Here is the last in the series of Six Common Sales Myths.
For small to mid-size businesses, the decision to commit resources to target a large account should considered carefully. The primary considerations are: “What are the implications of winning?” and “How, should we go about it?”
So let me provide you both sides of the story.
Why the Largest Accounts are NOT the Best Sales Targets
The Competition is the Highest: Sales managers and sales people almost universally drool over the thought of landing the big account. Some folks call them “Whales”. With these whales come visions of top line revenue waves carrying on their crests big commission checks and bonus trips to Bermuda for exceeding sales production quotas. The bad news is that every competitor’s salesperson is striving for that same, beach-front room in Bermuda.
It Reduces Your Negotiating Power: Have you ever been presented with 90-day or 120-day payment terms by your large customers? Have you been confronted by corporate edicts from your large customers to buy overseas, or forced to share your product cost models or had to make a pledge of cost-downs (targeted and contracted cost reductions delivered directly to the customer). All of these can be relentless.
You May Become Too Dependent on Them: Bankers, these days, have tightened their requirements for business loans. One of the things they look closely at is the vulnerability associated with one customer presenting too large a proportion of a firm’s business. Having a hefty chunk of business from one large customer may also make one complacent.
Under What Circumstances Can Large Clients be Good?
When You Are Selling a Unique Value Proposition That Is IP Protected: This greatly relieves the pricing pressure and competitive threats – but it is likely short-lived.
When you are adding desperately needed capacity to overheated market demand for your product/service commodity: When there are overall industry shortages of the product or service commodity you deliver, because of very high market demand for your customer’s products, those large “whales” swim a lot farther to find the krill they need to survive. They also become a lot less demanding. Again, this somewhat relieves the discomfort associated with working with large customer accounts – but heated up industry demand does not last forever.
When Your Large Customer is Enlightened: Enlightened means they have embraced the concept of true partnership – recognizing the need for mutual investment, mutual trust, mutual innovation and mutual ROI.
When Decision Making is De-centralized: De-centralized decision making increases the probability that you will find either: a) an enlightened decision maker in one or more of the myriad divisions of the “whale” or, b) divisions and circumstances to which you can deliver significant value from your company’s specific combination of value proposition and differentiation.
When They Spur You on to Innovation or Breakthroughs: The promise of a big payoff, with lots of business from a large customer, can spur creativity and product innovation. What it should not encourage is gambling. By gambling, I mean taking a long-shot that requires stretching beyond reason the laws of physics or the organization’s overall capabilities. Such gambling can quickly destabilize the financial safety net of the firm.
How to Eat a Whale
Yes, yes. No surprise. The answer is one bite at a time. But where you bite first is the real question. Here are some guidelines on selecting where your bite will be most productive, profitable and nourishing.
There are 6 basic strategies in war and business – 3 F’s and 3 D’s, and no, these F’s and D’s in no way reflect my 6th grade report card. Here are the strategies, by name:
– Frontal
– Fragment
– Flank
– Defend
– Depart
– Develop
The subject of strategy is simply too large to cover in this blog post, so suffice it to say that 5,000 years of military history and 75 years of marketing science have demonstrated, unequivocally, that the most productive strategic combination from the list above is the combination of Fragmentation (segmenting) & Flanking (differentiation). History and research have also demonstrated that frontal assaults can lead to disaster even in the case of great initial success. Remember Napoleon in Russia, Lee at Gettysburg, the English at Gallipoli, the German army in Russia and the Charge of the Light Brigade in the Crimean War. Or, in business terms, think Texas Instruments’ frontal assault on the watch market, Raychem in fiber optics and IBM in PCs. All were frontal assaults by large, highly confident organizations with huge assets behind them. All failed miserably.
By Fragmentation we mean, finding a business segment or Division of the “whale” to which your value proposition provides disproportionate economic value compared to its cost. By Flank we mean identifying, matching, communicating and demonstrating your differentiated value to the fragmented business segment that gets the most value from it, in effect, multiplying your overall value proposition.
A Case in Point:
Long before I was a market strategy and sales consultant, I was involved in a business that sold factory automation software. The division was attempting to sell this software solution to some of the largest, multi-site, multi-divisional manufacturers in the United States. We were spurred on by the knowledge that every large manufacturer we spoke with had active, funded corporate programs to find solutions to the common manufacturing challenge extant in all their manufacturing business units.
Talking with these corporate types, our software team energetically began to design and add capabilities to our system to assure we could handle all of the needs they had identified.
Unbeknownst to us, a competitor had been making inroads with what we perceived as a vastly inferior, inconsequential, less complete offering. They were selling low level, simple solutions into the divisions where decisions did not require corporate “influence”. They were, in effect, fragmenting the account -taking lots of little bites of the whale. By the time we had developed our comprehensive solution, the low level competitive solution had penetrated so expansively, in so many fragments of the business, that retrofitting was out of the question.
This is just one example of how subversive fragmentation can be used to penetrate a large account – one small bite at a time.
The Take-Away:
Large accounts are not inherently good or bad sales targets. They are good or bad sales targets depending on:
- the strategy used to penetrate them,
- the “enlightened partnership nature” of their corporate procurement,
- the centralized or decentralized nature of their decision making,
- the strength of your IP and the economic value proposition it delivers, and
- whether or not you are adding industry capacity to overheated market demand
That’s the long and short of it.
For more information regarding QMP’s Sales Process and Skills Improvement Workshop or Sales Improvement Consulting Services, call to 503.318.2696 or connect through our Contact Us page.
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