SELLING AND GETTING PAID FOR BETTER SERVICE
customers have become aggressive shoppers out of economic necessity. They don't
want to hear about our products; they want cost reductions. Too often core
customers are shopping and then giving us “last look” to meet the competitions'
better prices and terms or risk losing the business.
the entrenched supplier, we should have had the opportunities to both solve
customers' problems and fine-tune service levels for them. Shouldn't these
extra service values that grow with the relationship warrant “last look” plus
extra margin consideration? If so, how do we increase our courage and skills
for justifying that premium?
A DREAM SCENARIO
that a customer offers us last look and that our front-line hero on the spot -
stands firm, does not blink, perhaps gets a bit indignant and states the
Customer, I appreciate that times are tough and that you need and deserve the
lowest total cost possible. With your current buying process, we are already
the best total cost solution even though our price might be higher than what a
prospective supplier might offer. We deserve a last-look at the low market rate
plus a premium for at least two distinct value-added reasons.
unique, you can't get me from any other supplier and I want to remind you of
some things that I have done for you in the past out of my own value-added
initiative which have all saved you costs. For example,...(review them). For
being a top-flight sales rep, I deserve last look and something more just for
is my company's extra value-added. As our firms have worked together, we have
unconsciously built trustworthy relations and efficient routines that save
time, costs and anxieties. Our inventory levels, for example, now reflect our
past usage, so your fill-rates are consistently higher than when we first
started doing business.
If you switch
suppliers, there will be switching costs until you re-create what we already
have together. Plus, there are risks. A new supplier's final service
performance may fall short of ours, and they may try to raise prices back to
our current level or higher to make a fair profit after buying their way in at
a loss. For being a proven supplier and to avoid switching costs and risks, my
firm also deserves last look and something more.
If you want
significant cost reductions, then we should consider entering into a
cooperative, sole-supplier relationship. If we rethink our buying and selling
methods together, then we can reduce all elements of total procurement cost
including price. Otherwise, what we are already doing together is the best
total economic value.”
script above including a happy ending for us could only happen if we meet at
least three conditions: 1) such a customer must be a “value buyer”; 2) our
sales rep and company would have been creating and delivering distinctive
service values all along; and 3) we would have been continuously selling the
value of our services instead of waiting for a last-look confrontation.
first condition is likely, because roughly 80% of U.S. adults want
“best value”, 5-10% of Americans are pure-price buyers who will trade bigger,
hidden costs for smaller, measurable price savings. And, 5-15% are
psychological or carriage trade types. This doesn't mean that the value buyers
can specifically define what “value” is. They do listen, though, to total
economic value solutions.
large value buyers will not tell a supplier that they are the best value
source. They would prefer to get both the best service value and the lowest
market price. This can only happen when either the best supplier caves in on
“last-looks”, or two firms work cooperatively within a sole-supplier relationship.
other prerequisite conditions mentioned above are less likely to be in place.
In surveys, big buyers claim that about 10% of the sales reps are worth seeing.
These top reps should have a history of memorable value-added efforts for which
they could justify “last look plus.” The other 90% might have undistinguished
value-added records and would be happy to get last look and meet the new, low
entrenched supply firm should have been also working steadily to fine-tune the
value-added services and to create multiple, personal, chemical bonds with each
core account before last-look day. Because many firms have under-invested in
these activities, they might also be glad to meet a price. Now that tough times
are converting more customers into instant value migrants, more suppliers might
shift resources into customer retention and value re-invention measures.
entrenched suppliers should still have, though, an unconsciously created,
higher level of service value. While many buyers and sellers may now
under-appreciate this value, it isn't too late for suppliers to start to
identify, measure, sell and get paid for it. Most firms and their salespeople
are good at selling their tangible goods, but
few have any formal education or practiced ability for selling service
economics. We need to address this shortfall quickly to help stem further
STEPS TO CONSIDER
Salespeople need to survey customers regularly on what they have liked about
the best sales reps they have ever dealt with and what they disliked about the
worst reps. With this steady feedback, reps must continuously re-invent their
personal value-added efforts to become top 10 percentile performers worthy of
last look plus.
A sales team should generate a list of every special effort that they can
recall for each core account. Put these lists in a “can you help me” format and
review them with the customer. Ask them if these efforts were worthwhile and if
the list sparks ideas for new service improvements. This is a disguised and
disarming way of selling hidden relationship value before last-look day
Management must start participating in an annual schedule of team-selling.
While on calls, they should be asking about customer frustrations with
suppliers and new procurement objectives. We must keep looking for compelling,
unmet needs that we can fill at a cost that is less than what the customer
agrees to pay for it.
Sales training must re-focus on the how-to's of selling service economics. Does
everyone know: all variations for effectively cutting the price; the eleven
elements of “total procurement cost” fluently; the steps for selling,
installing, measuring and creating service value ideas so switching costs are
obvious to the customer; how to smoke out value buyers masquerading as pure
price buyers; etc.
Have case discussion sessions at which successful salespeople share how they
have sold and gotten paid for service in the face of last-look pressure. These
meetings will give recognition to the best and courage, technique and fluency
to the rest.
Longer term, each company must continue to improve its basic service excellence
to distinctive levels to both keep and penetrate accounts at a greater rate
than the competition. Distinctive service will win last look and support a
margin rate that on average is 5 to 10% greater than the mediocre competitor's
margin percent. And, a service edge is more effective for wedging into new
accounts than price.
global-glut of equally excellent commodities will keep customers shopping and
competition chopping for years to come. The competitive edge will come through
service value-added, but we must continually re-invent and re-sell this set of
intangible values to succeed and prosper. An excellent Pacific-Northwest
distributor is planning to have his sales force ready to get last look plus 2%
more on the price. Their new year's slogan will be “Two for me in this new
year”; more of us should join them in selling value.
Consulting Group, Inc. Article # 3.8