Relationship Selling: Relationship Selling Overcomes the Lowest Price Syndrome

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Part III - Relationship Selling Overcomes the Lowest Price Syndrome

Here’s how it works. The person responsible for revenue generation and expenses of a division or product line (the P/L person) sees you and your competitors as all alike if he hasn’t developed a relationship with you. A relationship means he associated you with the success of his business. If there are no relationships and it’s time to make an investment or a change, he says, “Get me the best deal,” which the functional and purchasing people interpret as price. The best way to get lowest price is bidding – commodity mentality.

This is why you are always in a competitive wrestling match. No one has developed a relationship with the senior person. It’s why you can’t gain share without lowering prices. You’re a commodity that can be easily replaced or substituted at any time. It’s also why you can’t introduce new technology. Even if the operations people say, “This would be great,” the P/L person will say, “Unless the business is threatened, let’s get along with what we have.” “Unless someone gives me a compelling reason, there is no need to spend here.”

What’s worse for you is the subordinates do not know what a “good deal” looks like to the boss, or what he sees as compelling because they haven’t asked for details. Rarely will a worker bee say, “Boss what’s a good deal look like to you, or what’s a compelling reason to pay more?” Like sales people, they are intimidated, so they assume what it should be. Unfortunately they are too consumed with their own desires and see the boss’s vision through their filters, which is usually wrong or inaccurate.

When you lose a sale in an existing account (negative impact on market share), listen to the reasons – price, financial conditions changed or some competitive tale. The real reason is that the P/L person didn’t see you as anything special to pay more, or he did pay more because somebody developed a relationship by seeing what was valuable to the leader, or he didn’t buy because he saw no compelling reason to change and/or buy anything.

Whoever relationship sells, that is be seen by the leader as a resource - helping him do his business better, will get the contracts.

A Relationship Selling Example

Recently a semi conductor client of mine wanted to move customer A’s production from one fab site to another, to make room for customer B’s production. This would cause Customer A’s unit price to go up, and to make it worse; A would also have to pay $260,000 for new tooling. They proposed this to A’s operations and purchasing people, and they went nuts. “No way,” they said. “Do you think we’re crazy? Besides, our boss will fire us.”

They asked for my help. I told them to get to the GM and find out what was critical to his success. We strategized on relationship to use to get there and what to do once they got there. Using my interviewing process the learned that capacity was the key to him because in electronics when business is good, semi conductors go on allocation and he knew it. The GM’s most important issue was to get his electronics to his customers or else his competitors would. Knowing this my client’ people went back and came up with a plan to guarantee A his capacity in return for moving the fab site and paying the tooling changes and incurring a higher unit cost. Sounds crazy, but A went for it because the General Manager who was responsible for sales and production felt that the guarantee of capacity was far more important for him than the extra expenses. Additionally, the people build a better relationship to move forward.

Had my client not known this, they would have had a tough time negotiating and could have lost Customer A. Had they stuck with the operations or purchasing people, they would have failed. Conclusion: It’s all about a relationship with the person who’s responsible for what your product or service does for his organization. If you can’t tie into his deal, you’re one of the bunch or you’re not needed.