Competition has always been a major factor in the business world, but these days it seems like the competition is fiercer than ever. As a result, buyers are placing tremendous pressure on sales reps to discount price in order to close deals. As a matter of fact, one of the biggest requests I hear from sales managers and senior executives is, “What can I do to help my sales people stop caving in to all this pressure to give away our profits?”
Well, there are several options that can make a difference. Learning how to sell value over price is a big one, and developing better negotiating skills is another one. However, a long time ago I learned a principle that a lot of sales reps need to understand today, and it is simply this: sometimes the smartest thing you can do is just walk away.
Consider the example of a leading enterprise systems management software company known not only for its acquisitive nature but also for its very aggressive sales tactics. One of the sales tactics this software competitor uses when deadlocked in a highly competitive situation is to offer their software to the client for free. That’s right? free!
Their thinking is that they are glad to give away their software IF the customer will agree to purchase maintenance (customer support and updates) and professional services consulting for a specified period of time. The software company takes the loss on the front end but they lock in the customer – and lots of profits -- by tying the customer up with a long term maintenance deal. Not only does this produce a direct income stream, but it also allows their consulting division to become “entrenched” on the customer site. This can create a dependent relationship and make it very difficult for the customer to change vendors down the line.
So, let’s take a look at how this plays out during the proposal stage, when several vendors are jockeying for position. What if your company is competing with this other vendor to get the business?
Customer: “I think your product is exactly what we’re looking for but your competitor offered to provide us the software at no charge, so long as we buy maintenance.”
You: “I understand. Do you feel like their software will provide you the same functionality that ours does, and will meet all your team’s requirements?”
Customer: “No. I honestly don’t, but they’ve given me an offer I can’t refuse. The only way I can get our CFO to approve your product instead is if you can match their price. I can’t accept anything at a higher price. Can you do it?”
Now remember, what is their price? That’s right; they’re giving away the product for free! Is this the way you run your business? What kind of effect will this have on your company’s long-term prospects? Do you have a business model that can compete under these conditions? Is it wise to even climb into that swamp?
Sometimes the answer to that last question is a resounding, “NO!” When a customer is looking for a price or terms that are so unreasonable that the chances are very good that you will either not make any money on the deal or see what little profit you do make be eaten away by the extra aggravation of servicing a low-performing account, what makes the most sense is to simply walk away.
I mean it. Before you can be certain that a deal is a good deal for you and your company, you must always identify – before you even start the call – what your walk away point will be. Some deals simply aren’t worth pursuing because the effects of the sale may be too damaging to your company. Whenever the customer asks you to discount too deeply, provide a shipping date that is physically impossible or deliver a specific grade of a product that may not exist -- and they won’t budge from their position no matter how much you try to work with them -- you will be much better off to simply walk away.
As a matter of fact, walking away from a bad deal may actually pave the way for you to come back to that same customer in the future and get a better deal. Just because you perceive all is lost does not mean all is indeed lost. For instance, the customer may eventually discover that the wonderful deal with the “other” competitor turned out to be a bad deal for them. Or, a completely new opportunity may develop. No matter what, it is best to walk away in a manner that does not damage your relationship with your customer, because you may soon get another bite at the apple.
Walk away, but do so amicably, with respect and dignity. If you’ve built up a strong enough relationship, you may not leave empty-handed. There may be other groups within the company who can use your products or services. Your client may not provide you with the business you had forecasted but may point you in the right direction.
Once you’ve walked away, send a sincere thank you note and don’t lose touch. Be professional in every possible way so that your behavior and your communication reflect well upon you and your company. Finally, don’t forget that there are plenty of customers out there. Just because you lost this particular deal, don’t feel like you’re out of opportunities. Learn from the situation. The extensive proposal you built for the client may help you in future opportunities. Success may be as close as your next call.
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Quick Sales Tip of the Month – Before You Celebrate, Evaluate
It is a great feeling to get back to the office with that signed order in your briefcase, especially if it is a big customer you have worked on signing for a long time, or if this sale represents a breakthrough into a new market. But before you celebrate, remember to evaluate what happened and what you learned during this sales call. Sit down with key people in your office and go over what worked, what didn’t, and what new information you picked up about industry trends, competitors and customer needs. All of this information will help both you and the entire sales team look forward to many celebrations in the future.
