At the age of seventeen I bought my first car. A friend convinced me to spend £65 on an aging Wolseley (transl. $200 for an old Chevy), one that had already swapped many pounds of sheet metal for many pounds of rust. However, the most important point to me was that this was what I could afford – and I was finally mobile.
Perhaps unsurprisingly, it seemed that every week post-purchase various parts of the car would fail to do what they were supposed to do; the brakes would fail to brake, the windshield wipers would fail to wipe, the shock absorbers would fail to absorb, and the tires wore at an alarming rate. Most days the Wolseley felt less like an automobile and more like a collection of defective pieces, each with their own maladies and idiosyncrasies.
Due to my limited funds, each of these challenges to my mobility would be met in a similar fashion. I would spend countless hours bent over or lying under the vehicle armed with the few tools I could beg for or borrow in an effort of find, fix, or replace the offending part. In so doing, I became well known to the local junkyard owner as I scavenged the carcasses of similar cars – many of which seemed in better shape than my own. And while their parts were rarely better than the bits that had failed my own vehicle, compared to paying for new and genuine replacements, they were a bargain.
I was definitely buying cheap – but at what cost? The many mornings, afternoons, and evenings I spent continually fixing my car were on my own time, which I had naively valued at zero. Throughout the course of ownership, I wondered if I would have saved money splurging for new tires or new shock absorbers. Nowadays I think so.
The Risks of the “Reverse Auction”
Over the years there has been an undeniable trend across the purchasing departments of corporate America to ensure no more is spent on the acquisition of products and services than absolutely necessary. It seems that life of sales has been reduced to ever increasing discounts, more ferocious competition, and greater commoditization. Lo and behold the “reverse auction,” where suppliers are forced to bid each other’s prices down to the last man standing in order to win the business.
I don’t believe that there is anything wrong with this if all of the suppliers and their associated offerings are equal; that said, I also believe this is a rare occurrence. If there really is no difference, then your customers have every right to simply demand the lowest bill. But is everything about your offering actually indistinguishable from competitors’? Does it truly make no difference if they buy from you or someone else?
Probably not. The reality sales must reinforce is that most supplies and suppliers are not one and the same.
Recently, I was listening to an associate working in construction complain about how many of their new fixtures break upon installation. Yet despite having to order twice as many than they had from their original supplier, an employee was currently being rewarded for finding the seller that offered “the same” fixture for 25% less. This was of course as confusing to me as it should be to you. By sourcing from this alternative supplier with the cheaper fixtures, the company was unambiguously paying more! Needless to say, I told him I had a vintage Wolseley I could get him an unbelievable deal on…
Now that’s a pretty straightforward example with a seemingly simple to remedy, but the cost of cheap is often much more subtle.
What about a company ordering electronic components? On the surface, there may appear to be several suppliers that can provide the same semiconductor. Behind the scenes though, engineers use software packages in the design of their products and these applications are often specific to that component manufacturer. This hidden cost can then manifest itself in several ways such as conductor incompatibility, inaccurate documentation, and having to train engineers to effectively use a new software.
Overcoming the Price Tag
It is a salesperson’s job to create or discover the unique value that they can bring to their customers, then marshal the resources, talent, and creativity of their company to deliver it. To establish this one-of-a-kind quality, the salesperson must have a clear understanding of what their customers need and care about. We may think that some aspect of our offering is of great benefit, but if the customer does not perceive that value, then it does not exist. And if competitors are offering the same or similar, then there is no differentiation – besides price that is.
Many of the organizations we work with are shocked to hear what their own customers shared regarding the harsh reality of unclear value, yet very clear competition. This disconnect undoubtedly comes from faith in and familiarity with one’s own offering and, as a result, an underestimating of alternatives. Interestingly enough though, we have rarely worked with a company that could not differentiate itself and offer something unique through a carefully crafted sales approach; one that discovers what their customer wants, then demonstrates and delivers on that desire in a professional manner.
Ask yourself: does the unique value in your offering decrease costs? Does it save time? Will it enable your customer to reach new markets? Will it provide them with the ability to better meet their strategic goals?
Consider for a moment a supplier who knows their customer’s business inside and out. They know that when they receive an order for a specific product configuration, their customer may be better with a slightly modified solution. A quick phone call and a short discussion regarding the different solutions would result in a superior situation.
What is that worth compared to the supplier that would simply send over their URL and ship as ordered?
In short, companies obviously have every right to buy from the cheapest supplier, and you should expect them to do so. But if we start by understanding the customer and the nuance of their situations, we as salespeople can highlight how our solutions provide greater value than our competition – and in doing so quantify the cost of cheap.