In this video, Terry discusses what to do when a high value sale starts sliding down to lowest price, using an example from one of our clients in contract manufacturing.
In a vivid example of the slide to lowest price, we recently saw an ultra high-value competitor lose a piece of business because they were 40% higher on price.
This was in a contract manufacturing environment. The competitor (who later became our client) was providing components to a larger entity. They lost the business on price -- and that's when they called us.
We knew at the time that the lower-priced winner would probably have trouble producing enough parts at the right quantity at the right quality to be able to fulfill the contract.
So we waited a few months, and sure enough, about eight months later, the phone call comes in: "Can we talk?"
Thankfully, we were ready for the call. We had helped our client's sales team get ready for the call by focusing on what had happened in those eight months.
And of course, as we had expected, it turned out that the prospect (the company that chose the lowest-cost manufacturing provider) was not on track to make their launch date for this new product that was on the horizon. The lost time was costing them about a million dollars a day in sales.
So they had saved a few hundred thousand dollars up front on the price, but they lost millions in terms of overall cost.
This is because "time to market" is another component of overall cost. And prospects often don't look at the consequences, like slower time to market, that are associated with making a price-based decision.
So to apply this to your sales: you want to set your filter so that you're aware if they're using these terms ("price" and "cost") interchangeably. Because if they are, then they're probably going to go to price and try to ignore any consequences associated with making a price-based decision.
You also need to have what we refer to as a complete cast of characters in your sale, because remember: there are two essential members of the cast of characters in every complex sale.
The first one is what we refer to as a Logical Customer. That means it's a logical person for a salesperson to talk to if they have low price going for them, because that's all the Logical Customer cares about.
But there's another member of the cast of characters called the Emotional Customer. That's the person who has the receptors for the consequences of not having your value.
So in the example above, in order to have a complete cast of characters, you either have to be talking to both of those people, or, if you're trapped at the Logical Customer level, you have to master the conversation of pulling the Emotional Customer's agenda into that conversation.
It might sound like this: "What's going to be most important to you when you're picking a supplier?"
The Logical Customer is going to say "Price" because everything is a commodity to them.
You can ask a question in response, like this: "What if it turns out that the lowest-priced vendor that you select is actually the highest-cost producer because they can't meet time to market?"
When we get into this more complex part of sales, one of the things we understand is that if you intend to compete on value, you don't do very well if you have an incomplete cast of characters. You're got to be talking to both of them, or at least have both agendas in every conversation.
Logical Customers are almost always over on the supply chain side, or in vendor management. They deal in commodities and they like to think everything is a commodity.
We have often said that if you invented some new earth-shattering technology and you announced it to the Logical Customer, I promise you, by lunchtime, they'll be saying it's a commodity, even though nobody else has it.
So you'll probably have to talk to them at some point, and the conversation is going to be focused on price.
You get to ask, "What if it turns out that the lowest price is actually the highest cost overall?" This will shift the conversation from low price to your higher value.
And of course, the beautiful thing about talking to both the Logical and Emotional Customers is the Emotional Customer can usually tell the Logical Customer what to do. In this case, there was a business unit manager who was eating the cost of delay in time to market. The few hundred thousand in costs of components didn't matter when compared to the true cost of taking the product to market.
So there's price and then there's cost. You're going to discuss your value in terms of what it means to not have it, as opposed to just talking about the value in declarative sentences.
You have to go through a lot of translation so you and your prospect can talk about what your value really means. You can cut to the net by asking a great question, like, "Well, what if it turns out that there's a difference in time to market, depending on who you pick?" Now we're focusing on who would care the most about time to market.
Naturally, the Logical Customer hates that discussion because you just trashed their commoditization model. But as soon as you include the consequences to the Emotional Customer, whether they're in the room or not, it tends to make a conversation a little wider. And it's easier then to alter the decision process when you do that.
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