sales as well as high consideration or is it more high consideration?
I can apply this in all sales scenarios. It would just be in low consideration. This would be primarily in marketing. I would put all or as many of these in my marketing content as possible so that the sales process is virtually unnecessary. If you do your marketing right below for a low consideration, there is no sales requirement. A good example of low consideration sales is Walmart. There is no sales activity in Walmart other than, “Where can I find the carpet cleaner?” Aisle 37 and then everything else is self-service sales. In that particular case, I’m going to include as many of these Ps in the copy on the product that I’m selling to help do that.
Which is why stores like Best Buy, Home Depot and others all have reviews on every product on their website or scannable links right there in front of the product. If you’re standing at the shelf, they’ll even put the stars on there so we at least have a proxy for, “A lot of people love this product. I’m going to love it too.”
That’s number one reason, starting with proof. Proof is our lead. It could be that proof is sufficient. Remember 70% of the population is externally motivated. What that means is they decide what’s good and what’s bad based on somebody else’s opinion. Proof is going to handle 70% of the situations. If you want to work in complex corporate environment, that’s not going to work. It might work at a lower level but it’s not going to work up the food chain. They need relevant proof. They need contemporary proof. They need contextual proof.
After all of this phenomenal information, I can’t imagine how people will be transformed by virtue of reading this episode.
They should be but they might be a little overwhelmed too, “Where do I start?”
I was thinking, “There are a million things I need to learn and understand at a deeper level and things I need to be doing differently.” What helped me was when you said that this is pretty much the order that you need to go through versus “I need to do all of this at once,” in the first conversation. That helped to hear you say, “This is a process in and of itself. It’s not just eight great ideas.”
It’s roughly in the order, we can debate that. Without a doubt, you lead with proof. The 30% of the population will go, “That’s nice. Tell me more.” That’s when we move to process. “This is how it’s going to work for you. This is the experience,” when it demos the experience. That’s the reason why I’ve sequenced this with my understanding of psychology. Thanks to the conversations I’ve had with you and Tony, I was informed of the process and of the steps as we go through.
Mark, if there was one takeaway for our audience that you’d encourage them to consider and to take action on, what would that be?You have to talk about price, not as cheapest, but as most valuable. Click To Tweet
It’s very simple. Stop thinking you’re the best and start having conversations with your customers to illustrate you’re the safest choice.
Thank you so much for being here and for sharing your brilliance. That’s the word for you, Mark. You are brilliant and it’s always a pleasure to have conversations. There’s so much valuable formation. I know that our audience will gain so much value from not just reading this. This is what we encourage our audience to do. Don’t read an episode and move on. Spend time studying this, taking notes, figuring out how you’re going to apply these lessons and put an action plan together around this on how you’re going to take these theories and concepts and move them forward in your own business.
If you like what you read, if you were triggered by the epiphanies, the insights, the ideas, come join me and Betsy and Tony at the next event. Learn more at ExecutiveStrategySummit.com.
What’s the best way for people to connect with you?
Email me at firstname.lastname@example.org.
Thank you so much, Mark, for being on here. This was fantastic. I know people are going to get a ton out of it. To the audience, if anyone has questions, not just with this episode, but with any of our episodes, reach out to Betsy and me. Reach out to the person that we’ve interviewed on the show. Mark here is an amazing individual. I’m sure he’d be more than happy to contact you back and give you any advice he can.
I’ll be happy to.
It won’t be free but it will be valuable.
Mark, I can’t wait to see you soon. Thanks again for being here.
Blessings on everybody.
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About Mark S A Smith
Mark’s forthcoming book, Scale Your Business, Now! summarizes what he delivers. He works with business owners and executives on how to take back control of the business and guarantee more profits in the next 120 days. He helps his clients regain freedom, exert influence, and manage predictable growth.
Heading his own boutique consulting company since 1990, he’s researched & developed executive leadership, business models, and go-to-market methods to predictably conduct successful executive-level meetings when multiple people must come to a conclusion to make important decisions. The result: his clients sell complex, expensive products and services as fast as humanly possible.
Mark is an electrical engineer, media technologist, computer programmer, hardware salesman, software marketer, business owner, executive coach, author, professional speaker, video producer, podcaster (The Selling Disruption™ Show), blogger, musician, and father of five Millennial children who do not live at home. He’s worked in 54 countries and six continents.
Mark’s authored many books, business case assessment tools, sales playbooks, go-to-market strategy guides, sales channel launch plans, business plan tools, video-based training systems, corporate webinars, and hundreds of articles and blogs. Books include Pivot to Profit from IT Disruption, Security in the Boardroom, Linux in the Boardroom, Guerrilla Negotiating, Guerrilla TeleSelling, & Guerrilla Trade Show Selling. Forthcoming: Scale Your Business Now! and Executive Temperament: Playing to Win in the C-Suite.
Clients include Arrow Electronics, Agilysis, AMD, BEA, Broadcom, Bakerson, Bullseye Capital, CDW, ConnectWise, Commvault, Dell, ePlus, Forrester Research, HP, Hitachi Data Systems, Microsoft, IBM, IPED Consulting, Internal Consulting Group, Ingram Micro, Insight, Tech Data, Living Fuel, Oracle, Raytheon, Ruckus, NetApp, Sanmina, Sugar CRM, Synnex, Lexmark, VLCM, Viavi Solutions, Zones, Society of Government Meeting Planners, National Speakers Association, and Meeting Professionals International.