Archive for the ‘corporate’ Category

The Whores of Corporate America

May 11, 2010

We are the Whores of Corporate America.  We succumb to outside pressure and do unnatural things in order to close business to satisfy an artificial time-line.  It starts innocently enough, with an offering of a discount on some small transaction that we’re being pushed to bring in before the end of the month.  But as time goes on, we, our managers, and customers get used to the “end of the month” or “end of the quarter” deal.  We come to expect it.

The problem, of course, with this lowest-common-denominator sales tactic is that it sends the wrong message to our customers.  Instead of conveying to our customers that they always get a fair price for the goods or services we provide, we inadvertently tell them that if they wait us out, they’ll get a better price.  And so, instead of transactions closing naturally, in line with an actual need, our deals get bunched up at the end of a reporting period.  Stress levels go up, prices come down – all because of some day that we’ve decided is more important than others.

The next time you decide to drop your pants to get a deal within the month or quarter, consider the implications.  What are you conditioning your customer to expect on future deals?  How are you changing their buying habits and negotiating tactics?  Is this permanent (and believe me it will be permanent) price action the precedent you want to set?

Before you break down and concede on price, just to meet some artificially important date, remember:  You’ll need business next quarter too.

More for the Same

May 4, 2010

The most popular customer negotiating tactic since in the beginning of time is The Same for Less (TSfL). That is to say, “I’ll buy whatever your selling, if you reduce the price.”  The easy answer, assuming you have adequate margin to absorb this request, is “Yes”.  “Yes” takes the deal off the table, “Yes” helps the customer feel like they got a good deal, and “Yes” allows you to move on to another opportunity.

But a better tactic for you, your company, and maybe even your customer is More for the Same (MftS), which usually appears as a counter-offer to TSfL.  The basic (and obvious) premise behind the MftS tactic is that instead of lowering your price, you offer your customer additional goods or services for the same price.  It requires guts and creativity, but offers some interesting benefits:

  • Price (per unit) Protection
  • Top Line/Commissionable Revenue Protection
  • An Opportunity to Grow Wallet Share by “seeding” other products or services

To illustrate the Revenue and Commision Protection benefits, consider the following examples:

Example 1:  You have provided a customer with a quote for a $1,000,000 solution @ 50% gross margin.  Your customer asks for 10% off of this quote in order to close the deal.  You agree.

After discounting, the new price is $900,000, your gross margin falls to 44.4%, and your revenue falls by $100k.

Example 2: Instead of agreeing to a price reduction of $100k, you offer to add $100k of additional goods and services to your quote at no additional charge.  Your customer agrees.

After this concession, your price remains $1,000,000, your gross margin drops to 45% (assuming an equivalent margin of the conceded product), and the revenue you recognize, for quota attainment and revenue retirement, is not impacted.

It isn’t easy, but if you are successful at changing your customer’s buying habits from TSfL to MftS, you’ll wind up retiring more revenue and hitting your quota sooner than ever before.

Market Share vs. Wallet Share

April 23, 2010

Growing market share is a tough thing to do.  This concept (by definition) requires you to add net-new customers at the expense of your competitors.  If the market is worth your time, competition will be fierce, barrier to entry is high, and sales cycles can be long.

Growing wallet share, on the other hand, leverages existing relationships that you already have, with customers who already buy from you (and are presumably happy with your product or service), to sell a related product.  For example, car dealerships grow their share of your wallet by pushing extended warranty packages when they sell new vehicles to consumers.  The effort (and cost) of adding this ancillary product is usually much lower, the sales cycle shorter, and the margin higher (in part because of the lower costs of sales).

To satisfy the endless need for quarterly/annual growth, companies are always trying to find ways to increase wallet share to augment their search for new core-product customers. They do this by acquiring existing companies/technologies or developing them on their own, and they do it because they know it’s sometimes easier than simple organic growth.

At the individual contributor level (that’s you and me), these new products and services represent an awesome opportunity. They give us a new reason to visit our customers, represent upside for quota retirement and earnings potential, and probably most importantly, increase our level of “stickiness” (which we’ll discuss in a future post).

So instead of complaining the next time your company acquires or introduces a new product (that your boss forces you to learn and pitch to your existing customer base), embrace it.  It’s a hell of a lot easier than cold calling.

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