Are Profit Vampires Sucking Your Blood?

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Read excerpts of an article that highlights how important it is for distributors to implement proven scientific pricing and sales negotiations processes that will stop unnecessary discounting by sales people for small customers who promise to buy in volume, killing a deal’s profitability with free services, and empower them to negotiate with confidence when providing complex customer solutions.

“The evil deeds of dastardly fellow, known as Count Purchasing, are legendary.”

You could probably add a few anecdotal stories of your own. But in our world, the greatest disaster to innocents with salesperson business cards comes when Count Purchasing transmutes into the shape of our best friend.

His sweet siren’s song goes something like this: “You’re really a great company. We really think you have worked hard…and because of all this, I am going to let you have the order… Assuming you can match the price.” To the uninformed, it sweetly rings forth with a too good to pass up message. At least until you analyze its hidden meaning.

Deep in the cavernous hideout of his castle office, Count Purchasing has an engraved plaque bearing the motto “buy from the best supplier, but pay the price of the worst on the planet.” In our case, he may be touting the ill-conceived price of that organization down the street. The one with no post-sale support, poor delivery and terrible accounting practices. Or in the case of our technology driven products, he may use the price of a company without specialists. All falling after your motion control, abrasives or cutting tool specialist invested days and dozens of phone calls helping his own engineering team develop detailed specifications, bills of materials and all the rest. Simply put, you do the work and get paid like the guys who did nothing.

“Vampire killing tip Numero Uno, you must recognize that Count Purchasing was trained to sing this verse.”

But wait, there’s more.

Another sweet song comes in the form of exaggerated quantities. “I will be acquiring zillions of these over the next few years. Give me the price level for your largest quantity break.” Strangely, the large order never comes. What’s worse is we, as innocents, often lock their organization into large quantity pricing without setting expectations for lack of quantity or periodically reviewing the results. Years pass and they continually feed on our goodwill. Again, a “trick of the trade” is used to pull the life’s blood from our organization. Vampire killing tip number two; develop quotes that allow for periodic quantity reviews.

“Not every vampire in our industry has a cubical down in the Procurement Department.”

Some of them dwell like invisible demons in the minds of our own folks. When we substitute “nice guy” thoughts in place of business sense, they flourish. Each and every time we give a really friendly small customer the same pricing as the gigantic user down the street – they put the bite on our bottom line. Research by David Bauders of Strategic Pricing Associates demonstrates thousands of examples of this phenomenon. Tiny customers are given sub-market pricing, strangely buying quantities of one or two at levels equal to or lower than your biggest customer who purchases hundreds at a time. Drop by precious drop the life’s blood of your business is drained from your bottom line. How much can this be? These are tiny droplets – but the red cells add up. David’s team has a track record of adding two points of added margin to distributor’s business.

“A trip to the musty crypt of the undead reveals a menacing claw fiendishly refusing to die.”

This monster goes by the name of Free Service. Let’s bravely explore the situation. We sold the customer a system back in 2006. Strangely, a decade later, we find ourselves mesmerized into believing post-sale service is our responsibility. What’s worse, we think we’re obligated to do it for free. In spite of expert advice to drive a stake through the beast’s black heart, the darn thing just won’t die.

The practice of free service is a time honored tradition in the electrical wholesaling world. It is reinforced by some supply partners. They would have you believe it’s the true duty of every red-blooded prey… I mean distributor. And systems integrators, contractors and installers echoed the message like sound bouncing in Dracula’s tomb. For some unholy reason, there’s not an issue with our service, as long as we never, ever charge for the privilege.

“Spend a little time at your next sales meeting talking about negotiation techniques.”

A few years ago we worked with purchasing guru Malcolm Mills on a series of sales process improvement programs. We discovered the guys on Malcolm’s side (purchasing) regularly attend classes covering negotiation strategies. They don’t lie, but developing skills to mislead our sellers seems to be worth the investment to them. Every time we stumble into one of their snares, it cost us money. Insist your sellers answer the comment “your price is too high” with a powerful value statement.

Invest a little time in understanding your value to the customer. Some of your day-to-day actions create thousands of dollars in real measurable value. Don’t let Count Purchasing hypnotize you into believing “all our vendors can do that.” First, it’s probably not true. More importantly, it doesn’t matter. If you produce real measurable value – it adds to the customer’s bottom line. You should be fairly compensated.

Click here to read the complete article.

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2 thoughts on “Are Profit Vampires Sucking Your Blood?

    […] Are Profit Vampires Sucking Your Blood? « Strategic Pricing Pays. […]

    […] Are Profit Vampires Sucking Your Blood? « Strategic Pricing Pays. […]

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