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STREET SMARTS

When the Price Isn't Right

A veteran entrepreneur explains that to win loyalty, you have to offer more than a discount.

Norm Brodsky is a veteran entrepreneur.


Travis Ruse

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Street Smarts

To win someone else's loyal customers, you have to offer something more than a discount

These are trying times for salespeople. I've been in business for almost 30 years, and I can't remember when selling was tougher than it is today.

Why is it so tough? For one thing, because you can't count on making a sale by coming in with a low price. Everybody's prices are low. Sure, there are still some pockets of overpricing, but by and large the fat has been squeezed out of the system, and customers know it. They know they aren't going to save much these days by buying strictly on price. So, to get their business, you have to offer something worth more to them than a discount.

You also have to overcome the new customer loyalty, which I discussed in last month's column. More and more frequently, I'm finding that customers want to stay with the supplier they already have. They'll often say so up front, when you first go in to solicit their business. When that happens, it's not enough to tell them why your product or service is better. You have to show them.

I'll give you an example. About nine months ago, I got a chance to pitch our archive-retrieval service to a large accounting firm in New York City. A friend of mine helped me arrange a meeting with the partner who handles purchasing for the firm.

I knew going in that this firm would be a tough sell. The partner had a close relationship with his current storage company, and he didn't try to hide it. He said, "I have to be honest with you. I've been doing business with these people for a very long time, and I like them."

He also told me that he planned to show them any proposal we made. My guess was that they wouldn't have to match our bid to keep the business; they'd just have to come close. In effect, he was using us to negotiate a better deal with them. That's all he really wanted.

What I wanted, of course, was the contract. To have a shot at winning it, I had to show the partner how we could help the firm save money. First, I had to find out how its files were being managed.

I suggested that I spend some time in the firm's records room. "Records management is my business," I said. "It's not yours. I think I know more about it than you do, and I can give you some suggestions on how to improve your system and generate some substantial savings in the process."

He thought that was a great idea and had his office manager take me down to the records room.

What was I looking for? Two things: internal savings and external savings. I wanted to find ways that the firm could save money, not only by changing how it operated internally but also by reducing the charges it incurred for external services.

As it turned out, I had no trouble spotting opportunities to do both. The firm had what was essentially a manual system for keeping track of its files. There wasn't enough space in the records room for someone to enter the contents of files directly into a computer. So, instead, the records people would write the information down in a log, send the boxes out for storage, and do the computer work later. They were a year behind, however, and used the computer mainly as a backup.

The system was extremely inefficient. It required too many people, wasted tons of time, and resulted in costly errors. It also led the firm to spend a lot more money than necessary on archive-retrieval services. Because there were too many boxes on the premises, for example, the firm was constantly having to send some back to make room for the new ones that were coming in. As a result, it wound up ordering--and paying for--five deliveries a week, when it should have needed only one.

I spent about two hours in the records room. Later I called the partner. We agreed to have a follow-up meeting at his office, including three people from my company and seven from his. The meeting began at 5 p.m. and ran for almost five hours. I told the people from the firm everything I'd found and gave them numerous suggestions for cutting costs, many of which they could implement immediately. I also offered to help them find the software they needed to upgrade their computer-based tracking system, using contacts we'd developed in our work with other businesses.

Understand what I was doing here. First, I was educating the partner and his people about my business. I was teaching them how to save money by being smart consumers of archive-retrieval services. The more I told them, the more questions they asked. It was as if they'd never really understood what they were paying for.

Second, I was letting them see what they weren't getting from their current supplier--without saying a negative word. I never bad-mouth my competitors to customers. I believe that when you do, you wind up looking bad. Still, you have to show how you're better and why the customer is going to benefit from using you rather than them. So I took care to point out a number of potential external savings that I knew the accounting firm couldn't get from its current supplier. Our competitor didn't have the right technology. We did.

Third, and most important, I was building trust. How? By giving away our ideas and our expertise. By going forward without any guarantees. By investing a significant amount of time and effort in helping the firm save money, with no promise of a return.

In effect, I was making the case that the partner should give us the account because he could depend on us to watch out for the firm's best interests. I was showing him not only that we could help him save money but that we cared about saving him money, that we were trustworthy. I was giving him the best reason in the world for switching suppliers: peace of mind.

And that's exactly what you have to do if you're going to compete successfully in this environment of customer loyalty. You have to prove that you deserve a customer's loyalty more than your competitors do. Believe me, it's a long, difficult, and expensive process, and you don't always walk away with the sale.

Fortunately, in this case we did, but it took another eight months. During that time, we continued to offer our advice to the firm and spent hours upon hours working on the specific terms of a possible deal. Meanwhile, the firm was also negotiating with our competitor. In the end our patience was rewarded, and we landed the account, much to my relief.

Of course, we probably wouldn't have pulled it off if I hadn't been so involved in making the sale. I'm not bragging here. The fact is, you need to know your business extremely well to be able to sell this way, and who knows it better than the person who built it from scratch?

In other words, an entrepreneur's knowledge is a significant competitive advantage. I use mine whenever I can.

Norm Brodsky is a veteran entrepreneur whose six businesses include a former Inc. 100 company and a three-time Inc. 500 company. This column was coauthored by Bo Burlingham.

Last updated: Oct 1, 1997

Street Smarts columnist and senior contributing editor NORM BRODSKY is a veteran entrepreneur who has founded and grown six businesses.
@NormBrodsky




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