Situation: A B2B company has historically negotiated pricing with customers individually. While there are similarities between customers, each receives a product customized to their needs. The CEO is considering creating a “full disclosure” pricing model including their costs and seeks feedback from others. Do you share company costs with customers?
Advice from the CEOs:
With only two exceptions, the CEOs did not agree with the concept of fully disclosing their cost structure to the customer.
The industry exceptions were public construction and government work. Some cities and the federal government require cost breakdowns and mark-ups by regulation.
The difficulty with the profit or license line, however it’s labeled, is that it becomes obvious that this is the company’s profit ‘nut.” This may be shared with a CEO that you respect; however, if the CEO shares this information with others in the organization your cost breakdown may become the basis for future line-by -line negotiations for cost reduction. Those with whom your company negotiates will be acting in their company’s interests, not yours.
The key is to optimizing pricing is to identify and sell a solution to the customer’s pain. If you do your homework well, and the customer is the right prospect, the price that you charge will pale in comparison to the costs that the customer seeks to avoid.
In your first negotiation, make sure that you have identified the customer’s pain and are presenting a value that addresses this pain. Only after you set expectations and have assured balance of effort do you go into more detail about your cost structure. Even here, only share detailed cost information if you deem this critical to the sale.
Look at it this way – price is not the key issue. The key issue is whether you can solve the customer’s problem and do so while providing an appropriate return on investment for the customer.
Situation: A CEO wants to add a key person in sales. For a long time most sales have been handled by a long-term employee with a strong sales background in the company’s market, often working closely with the CEO. This sales person is nearing retirement. What process do you use to add a new sales person?
Advice from the CEOs:
Involve non-sales personnel in the interview process. These individuals are important to your company culture, and will necessarily be working with the sales person. They may bring insights to the interview process that you do not see. In addition, involving them in the selection process will smooth the on-boarding process of your eventual hire.
Work with current staff to create a 90-day on-boarding plan for the new person. This helps in two ways: it identifies important characteristics that you will want to see in a good candidate, and it provides an on-boarding road map that will help the new hire to succeed.
Consider going one step further and have current personnel identify and pre-qualify candidates for you.
Use creative as well as traditional methods to identify potential candidates. In the process, make sure that you are not misrepresenting your situation or creating legal or ethical problems.
Have your options in place when you are ready to move on a particular candidate.
Situation: A company offers a service that can potentially boost clients’ revenues by 50% or more. However, the CEO has found it difficult to communicate this value proposition to potential clients. While some clients understand and have bought the company’s service, too many others have not. How do you communicate your value proposition?
Advice from the CEOs:
Not everybody will buy any service, no matter what advantages it offers. Here are steps to take:
Make a list of clients that you have closed, and those that you have not.
Identify whether there is a difference in the profile of the clients that you’ve closed and those that you didn’t.
From the commonalities among those clients that have accepted your value proposition, create an ideal customer profile.
Use this profile to pre-qualify potential new clients and assure that they meet this profile before investing in sales efforts.
By focusing sales efforts on those clients that you are most likely to close, you will improve your close rate and also reduce your sales cost to revenue ratio.
As you cultivate a new prospect, identify those individuals within the client company who can block your sale. Make these individuals heroes for supporting your offering. Offer them appealing learning retreats. Offer augmentations that appeal to the unique needs of the client. Raise your prices to fund these augmentations, but more than cover these costs with boosted revenues to the client.
Focus on the key WIIFM – “What’s in it for me” – that will appeal to key purchase influencers. Enlist these people as your evangelists within the client.
Emphasize not just financial benefits, but quality of life benefits that will accrue to clients through your service. Back this with a guarantee that you feel comfortable making.
Situation: A company has goals and objectives in place for the whole company. The challenge is that they need to focus top managers on effective processes and not just on their team’s objectives. In particular they want to increase focus on cross-functional processes. How do you focus managers on process?
Advice from the CEOs:
Start by identifying all critical processes. Once this is done, build an in-house system to track these.
Make contingency decisions dependent upon sticking with the processes.
Consistent follow-through is essential – talk through the blocks as they arise.
Don’t become a slave to your own system. Stay flexible and allow appropriate non-prescriptive behavior/solutions where it makes sense. This helps to feed creativity in the organization.
Be an advocate/cheerleader for the new culture. Employees need ongoing encouragement as they shift focus to the new regime.
Build an underlying culture to support your processes. This takes time and persistence.
If you are growing, as you hire new people, select new employees who fit the new culture. This helps to create lead models for the rest of the group.
By definition, growth means increasing infrastructure, which in turn means more restrictions and rules. Keep it fun. For example, create a wine penalty for missing deadlines.
If you’re late on your deliverable you have to contribute a good bottle of wine, with your name and the month that you were late on a tag attached to the bottle.
Contributed bottles of wine are shared at the company Christmas or holiday party.