By Derek Smith
Sometimes even doing everything right isn’t enough – you need to let customers know that you are doing the right things.
Especially during a down economy when every customer is looking to shave expenses wherever they can, the added value your company brings to theirs can be taken for granted or forgotten. Customers too strongly focused on the price of products can easily lose sight of the bigger picture business relationship you have spent years nurturing.
To save a couple of dollars on a brake drum, customers may take their business elsewhere, not realizing that the additional services and expertise they are leaving behind will cost them much more in the long run.
“The biggest pitfall of selling on price is that nobody wins, not even the buyer,” says Chuck Marrale, president of One On One Sales Development, Inc. “If I beat you on price, you’ve lost the customer. I’ve gained the customer but lost margin. And, ultimately, the customer is going to expect a level of service that he was getting when the price was higher, and he won’t get it, so he’s lost. Nobody wins.”
Focusing on price alone is a no-win strategy. Someone always will have a lower price, so it is shaky ground on which to differentiate your business.
“Other than the obvious loss of operating revenue, price selling causes competition based solely on who has the lowest price,” says Tim Kraus, president and CEO of the Heavy Duty Manufacturers Association. “Price selling always spirals downward. The ability of the distributor to differentiate based on service, knowledge, support and availability becomes impossible as margins erode.”
A distributor makes a name for himself by doing something unique or doing something better than the rest. If there is a niche to fill – whether it be products or services – there will be a distributor ready to meet that market need.
But too often distributors do a poor job at promoting the products and services they provide. They may assume customers and prospects already know all there is to know about their business and they fail to effectively promote the full breadth and depth of their true value proposition.
It’s a costly mistake that can not only prevent growth of new business opportunities, but it also can lead to customers jumping ship because they don’t know what you can do for them, or what you might already be doing that they simply are taking for granted.
“Letting your customers know what value you provide is probably the most important factor for a distributor’s profitability and their ultimate sales,” says Marrale. “The key question that a distributor has to ask is what do they offer beyond the normal services to justify their price. We’re in a market that has been driven by price for so many years, that distributors … take the services that they offer for granted and assume the customers know that they are there.
“They don’t promote them, they don’t sell them. Some of these customers have been doing business with a distributor for 20 or more years and all of a sudden will say, ‘you do that?’ or ‘you do this?’ The distributors need to better promote and market their services.”
While there is sometimes a fine line between self promotion and boasting, communicating the legitimate value you bring to the marketplace is not a time to be bashful.
“A company can self-promote and brag all it wants, as long as it is being honest and able to back up its claim with facts and a list of happy customers that reinforce it,” says Kraus. “Heavy-duty distributors tend to be fairly humble and a little self-promotion is a needed entity with many of them. They are the backbone of the heavy-duty aftermarket and in many cases need to assert themselves more in their markets.”
But be careful when promoting your business that the claims are honest and you do not overpromise. That can be more damaging than making no promise at all.
“When a supplier can’t deliver as promised, the trust is broken and it can be difficult to rebuild,” says Gloria Pliler, director of Parts Procurement for Swift Transportation.
WHO ARE YOU?
To communicate who you are, you need to know who you are.
“To effectively train and equip employees to project the company’s value proposition, one must first define it,” says Kraus. “One method is to bring together a group of your people in a brainstorming session and define who you are, what you do, and how and why you do what you do. You must establish the overall value proposition of an organization and articulate that to the people at all levels of the organization. The high-performance companies in the industry are the ones where everyone is reading from the same book, understanding continuous improvement and conducting business as a constant process of moving toward excellence.”
Even more importantly than knowing who you are and what makes your business exceptional, is knowing how that fits in the market and meets specific customer needs. That requires listening to customers.
“You’ve got to figure out a way to listen – figure out what the customer needs and wants and go in and listen,” says Pat Bierman, president of HDA Parts Network. “And you’ve got your smorgasbord of things they want, so you find a fit. Let the customer know all of the things you do and ask him if price is the most important thing. If it is, they may be a customer that you don’t want.”
Rick Gregory [see the Guest Editorial, page 36] is president of R.C. Gregory & Co., a marketing consulting firm, and co-author of “The Dollarization Discipline.” His approach and the basis of the book is that added value needs to be defined financially.
Even companies that do a good job in marketing themselves and promoting their full suite of added-value services need to take it a step further and demonstrate how those services will impact the customer’s bottom line in a definable, monetary way.
If a company can’t effectively do that, the customer has only the price of the product to consider and the company may lose the sale – even if they brought greater value to the transaction.
“One of the core concepts is that whenever somebody buys something, at some point in the conversation they’re going to know what the price is, and the price is always stated in dollars and cents,” says Gregory. “Then when somebody is selling something, the way they’re trying to get you to part with your money is by using words. So how do you put a word on one side of the equation and a number on the other side of the equation and then decide how much money you should invest for those words?”
The more you know about the customer’s needs the better able you are to create a compelling equation. Gregory says salespeople need to do “consultative investigating.” He says spend time learning as much about the customer’s business as possible. Look for ways “you can either help them make some type of gain or you can help them avoid some kind of loss,” Gregory says.
For instance: Can you help them reduce their parts inventories? Increase their uptime? Lower maintenance costs? Boost employee productivity by taking over some responsibilities, such as warranty processing?
Make a two-sided list. On one side, put down the customer’s challenges and needs. On the other, put down the services you do or can offer. Then, connect the dots between the columns and match where your company can help theirs.
DO THE MATH
Gregory admits it takes practice and some things are harder to quantify than others, but it’s a worthwhile strategy. So many companies, he says, use the term value-added that it has become meaningless to customers. On the other hand, quantifying the value puts things in definite terms.
“If a seller asks me to pay one cent more for one product versus another, I want to know what I am getting in return for that extra investment,” says Gregory. “Words are a different language than money. If I say your investment of $10,000 will generate fuel savings for your fleet, how do you know if those savings will be less or more than the $10,000, and when will that happen?
“On the other hand, if I say your extra investment of $10,000 will be repaid in fuel savings in 10 months and will continue to generate $1,000 in savings every month after that, you now have a basis for judging the merits of that investment.”
While fuel savings is easier to quantify than, say, the value that your counter sales team and their decades of combined experience brings, putting a dollar sign on the latter is not impossible. Gregory says employee skill, knowledge and experience are features of a company and need to be expressed in how they benefit the customer.
“For example, skilled employees may result in faster selection and delivery of parts to a customer, which helps them get a premium for an emergency repair,” he says. “Knowledgeable employees might recommend an alternative that the customer hadn’t considered, which results in labor and materials savings.
“For each of the items on your list, you need to ask the questions, ‘So what? Who cares? And why should they care?’ Then answer those questions with money.”
It’s a strategy that for many will require a significant mind shift. Selling on product price is deeply ingrained in the minds of many salespeople and moving away from it to a broader, more meaningful approach will take training and practice.
“When the salespeople go out, all they do when it comes to attempting to get business from somebody is to give price quotes,” says Marrale. “They go in and see that they’re using this widget and they have a comparable widget so they ask if they can put together a price quote. They are in nothing more than a price negotiation position. They talk nothing about how much inventory they have. They talk nothing about all of the other services they can render, so naturally all of the discussion is pointed strictly at price.”
Winning the business based on price can prove to be unwelcomed. “All of a sudden this person wants same day or one-hour delivery because that’s what he got from the other guy,” Marrale says. “Then you have a problem because you’re giving your margin away.”
It also pays to be specific when tailoring the value you communicate to specific customer needs. For instance, Eagle Transport, based in Rocky Mount, N.C., is a bulk petroleum hauler with more than 350 power units. Safety, uptime and reducing chassis weight are priorities for a fleet of this profile, as opposed to lower-cost components or fuel-saving devices.
Richard Overman, vice president of Maintenance, says he worked with a local distributor, Stone Truck Parts, and its marketing partner, HDA Parts Network, to create a program that would serve Eagle Transport and all of its 22 full-service shops throughout the East Coast, from Delaware to Key West, Fla.
Overman says since safety is the top concern, he did not want parts procurement duties handled at individual locations, he wanted that responsibility. They worked together to create a Web-based system that allows the individual maintenance locations to go in and place orders, but the product choices and pricing are determined by Overman. That way, sales calls are not being made at every facility, reducing technician productivity and possibly leading to a component getting on one of their trucks that does not meet the fleet’s requirements.
“I don’t work off of the bottom line,” says Overman. “To me, it’s not a matter of how cheap I buy a part, it’s getting what I paid for. That’s the reason why we know exactly what brake shoe is going to work for us and exactly what brake drum is going to work for us. In the aftermarket, you’ve always got someone who can sell a product a whole lot cheaper, and it may work fine on an over-the-road piece of equipment, but it doesn’t work quite as well for a regional carrier, and it doesn’t work at all for a hazardous-material carrier. But they don’t all know that; most only know that if they sell it, they’re going to get a commission.”
Of course, price eventually will enter the discussion. But by the time it does, hopefully you have created a strong foundation so that it is not the only important factor the customer considers.
“Eventually through that proposal the customer is going to ask ‘what’s your price?’” says Marrale. You give the price and the customer may respond that he can get it cheaper elsewhere. Next, Marrale says, if you have the ability to sell it for that lower price, let the customer know, “but you don’t get this, this and this. In one way you’re justifying your price, but another thing you are doing is promoting your services.”
Moving away from price-based selling and communicating the true value of your company will ensure long-term success and help reduce some of the market’s inevitable cycles. Whether it is proposal-based selling or adopting principles from the “Dollarization Discipline,” if you don’t let your customers and prospects know what you do and what you do for them, nobody else is going to.
