Chapter 1: The Dark Side of Customer Consensus
Commercial leaders find themselves more frequently than ever before competing on little else but price.
As the head of sales and marketing at a global industrial fragrances company recently put it, “I just don’t understand. We’re the leading supplier in our industry. Our products are world class, or brand second to none, and our salespeople are highly skilled. There’s not a single deal in our industry where we’re not invited to participate – we make it to the table every single time. …. But even when we do, we’re always one of three suppliers at the table. Despite all of our commercial strength, we end up competing on nothing but price every single time. It’s killing our business. Our premium position simply can’t sustain that kind of margin erosion.”
Welcome to what we call the “1 of 3 Problem,” where a supplier commonly wins the battle for customer consideration – even preference – but ends up competing against two others on little but price nevertheless. [To fight it] They carefully redesign marking campaigns and sales collateral to better communicate the broad range of their company’s “best-in-class, cutting-edge solutions” and “unique ability to provide moments of deep customer delight.” … and yet … costly efforts to better articulate their company’s value is something akin to “Yeah, we knew that already.”
Today’s customers will often concede the point right up front, responding, “We totally agree! We think you guys are great! Your solution is by far the best, and we’d love to partner with you!” … so if we can get your solution at their price, then we’re good to go!”
There’s little evidence that today’s customers are any more willing to payfor that extra value even when they perceive it. At least not when they believe the next best alternative to be sufficiently “good enough.” … Most suppliers’ single biggest competitor isnt’ so much the competition’s ability to sell as their own customer’s willingness to settle.
Climbing the “Me to We” Mountain
If we think about the various stages customer stakeholders must pass through to move a purchase forward, we can narrow it down to three in particular, each crucially important:
- Problem Definition
- Solution Identification
- Supplier Selection
What we wanted to figure out is … when that purchase is most likely to fail. … One in particular stands out as especially difficult, and that’s Solutions Identification.
So while customer stakeholders might all agree they have a problem, there is going to be debate on the best way to solvethat problem. .. the place where they really need to rally agreement is around the specific solution to the customer’s problem, irrespectiveof supplier.
The analysis tells us the thing least likely to create disagreement is Supplier Selection (welcome back to the 1 of 3 problem) … [and every supplier is saying] That they’re the leading provider of whatever solution that customer is alreadylooking for.
So if a purchase decision is going to stall, more likely than not it’s going to stall far earlier than most suppliers would anticipate, particularly if they’re focused only on watching for signs of customer disagreement around the value of their offering. … so if reps do indeed manage to “get in earlier,” they need to take that opportunity to ehlp customers overcome the challenge they’re facing earlier. And that challenge has little to do with choosing a supplier and everything to do with deciding which problems are worth solving in the first place and what solutions are worth pursuing to solve them – all irrespectiveof supplier. … Suppliers’ biggest challenge in winning customer consensus has nothing to do with that supplier’s solution at all.
Even more troubling, much of the customer’s primary consensus challenge occurs far before most sellers are even present to address it in the first place.
Mind the Gap from 37 to 57
On average, customers are 57 percent of the way through a typical purchase process prior to proactively reaching out to a supplier’s sales rep for their direct input on whatever it is that they’re doing.
Now, that 57 percent number has huge implications for suppliers. If we consider what’s likely happening inside that 57 percent, changes are pretty good that customers are now doing on their ownmost of the things that suppliers were hoping to do with them together: They’re identifying a need. They’re prioritizing that need relative to others. They’re determining which capabilities they’ll require to address that need. They’re identifying which suppliers are best able to deliver that capability. In most cases, they’re conducting preliminary research on how much each of those suppliers cost. So by the time a supplier is called in at that 57 percent mark, more often than not there’s little left to discuss but price. As one senior leader memorably put it, “That 57 percent is a freight train to RFP Station. And we’re on it.”
We also asked customers to identify the point in a purchase process at which internal conflict most likely reaches a peak – or the “wailing and gnashing of teeth” hits a crescendo – and that deal is in the greatest danger of falling apart altogether. And thatnumber came back as 37 percent.
Group conflict peaks at 37 percent. That’s the summit of the “me to we” mountain where that deal is most likely to die. And you’ll remember, that peak centers around Solution Identification, not Supplier Selection – a problem most suppliers infrequently address. … If a purchase decision is most likely to stall at 37 percent, but a supplier sales rep isn’t likely to be called in until 57 percent … how many times have sellers lost before they could ever attempt to win?
That gap has hugely important implications for suppliers. … Customer consensus isn’t a sales challenge, it is a commercialchallenge. … B2B marketers are going to have to find ways to anticipatecustomer disconnects far earlier in the purchase process and avert them proactively.