A little about me
I have spent most of my working life working in the B2B space: auditing/accountancy, corporate recovery, management consulting, IT professional service and marketing services. And there is something that I have noticed during the latter years that was not present in the earlier years.
How the B2B sales and B2B buyer dance tends to work out
Here is what has happened more often in the latter years. The B2B sales guy is courting the B2B buyer and the buyer makes sure that the sales guy knows that he is only one of a number of people courting the buyer. What does just about every B2B sales guy (that I have worked with / come across) do? The one that expends (and wastes) the least effort just drops his price to the absolute minimum he can get away with. The most wasteful one has his organisation put in a ton of effort educating the buyer, coming up with shiny objects, detours/side shows, and in the end drops his price to the absolute minimum.
When he wins he is delighted, it is something to show the folks (that matter) back at home. The people back at home are rather simple and confuse revenue with profitability. They don’t even think of cash-flow. When he does not win he tends to say that the other guy won because he offered the lowest price: “we are just not price competitive enough!”
Once the delight of the win fades, reality hits home – at least to the team that has to deliver on the promise. It soon becomes clear that it is not possible to deliver what has been promised and make enough of a profit on the work. Here it goes one of two ways. Either the least investment is made – people, time, effort – to get the job done so that it is done just good enough. Or the pressure is placed on the delivery team to work long hours (not bill them) and deliver a great job.
What is the thinking about doing a great job? This usually happens when the piece of work is being done is the first piece of work for a new customer. And there is the carrot of a lot more work to come. The organisations management (including the sales guy) is convinced that doing a great job will secure a promising future. A future where the B2B sales guy has the upper hand: he can charge higher (more realistic prices) and win a steady flow of big piece/s of work usually termed “implementation”.
Welcome to the ‘dark side’ of the human condition
What actually happens? Before I spell that out let me just remind you of the darker side of human beings. In particular what I call the ‘four prime directives of the dark side’:
- Look good, avoid looking bad;
- Be right, avoid being wrong;
- Strive for control and dominate, avoid losing control and being dominated;
- Justify self, invalidate others.
Back to the B2B sales/buyer dance and how it plays out
Back to my question, what happens? The buyer wants to continue looking good and is at pains to avoid looking bad in the eyes of his boss, his organisation. So he insists on getting a discount on the existing price he is paying in order for him to reward further and usually larger pieces of work to the B2B sales guy.
The buyer insists he is right, he is being reasonable. Loyal customers (like him) should get a volume discount isn’t that what loyalty merits?. The B2B sales guy explains that he dropped his prices to ‘cost’, even made a loss, on the expectation of higher prices for the follow on work when value had been demonstrated. What happens? The B2B buyer justifies himself, his stance! And proceeds to invalidate the B2B sales guy’s perspective.
During the whole encounter “negotiation” (which can be from days to months) the B2B buyer is determined to be in control and dominate the B2B sales guy and avoid being controlled/dominated (taken for a ride) by the B2B sales guy. After all, he got to do it the first time and the B2B sales guy was ok with it. Why change now?
Now what happens? The B2B sales guy caves in and gives the buyer pretty much what he is asking for. What drives his action? Fear, the fear of looking bad in his organisation and the desire to look good. The folks back home are not that sharp: they will rejoice in the revenue and not look too hard on the margin on the piece of work that has been won. And of course, the long hours (with no pay for the extra work) will be worked by the guys who deliver stuff.
And the same cycle repeats itself in the next sales encounter especially if it is a ‘brand name’ that is well known and thus highly valued by the organisation: a brand name that gives bragging rights.
Somewhere in the organisation is a finance guy (like me – I qualified as a chartered accountant many years ago) is wondering why the folks in the organisation are doing what they are doing. Why are you guys selling valuable people/skills/expertise so cheaply and thus giving up revenues that are needed to invest in and grow the business – the people, the methodologies, the thought leadership, the tools..?
What I have to say about the B2B sales/buyer dance
I am not an expert in sales and yet I have done selling and account management. Arguably, you might say that I know a thing or two about people and negotiations. And I say to the B2B sales guy, your leverage is right at the start. You have to position yourself and your organisation correctly right at the start by genuinely creating value for the buyer right at the start.
When I say creating I mean creating value – not talking about creating value. I mean being/living/embodying the value. How? Here are some ways I have gone about it and that have worked for me:
1. Take and demonstrate a deep interest in the company, the industry and the markets that the company operates in. That often means showcasing a good grasp of the history of the company and where it has got to be. This is not easy, it takes time and requires real dedication.
2. Use the work that you have done to generate insight into the situation that the company is facing and the options that are available to the company. Explore those options with the buyer (and his colleagues) by facilitating a workshop (or two) to explore the options and their implications.
3. Take the buyer (and his colleagues) through concrete examples of how exactly you/your organisation have addressed that kind of situation/issue/problem, the hurdles that came up along the journey, where they came up, why they came up, how they were addressed or not, the outcome and lessons learned.
4. Take the buyer (and his colleagues) as concretely as possible through the journey he/his organisation is going to go through. Help him to visualise the assets he/his organisation has. Help him visualise the obstacles that are there already and the ones that are likely to show up given his organisation/his unique situation. Work with him to develop ways that you/your organisation and he/his organisation can work together to handle/overcome them.
I hear you say that this is a lot of work. I agree, it is a lot of work. I hear you say that this is simply not possible because you situation is such that you are not allowed to meet the buyer (and his colleagues) to do what I propose as the whole process has to be done at arms length. I say that when that has been the case I have made it clear that the price of my participation in the game is access (one or two workshops) to the buyer and the key people who are party to the issue at hand and addressing it. And where this has not been granted I have walked away.
As a result of the time/effort that I have taken and the value that I have created, I have had the confidence and desire to charge the right price. The price that goes with the value that I have created (already) and am committed to bringing to the customer when I take him on as a customer. Put differently, when I have done it right, like I know it can/needs to be done, I have not had to discount my price to win the work.
It might just be that I do what I do because first and foremost I have the being of an educator, a coach, an advisor. . And I have never been put through ‘sales school’ and come out as a sales person. What do you say? What is your experience?
And can you please help me understand why B2B sales guys do what they do – again and again? Why do they continue doing what they do and yet expect a different result each time?