If you get your marketing right and your interaction with your customer right, then you can shift the buying criteria of many people from price to value.From buying the product alone, to buying the way the salesperson interacts with the customer.
An electrical goods chain almost seem to have a policy of the first question they ask being “What is the best price you have been offered”?What follows is a conversation about the various products they can offer and how cheaply they can offer them and what extra technical features we can get if we pay more.They create a price-driven, technical relationship.
If instead the salesperson bothered to ask a few simple questions such as “what do we want out of the TV?”, “Have we had a plasma before?”, “What will you use the plasma for?”
“How big is the room?” “How often will you use it?” etc, not only will we buy the right product, we will appreciate the help and I’m far more likely to buy from the shop where we was helped.
That shop will also be the most likely destination for my next electronic purchase.We know this sounds obvious, but we find this approach in most B to C and B to B selling very rare.
A different scenario is a where a customer has an urgent and possibly significant need.They may or may not ask for competitive bids, but they will probably ask for a proposal and a quote – because price is still a key selection criteria.The sale may be significant and the unexpected revenue can be very welcome.
In such situations many organisations forget to take care of the underlying relationship whilst addressing the project at hand.They may do an excellent job or sell an excellent product – but they define the relationship as ending when they raise the invoice and thus behave accordingly through the project.
One challenge of these types of relationship, which we Iabel “ad-hoc” (because they are intermittent and unplanned) can be the “real” profitability.We have seen situations where the proposal process alone takes out all the perceived profit. Price negotiations can be very severe too.
Sometimes sellers will even “buy” the work thinking that they will raise the price of future work – and then discover that not only can they not raise the price of future work – the future work does not come to them.All they achieve with this strategy is setting a precedent for low price.
In a tightening economy these surprise calls do still come, however price becomes even more of an issue and “beauty parades” between competing providers become common, mostly as a device to drive down cost.
Customer behaviour can rapidly move from “deal-hunter” to “price-buster” – where all that matters is the dollar because the seller has given them no other reason to buy from them.
As the profitability of the above relationships reduces in a shrinking economy, so sellers reach out to new potential customers.That makes sense, but the key is how you reach out.There can be a temptation to try to socialise with or entertain potential customers.This is done because it is easy.We believe there are two fundamental risks with starting such a social relationship.Firstly, not everyone enjoys social activities and by inviting the roughly 50% of people who are “introverts”, you may have taken a step backwards, as the last thing they want to do is be sociable – especially with strangers.You have just invited them to their idea of hell!
The other and possibly more significant and frustrating aspect of a social relationship is that of converting it to significant revenue.It can be very hard to turn a relationship that has been going on for months in terms of fun, to a relationship involving business.And if you succeed, you can be sure a “mate’s rate” will be part of the deal.
If you are going to reach out to potential customers then do so, but do so in a way that moves from no relationship to one of trust.Trust can be partly a function of time but it is more a result of behaviour.If you get the opening conversation or email containing the right language, you can immediately demonstrate to your customer that you are different, are there to help them and can be trusted.
We often find it easier to move to a trusting relationship with someone we have never met, than we do to shift a current poor relationship.This challenges the hypothesis that it is easier to get more money from current customers than from new customers, but we have found it to be true.75% of our current customers were not customers 12 months ago.
If the relationship is so important, why is it that most organisations simply measure the revenue from the customer and not the relationship?We think it is partly that it is easy to measure numbers and hard to measure feelings.But partly as well we don’t think most companies have stopped to really think about it, especially when the numbers have been so good for so long.
Many companies do of course survey their customers, but surveys are often ignored or filled in too quickly. Also, they may hint that you do not care enough about what your customers think to ask them personally.
Our suggestion is that you seek face-to-face feedback – but make sure the person asking for feedback isn’t the person who delivers the service or product!If the person conducting the meeting is part of the sales team then it is unlikely that the customer will be honest as many people will tend to avoid uncomfortable situations.Giving bad feedback can be a very uncomfortable situation.Better to employ an independent party to speak to your clients asking hard and revealing questions such as “What would we have to do to lose the work?”.
Then, once you have some feedback, put in place a programme to help your people develop the mindset to help, and the skills to build trust.
To finish, let us leave you with a question to ponder.If your nearest competitor in terms of offering, quality and price were to drop their price by 20%, would your customer still buy from you regardless, would they expect you to drop your price accordingly or would they move their purchase to your competitor.The answer may give you an indication of where your relationship sits.