| Ask the Sales Doctor |
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| This is a weekly column transcribed from my Radio Show. "Ask the Sales Doctor" is the segment of the show in which I answer questions sent in by listeners. Send in your questions by mail, email, fax or phone. If I pick yours to be "Question of the Week", you'll win an autographed copy of my best-selling book, The Six Steps to Excellence in Selling. |
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| Competing with the Internet |
Bradley from Charlotte, North Carolina writes:
"The Internet is making my life miserable. In the past, I could sell my customers industrial products at 35-38% margins. Now my customers, buyers at large corporations, are using the Internet to source my products for 10-15% less. I have to match prices or run the risk of losing the business. My expenses are higher than the Internet companies'. I'm spending money on lunches and golf outings, giving education and consulting for free, and now I get beat up on price as a reward. What's up?"
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Warren answers:
 I'll tell you, Brad. You're in a really tough position for a number of reasons. I'll tell you what. There are two strategies that I've got here. Number one you're not going to like. That is that you'd better find some new prospects because your model, it seems to me - lunches and golf outings. 35-38% margins in industrial products seems a little bit high to me. I've got a lot of industrial customers, and they're operating on 27-28% margins, which is right at your 10-15% less. So maybe you've had such great relationships with these people over time that they've been paying more and liking it. Well, that's not the way it is today. With disintermediation [?] going on with the Internet, you're going to face this every single day now and into the future.
But I will give you some ideas on how you might be able to do a better job at not only not losing this business but being able to hold a little bit of the price. One of my clients is in the custom automobile/van business, making them good for handicap people. There are four or five manufacturers, three of whom compete on price, two of whom compete on value. My client is with the value proposition people. I was working with one of the salespeople in his office. There was a customer in Portland, Oregon that was really beating him up on price. I wrote down notes. I always write notes to people, "Say this, ask this." I wrote down the words, "Why in the world would you want to buy this vehicle from me?"
So Brad, I pose the same question to you. Ask your customers why they buy from you, or why they would by from you, or why they like to buy from you. You'd be surprised at the response. In this particular case, the customer gave all these reasons. "Your customers love you. You've got on-sight service. Blah, blah, blah, blah, blah." And the customer talked himself into paying more to work with this particular company.
So what I'm getting at is you have to ask your customers, Bradley, if you are giving them any value. If you're not, then you're in a very tough position. You're between the proverbial rock and the hard place.
I feel like I'm being hard on you, but the other thing I'd do is cut out the golf and the lunch bit. That seems kind of like a Willie Lowman is dead thing. If you think that it's jokes and cigars and alcohol and golf outings and lunches that are going to endear your clients to you, you have rude awakening coming because nowadays, everybody is trying to cut anything they can to the bone. Any middleman is being cut out. Anybody is being disintermediated who can be. So your client base, large corporations, they are in hyper-competition, Brad. There is global pressure on every one of us to perform better, faster, cheaper. So that's my second thing. Prepare to defend that part of your price disadvantage by finding out a way that your product or service is better. Is it warranties, guarantees, is it service? You have something you do, this education where you teach some things and consulting? Maybe it can be bundled. If they just want the price you'll take away the education, you'll take away the consulting.
Those are some of my ideas. I think you will find something that I'm finding as I travel across the country. All of my listeners can benefit from this. The ability to find and get new customers is going to be incredibly highly valued in the new business-to-business environment that we find ourselves in. Brad, it sounds like you have to be one of those vanguard, leading edge people. You have to get out there and start finding ways to build or rebuild that business.
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| Warren's Favorite's |
Maximize Your Networking Skills
What do you recommend to do after you've attended a network party where you've met new potential customers?
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Getting Nosy
As a financial advisor I have to ask people some pretty nosy questions. This is easy to do after I've developed...
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– Warren
Wechsler |
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