The Difference Between a Brand and a Label…. a pricing guy’s persepctive.


There is a difference between a brand and a label.

Dog in a bag

A brand comes with a reassurance of quality. Put simply; the consumer subconsciously realises that it is too dangerous for a company with a long standing reputation to produce anything that might trash that reputation.

A label is a way for simpletons to show other simpletons that they have more money than sense.

It is easy to tell the difference: Whilst a brand may be visible at the point of sale, it is not necessary for it to be visible after the purchase is made. In other words if it is emblazoned on the outside of the goods in letters four inches high, it is a good indicator that the item is intended for simpletons (and may be fake anyway).

PS …Just been out and measured the size of the letters on my Mercedes and thankfully they are not four inches high!

How to overcome the tyranny of tenders


The tender is a devilish device designed to cynically negate all the carefully crafted embellishments of the salesperson and all the wonderfully concocted unique propositions of the marketing department. However they are about as much use in choosing a supplier who will give you long term value, as a beauty pageant is as a means of choosing a life partner.

In the eyes of a procurement professional, a tender makes all other things equal so that the suppliers can be focused on sharpening their pricing pencil until it is little more than a well-chewed stub… so short it can barely be clenched twixt finger and thumb.

So how do you win business is in the face of such a soulless adversary?….

The first thing to say about tenders is, that if the first time you hear about one is when the request arrives on your desk, then you should assume that you have already lost (Sorry if this sounds rather like the old joke about the lost tourists who stop to ask a farmer for directions and get the reply ‘If I were you I wouldn’t start from here’)

You need to consider how a tender comes about to understand how to tackle it. In instances where there is already an incumbent supplier, the technical part of the tender document will be written based on the product or service they are already getting. Unless they have a burning desire for change, what in effect they are asking for is more of the same please… but cheaper’.

Because the document assumes there is only one way to provide the product or service, you have no way of registering that yours has an advantage and that they will need to accept some risk or cost of change….Also I have never seen a box in tender documents asking you to put in why they should pay more.

So, turning hindsight into foresight this is how you go about it:

  1. Identify all the potential customers that you think could especially benefit from your product or service….regardless of where they are in the tender cycle.
  2. Research them like hell and set about building contacts at as many levels as possible. If there is not a tender in the offing they should be more inclined to talk to you.
  3. If you are successful in making contact, use your very best discovery skills to understand the world from their point of view…How they make their money, what’s important to them, what makes the individual decision-makers tick, what gets them worked up.
  4. Gently and subtly, without being rude, point out what they are missing by using the incumbent supplier and make sure that you are on the next tender list. If they can see that you have invested time in them it would be mean to exclude you.
  5. Turn up the volume a tad just before they start to draft the technical section of the next tender. The aim is to have it written it in such a way that only you can fulfill its requirements.
  6. Make sure that they see value in doing things differently and expect to pay more for this approach.

A tender is not the time to do your selling, it is a time to remind them of the (very subtle) selling you did months if not, years ago.

If you are going to have to undergo the somewhat degrading spectacle of appearing in a beauty pageant, it probably helps if the judges already know you and you have been out on a few dates together.

I know this doesn’t help you win the tender sat on your desk today, but it should help you win some a couple of years hence.

The Moral of the Story is simple…. be proactive not reactive. Put the first step in place today. If you want a rich seam of business to mine in the future, make it someone’s job to find and engage targets now.

Believe me, you will thank yourself (and possibly me) in 2-3 years time!

…of course we can help, if you need to build this capability.

 

 

 

 

The best two words with which to start proposals…


When we are working with a client who is expecting to make some large sales, we often end up looking at the way they write or present proposals. The manner in which you present your price is at least as important as the number itself. For those that don’t know the difference; a quote tells the customer how much they have to pay, a proposal tells them why they should pay it.

We see some that are little more than a quote fired out of their computer system listing parts and prices, some that are elaborately bound documents filled with words and some that are creatively designed PowerPoint slide sets. However it is presented, there is one thing we are always on the look out for. This is our version of it:

We always start our proposals with the heading UNDERSTANDING CHECK

The heading is followed by a sentence or two something like this:

‘This is what we have learned about your business. Please correct us if we have misunderstood anything:’

We then go on to include 8-12 short paragraphs (or long bullet points) along these lines:

  • Your business provides [product/service] to the [definition] and [definition] market sectors…
  • Your overall corporate objective is to…. and this means that you…. and you hope to…
  • The way you go about servicing your customers is to…
  • The problem you sometimes encounter is…. when this happens it can cost you…
  • You are looking for a way to….
  • To this end you are seeking a supplier who can….
  • You told us that an ideal supplier would be able to….
  • Any potential supplier must meet the approval of….

These should be written using their language or jargon… or no jargon at all. The aim is to let them hear an echo of their own voice. It should contain no specifics about you or your product. That comes later.

If it is well written, when the customer reads this section a warm little sigh occurs deep in their breast and their inner voice says with a smile…. ‘At last!… someone has listened!’

The next Heading is Our Recommendations… or Our Approach.

Writing this bit is a piece of cake. You simply look at each piece of the Understanding Check and say how your company, product or service meets that particular need.

  • We have many clients in the [definition] sector and…
  • Our approach is designed to allow you to continue to….
  • Our product solves the XYZ problem by….
  • As per your requirement we are able to…

The process of writing the Understanding Check has a built in safeguard. If you find you are struggling after writing two or three bullet points then it means you haven’t done enough discovery and you need to ask some more questions. If you don’t, your product will probably not meet their needs (because you simply don’t know what they are).

Warning: Don’t copy and paste. Don’t prepare a generic template with the bullet points in place…. always write it from scratch. It is the discipline of thinking about meeting the customers needs that will win you the business, not the quality of the paper and binding.

Our recommendation is that a proposal of this nature should be delivered with a person attached to talk through it (and help the customer nod in agreement at every step). If we know that the primary contact is not the final decision maker then we sometimes say ‘I have brought a draft of our proposal to show you to make sure it is OK before we finalise it’ … it is still beautifully bound and usually doesn’t get amended.

PS If you need us to train your people on how to combine the discovery process with proposal writing, drop us a line at enquires@burginassociates.com

 

 

 

 

 

How to stop your staff giving stuff away…


Do you recognise this…

An important customer phones up and asks someone at your firm to do something for them…

“Can you just do this for us…. “ or “Rather than do it that way, it would suit us if you did it this way instead…” (i.e. the non-standard way).

Your people are well trained. They do everything they can to delight the customer… go the extra mile. So with a big smile they agree.

But somewhere in the process the customer doesn’t end up paying for this extra service. You sort of hoped he would, but nobody mentioned anything about it so the job gets done and no invoice is sent… or if it is, the customer is furious because the charge comes as a surprise.

I will let you into a secret. The customer wasn’t sure whether you would charge or not. But they weren’t going to mention it if you didn’t.

Here is a little phrase we train our clients to use that solves the problem. Anytime someone asks you to do something that is outside the normal contractual arrangement, the very first thing your people should say is:

“I am sure we can help with that, let me work out a cost for you”… all one sentence without taking breath.

Get them chanting it out loud at your next team meeting until they say it without thinking.

This little phrase solves the problem in three ways:

Firstly: it puts the principle of charging for the service squarely on the table so no one is in any doubt at the outset.

Secondly: by using the word cost rather than price, it reminds the customer that there is a cost to you associated with providing the service.

Thirdly: it gives them a chance to argue if they want to, before anyone is committed to doing anything…. and that is much fairer to both parties.

A colleague of mine many years ago, having overheard one of his team giving away something, waited until he had put the phone down and asked him to join him outside the front of the building. Looking up at the company sign, he asked the somewhat confused lad “Can you tell me where it says ‘Registered Charity’?”

The moral of the story is it is always best to let people know what they have to pay for (and what they do not) as soon as possible. No one likes nasty surprises.

 

 

 

How to get your customers to deliberately raise their own blood pressure…


“Payment Problems: Authorisation Declined Call us Immediately” … the title on a letter that dropped through my letterbox yesterday.

Now I know that my bank account balance could cover this house insurance renewal twenty times over, so I am looking at an administrative cock up. If you are like me when you see a letter like this your heart sinks. You know that you need to set aside at least 45 minutes of your busy day to deal with this… it may take less, but the last thing you want is to have to drop out of a call to a call centre when the end is in sight, to go to a meeting.

Your heart sinks again when you see “We will also charge you a failed payment fee of £25, as described under ‘Other Charges’ in the ‘Policy Payment Arrangements’ section….” … Now you are going to have to work yourself up into a truly Daily Mail tone of indignation in order to get them to waive the charge… adopting the full “Are you doubting my integrity young man?” approach to frighten the call-centre operative into speaking to their supervisor.

Turns out they tried to use a debit card that had expired and sure enough on page two of my renewal letter in small print  … (page one of which reads NO NEED TO CALL we will automatically renew.” in big blue letters!) …it showed the card details they planned to use including the expiry date as a month before the letter was printed.

A simple piece of computer programming could have been put in place that said – if the renewal date is later than the expiry date, then insert “Please call to give us some new card details as this one has expired” on page one of the letter.

But no… some clever-dick decided to send me a heart-stopping letter that forced me to take time out of my day, pretend to be a Daily Mail reader (stretching my acting skills to the limit)  and make myself angry in order to avoid something deep in their terms & conditions.

There are two morals to this story:

Firstly: If you have to refer to your T&Cs then the relationship with the customer is already broken. Some legally-minded folks fail to see this.

Secondly: Stop people in your organisation from jumping to the conclusion that all customers are setting out to defraud you and need teaching a lesson. If they do they will write this assumption into the company systems.

PS I am now expecting a customer survey asking me how the operative handled my problem. Of course there will be no box to tick that says… Operative was fine (if a little scared), but your systems stink.

 

Plucking a Price out of Thin Air…


Perhaps you have a product that is so unique that you cannot begin to imagine how much you can charge for it. Perhaps it is a software product that has no direct cost attached to it… so there are no clues to be had there… it is always going to be a 100% margin product whatever the price. Perhaps it is a service for which the customer will have no obvious benchmark. Here is a little technique to help you come up with a figure. We call it Relative Value Comparison and this is how you go about it:

Firstly figure out what benefits your product can deliver that could be expressed financial terms e.g. profit made, money saved, time saved, new customers won.

Next try to lay your hands on the kind of figures the client (or a typical client in the sector) would recognise e.g. if your product helps win new customers, then find out what revenue they would expect from an average customer.

Then craft a little sentence that starts with “If our product only….”

Something like:

If our product only wins you three more customers worth £20k a year, then isn’t it worth giving it a try for £x”

or

If our product only prevents one breakdown in its twenty year life, if that breakdown results in 24 hours of downtime at a cost of £3,000 an hour that is £72,000. Isn’t it worth avoiding that for £x”

Once you have done this, you need to read the statement quickly out loud and without really thinking about it, put in a value for x that seems to make sense. If you are democratic soul have a few colleagues do the same.

This little trick is a good way to find a price that ‘sounds right’ in the context of the selling process. If it sounds right in your head, then the chances are that it will sound right if made as part of similar justification to a prospective customer.

WARNING: The technique does not work if you then plonk the price on your website without the justification.

The moral of the story is that: The means by which you justify value is at least as important as the price figure itself.

PS The technique also works when justifying a higher price than a competitor. Craft a statement that values the risk of an inferior product. “If our product only saves you having to…. Isn’t it worth just another £20 to be sure you wont need to”

Which is the better promotional gift; a champagne lunch or a baseball cap?


A little while ago we were analysing the pricing strategy of a manufacturing business that sold to industry through a variety of large national distributors. They told us that they went to great lengths to stay sweet with the purchasing directors of the three or four large chains that serviced their market. They agreed to large double digit rebate discounts and lavished corporate entertainment on these important individuals including treating them to a champagne lunch at international rugby matches.

One of the things we do when we get digging into the commercial affairs of a client is to perform a little test we call Switch Point Analysis. We carefully consider everybody in the supply chain – end-users, influencers, specifiers and various people working in distribution – and ask ourselves could this person decide to switch our product for that of the competition or vice versa? … if so what is likely to make them do that? …and what role does price play (if any) in their decision?

The unfortunate thing we found (or fortunate depending on your viewpoint) when we looked into this for this particular client, was that the purchasing directors that they lavished all this attention upon were very unlikely to influence their market share. They were always going to dual source their type of product and from their lofty tower in head office they had no way of controlling the amount sold of each vendor’s goods.

We became increasingly convinced that the day-to-day decision about who would get the market share was in the hands of the fork lift truck drivers at the distributors’ branches around the country and that the most likely criteria for their choice would be something like: whose product was closest to the door.

Our advice was to ease back on the rebate agreements, make excuses and not go to the rugby, buy a box of baseball caps to distribute to the fork lift truck drivers and persuade them to put the product near the door for their convenience.

The Moral of the Story is: That purchasing people want you to think their power to decide the fate of your business is second only to that of the almighty. Stop and think about it for a moment and you will realise that there is nearly always someone else choosing whose product to buy and it is very… very seldom on price.

 

 

 

 

 

The Assassin’s Dossier


Do you remember the scene in the movies when the hired assassin opens the brown envelope and takes out a complete dossier on his next target?

 

Now I am sure that none of you have ever wanted to bump off any of your customers – no matter how difficult they are and no matter how little they pay. However there is something to be said for going into negotiations with all the facts at your fingertips.

 

A little while ago we completed a project which involved three senior directors going out to the market to present a new pricing system that we have helped them develop. The end result was that ten specific customers would end up paying quite a lot more. Seems they had been underpaying for the service they had been getting for years.

 

The culmination of our process was a full day and a half of training for the directors in question. We presented them with a complete dossier on each customer drawn from their own data and external sources. Each dossier included:

 

1.    A copy of the new price list (printed nicely and laminated so it looked like it wasn’t negotiable)

2.    Notes on the way the pricing mechanism works including some calculated examples

3.    A set of notes from the training sessions we had run explaining how to present the prices at this stage and how to answer common objections

4.    A history of the customer’s trading over the last three years showing ratios and trends indicating that their business had cost more to service

5.    A financial model showing how the new charges would affect their costs based on recent months’ activity

6.    A copy of their forecasts for their activity compared with actuals showing how hopeless they were at helping us plan the capacity to service them

7.    Details of the customer’s business with his marketplace – his overall strategy and performance, the price of his products, his approach to market etc.

8.    Details of the current relationship with the customer from the people at the sharp end including their quirks and how they make life difficult

9.    A list of all the little favours that were done for the customer at no charge (including all their cock-ups that we helped brush under the carpet)

10.A set of carefully thought through arguments supported by statistics justifying the cost increase and showing how they could work with us to save costs in the future by changing their behaviour

 

There was around £4m of profit either way riding on the outcome of these meetings. I can’t remember anyone being more thoroughly prepared.

 

The moral of the story is: Why would you go into major negotiations that could earn you or cost you millions without doing everything you could to prepare?