Buyers & Sellers: In the first part of our series, we examined the implications of IT buyers negotiating positions rather than interests. Neglecting to examine seller motivations and organizational structures that may give them an edge. In this installment, we take a look at sales missteps that stem from an ignorance of the organizational pressures on buyers.
What Suppliers Don’t Know About their CustomersUnlike buyers, who often simply neglect supplier interests, sales teams are much more likely to be keenly interested in what buyers want, but often misread the signs or make the leap to thinking that they know what the buyer wants. Having someone that has been on the buy side can be invaluable to help avoid these unwarranted assumptions. Buyers & Sellers Honesty Dance. Here are just some of the things an ex-buyer will tell your sales team.
- Most of your calls are an annoyance, but they don’t have to be. Most sellers call to ask a question about something that matters to them; not what matters to the buyer, e.g. “when are you making a decision?” Great salespeople call with a news item about a competitor, a sneak preview at an analyst report, a bit of inside knowledge about features that the client should be using but isn’t. In other words, they know that they are asking the buyer for something with high value – their time, and in order to earn that time, they need to provide something of value. Even if the “when are you going…” conversation never starts, sometimes you simply invest in giving value as a good-will gesture.
- The RFP game is often rigged. Unless your client has extensive internal expertise in a domain or has an external advisor like RampRate, their evaluation will often favor an incumbent or the first provider they called, who got to set the tone for all discussions. Making sure the client asks the right questions in their RFP and builds a balanced evaluation model (or gets an objective advisor) is half the battle. If you suspect that isn’t the case, you often need to find the most senior decision maker to reframe the discussion – or no-bid the project.
- Savings aren’t necessarily or always good. Cost savings without a good place to reinvest them often only serve to reduce your customer’s budget. Calling your client with not just a cost reduction, but a new service to reinvest that money into — with real impact on performance, productivity, reliability, or security — can be a key to getting the excitement you expect. Then again, some execs are bonused on savings as well – so knowing the right balance between lower cost and higher value is crucial.
- Small clients can be disproportionately important. Think your buyer is a secondary account? What if their private equity investor is building a centralized IT strategy across its $1B+ portfolio and the best relationship they have in your service line is with your small insignificant client? What if their CIO carries an outsize influence among his or her peers? What if they are indeed the rare “hockey stick” growth firm?
- Your “discount to land a big logo” strategy can backfire. Sure, landing a Fortune 100 logo is a big win. But it may be forced to be a quiet one as more large buyers are reluctant to associate themselves with providers publicly due to security, competitive Intel or reputation risk concerns. So giving someone a discount for being big might not advance your own marketing efforts as much as you think. And at this scale, there is no such thing as an introductory offer – good sourcing teams will make sure that your margins stay lean indefinitely.
- Your social responsibility may matter a lot. More and more buyers are looking at corporate social responsibility (CSR) ratings, and eco-sustainability practices and rankings. Carbon matters. Diversity and other employment practices matter. Supply chain matters. Transparency matters. Or they might just care about the price and not care if you club baby seals. If you don’t know, your pitch will miss the mark
- Sourcing advisors are on your side. Although we may seem like an annoyance, with in-depth probing and prodding under the covers, our goal really is a long, satisfying and successful marriage that doesn’t require too much time mediating future issues. So, if you’re wondering why we ask all of the questions we ask, it may be useful to you to know that less than one percent of RampRate clients terminated a deal early (vs. 48% of all outsourced buyers in a Recent Deloitte study).
Identifying the Buyer’s Interests – Buyers & Sellers Honesty DanceHere are just a few questions you can ask to see how to best position your services in a negotiation:
- What are the top things that kept you up at night last month? Unplanned outages? Budget shortfalls? Staffing shortages? Looking bad in a CIO presentation?
- Conversely, what makes you a hero in your organization? Cost savings? Uptime? Agility/fast launches?
- What peer groups do you participate in? Do your investors help drive your IT services strategy? If so, who are they listening to?
- What’s your policy on publicity such as participating in case studies? On being willing to co-present or be on panels at conferences? Do you actively participate with your Supplier in training or workshops?
- What are the dimensions of your supplier evaluation scorecard?
- Have you considered using a sourcing advisor to help you make a better decision?
Making Use of the Shared KnowledgeNow that you know a little more about what truly motivates the folks on the other side of the table, you can engage in a truly balanced negotiation. For example:
- A buyer gets out of its outdated landline contract a bit early and buys mobile device management and some cloud services at half the price but twice the commission to the sales team
- A seller that has moved upmarket from wholesale to retail but has a cap on their expansion happily takes back premium data center space from a wholesale buyer and resells it to smaller retail customers at 2x the price
- A CDN provider compensates an influential but small customer with free services instead of delivery cost reductions mid-contract. The customer retains his budget and heartily recommends its provider during its local CIO club outing.
- A customer takes an anchor tenancy in a new facility to impress the new CFO with exceptionally low rates and repays the provider by giving all the big carriers a reason to come to the building as well as being a reference client for buyers unsure about being an early adopter.