... for not choosing you
This blog has been six months in the making. Back in June, when I took a break from facilitating a Business Acumen for Sales Professionals session, I looked at my phone and saw three missed calls from a number I didn’t recognize which initially worried me that something someplace was wrong. I listened to the urgent voice mail from a participant at another client organization going through a different year-long Strategic Business Selling learning journey and sure enough, something was wrong…
“Hey Rob, remember you said to call you if ever we needed help? Well, I need help. I just found out that I didn’t get a big deal I thought we were going to get and now I don’t know what to do. How do I get back in there and reverse this decision?”
I called him back and shared that it is very unlikely that we are going to reverse the decision today. We discussed and explored some of the root causes for why he didn’t get the business and ultimately we determined there where three reasons why a competitor won the business:
- The competitive price was 8% lower
- The competitor offered a two-year deal with no price increases
- The competitor was offering 75 days to pay (as opposed to 30 days to pay)
I asked the participant what he positioned as his value proposition and he shared:
- Guaranteed supply security
- Higher quality materials
- Technical support
At the time, we discussed several factors that caused the final decision maker not to go with the participant’s offer. The chief driver was “price,” but the mistake the participant made was not presenting the entire value proposition from the total business perspective. I suggested that the decision maker made a short-sighted decision and didn’t take into account all of the factors needed to make the right decision. I shared with the participant an idea; let’s come back and revisit the customer in 6 months and let’s make him “sorry” for his decision.
Here it is mid-December, and I just finished an update call with the participant. He had an account review meeting with the customer who had turned him down in June and here’s what he discovered by engaging in a business dialogue:
- The vendor of choice missed two deliveries in the last 6 months
- Several batches have been rejected for quality issues
- The transportation costs were higher than originally budgeted for
I said, “Perfect! Now you can go back and utilize your strong business acumen skills to make that customer sorry.”
I recommended a further business review with the customer that quantifies that actual costs of ownership and impact to the customer’s brand equity – including the fact that the customer let their customer’s down by not being able to deliver product – so the customer can see the results and metrics of the decision. Here are the high level business acumen perspectives for an order of 1,565 containers of material:
Competitor A (the participant I am working with)
- Price of material = $456 per container
- Shipping costs = $16 per container
- Payment terms = 30 days
Total cost of ownership = $472 per container
Competitor B (the company that won the deal)
- Price of material = $420 per container
- Shipping costs = $22 per container
- Payment terms = 75 days
How much did it cost the customer to lose customers/reputation for missing deliveries because they didn’t have materials?
The customer admitted they lost about 265 containers of sales at a retail price of $889 (almost $236,000 of revenue). The customer also lost $6 per unit in higher shipping costs. The quality issues resulted in another replacement of 78 containers and there was a significant amount of lost time apologizing to the customer’s customer about the issues which has hurt the brand.
To quantify the total cost of ownership:
- Raw cost per container = $420
- Additional shipping costs = $6
- Lost revenues and replacement costs (spread over entire order per unit) = $38
- Lost perception of quality - $10 (we approximated this based on volumes of sales)
- Savings on cash flow = +1 (this benefitted the customer)
Total cost of ownership = $473 per container
When all of the analysis is completed, competitor B was more expensive for the customer in both the short term (actual total cost of ownership) and in the long-term (loss of confidence) as a result of the supply failures and quality issues.
When the participant presented this to the customer, the customer truly was sorry he didn’t choose him in the first place!
In summary, Business Acumen skills matter. Having the ability to engage in business dialogues that position value and cost to customers is as important as product knowledge and the strength of the relationship.