Anthony Iannarino | The Sales Blog

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Your Two Choices When Your Client Commoditizes You

alt text image of a person faced with two choices as a metaphor

Some circumstances can cause a client that previously treated you as a strategic partner because of the value you created for them and the results you helped them produce. They could have financial challenges that cause them to seek savings in all parts of the business, a change in their financial strategies, but whatever the reason, someone decided to spend less in your category in the future, not by expecting less, but by paying less.

When this happens, your client asks you to compete by filling out a Request for Proposal. In the worst cases, you don’t compete by filling out an RFP for their business, you complete one for each product or project, creating a problematic scenario, primarily if you built your relationship by creating greater value and by producing better results. The transactional, commoditized approach your client now takes prevents you from sharing your best insights. The process is more difficult, but also because your sales model can’t be sharing your ideas without being able to capture a fair portion of the value you create.

There are two primary strategies when you can no longer profitably serve your clients because they have commoditized your offering.

Fight for the Right to Create Compelling Differentiation

For this strategy to work, you have to be able to create compelling differentiation. Some B2B sales trainers share ideas about sales who believe that relationships are no longer critical, an idea not supported by any evidence, and an idea that conflicts with how Homo Sapiens tend to behave. Having spent time developing your relationships, the starting point for creating an opportunity to develop compelling, differentiated value is with the sympathetic audience. This audience would prefer to retain you, having chosen you as a partner.

Helping the people with whom you have built unassailable relationships means reminding them of all the ways you have helped them drive costs out of their business. You have also shared ideas that helped them solve problems they believed to be intractable or the proactive initiatives that helped them produce better results in some areas of the business. You are going to need your existing relationships to assist you in this fight, which means you may need them to insist that they keep you. You want to have the relationships you need before you need them; you want to have made enough deposits to cover the withdraw you are going to attempt to make.

If there is no additional value from buying from you instead of a competitor with a lower price, there is no reason to pay more. One of the reasons you can’t believe your lower-price competitor is cheaper is because the price is only one of the costs your client incurs when they buy something. The first place you might look to find differentiation is the soft costs your clients pay when they accept a price that is too low to support the results they need. Proving that the soft costs will increase what your client spends is an excellent place to start.

Starting with the first RFP, and, should you get one per project, you need to complain about the RFP. You don’t want to complain about having to compete for their business; you want to complain that the RFP doesn’t allow you to provide the best solutions because of the way it is written. Where there are different ways of doing things and one produces better results than another, you want to infect the person letting the RFP that they got something wrong. You also want to tell you contacts how the lower quality solution is going to cost them more than they might save by accepting a lower price (We call this idea, Concessions).

Like any strategy, nothing works one hundred percent of the time. When your margins collapse, and there is no compelling differentiation, you have one other choice.

Replace Your Commoditized Client and Recapture Them

The root cause of your desperation is not the loss of the client, but the fact that you don’t have a pipeline of potential replacements that would allow you to lose their business. Because this is true, you can compete for lower-margin business until you are using your company’s profit to pay for empty revenue. Were they not already your client, you would walk away from the bad business without a second thought.

Our fear of losing something we already have causes us to make bad decisions, which explains why you put forth more effort to retain a client with shrinking margins than you do finding clients who will value what you do enough to pay for it.

Sometimes, the best thing you can do is to walk away from bad business, even if it was previously considered good business. The transactional approach to buying may serve your client well. Still, there is a higher likelihood taking money out of their solutions will create enough problems that your contacts will become unhappy enough with shoddy products, bad experiences, lack of results, and difficulty achieving some of their more strategic goals that they decide to do something different.

Some people have to experience harm before they find the will to make changes. You can walk away from bad business without walking away from the contacts you serve. When their problems and complaints start to mount, you want to be sitting across from your contacts, explaining why the lower-priced offerings aren’t working and sharing the list of the concessions they made unknowingly.

Never is a lot longer than people believe. Our Sun is going to explode in 4 billion years or so, eliminating all life on this planet. But mostly, never is a lot shorter than people believe, especially when it comes to losing a client.

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