Q. Dan, I need your help urgently. I have been working on a large deal for several months. My customer recently emailed me that they have narrowed their choice to three vendors. He said that any of these will "get the job done". They said that next week they will be asking us to participate in an on-line reverse auction. I don't know how to respond. Any advice?
Lynn, MA
A: Edward, great question. For several years I worked for the on-line reverse auction technology market leader (Ariba) so I really understand your pain. I frequently come across this issue during my Trust Triangle Selling™ workshops where many potential superstars face this unexpected obstacle. The fact that you have been working this opportunity for several months and were blindsided by this key buying process step would definitely be considered a huge surprise. And we know that Sales Superstars do not like surprises. In the future, be sure to qualify the opportunity early making use of the TTS™ Account Qualification Methodology (BMPCC). For additional information on this approach read my Sept '08 newsletter on the topic. Understanding the details of their "P" or Buying Process early in this opportunity would have given you an early warning so you would have many more options in dealing with your client's approach. I have developed a TTS workshop module specifically to address this issue. Here's a list of the "Top Ten Best Practices When Dealing With Auction Environments" that should help you out:
1. Don't Panic & Don't Be Intimidated
The customer wants you to panic and lower your price. She wants you to believe three things:
a. Price is the only decision criterion.
b. Unless your company shaves the price to unspeakable levels you will lose this deal.
c. If you fail to play the game, you will lose.
It is critical that you understand the most important key when dealing with an online reverse auction: it is merely the electronic version of a face-to-face negotiation. Nothing else has changed. If you know what you are doing it is really no different than any other selling situation. Additionally, outstanding consultative selling skills are more important than ever before.
Remember this great quote:
2. Don't Fight
See it as a positive! If they have already decided to utilize this technology what good does it do to fight them on this issue? Be a true consultant! Agree that in certain circumstances, when deployed properly, this technology can be very useful to both the buyer and seller.
3. Understand The Technology
You must understand that most auction software has many "behind the curtain" switches and toggles which enable the buyer to provide benefits to trusted suppliers who have track records of reliability or service. The rep must be sure to understand which toggles are part of the selling process. The rep must convince the customer to flip these switches in favor of his company prior to the auction event.
4. Use The Trust Triangle Selling™ Account Qualification Methodology (BMPCC)
Selling in a reverse auction environment is really no different than selling in any other environment. Very early in your sales cycle you must understand how to properly qualify your opportunity using the Trust Triangle Selling™ account qualification methodology (BMPCC) fully discussed in my September Newsletter.
5. Understand The Decision Makers
You must understand all the key players who will be involved in this opportunity. Who is establishing the minimum specifications? Who is making and influencing the final decision? Who is grading the results? Who is running the auction?
6. Understand The Buying Criteria
Just like any non-auction environment, it is more important than ever to fully understand your client's needs, pains and buying criteria. Just because the client uses an online auction tool does not necessarily mean that she will be making a 'price only' decision. Unless you are the low price leader (which is not a good long term strategy) it is your job to prevent her from making a decision solely based upon the "initial investment" (selling price). Remember, price is the key decision criteria when no superstars exist to convince the customer that there are other more important purchase criteria such as ROI, TCO and Quality.
7. Understand The Buying Process:
Use D-3! Discover, Document & Drive the buying process. Offer to help make this a successful project. Are you assisting the person who is designing the auction specifications? Are you giving them suggestions as to how to use the auction as a tool in her overall buying process?
8. Prepare! Prepare! Prepare!
As with any negotiation, you must do your homework and be prepared!
Here's a laundry list of the questions that should be answered prior to picking a strategy and participating in the auction event:
- If the decision were to happen today, would we win?
- If we decide to use a disengage strategy (decline to participate) what will be the impact on our long-term relationship?
- Will we be given any credit for our unique competitive advantages? If yes, how much?
- Do we know the exactly how the customers are planning to make this decision?
- Will they continue to negotiate after the auction? (terms, warrantee, delivery etc.)
- What does the competitive market look like?
- What has been our experience in competing against this competitor in an auction environment in the past?
- What is the cost for the customer to do nothing?
- What is the cost to the customer to switch to or from our offering?
- What is our walk position?
- If there will be further negotiation after the auction, what does the "Trade Matrix" look like?
- Will we be given time and access to the key decision makers to:
- Understand their pains, issues, challenges
- Explain how our unique competitive advantages will uniquely alleviate these pains?
- Justify how these unique competitive advantages will result in a lower TCO or higher ROI?
- What is our likelihood of winning, if we attempt to change:
- Players?
- Decision Process?
- Decision Criteria?
- What will be our bidding strategy?
- Do we believe the firm conducting the auction has integrity? Be sure to get the rules of the game agreed to in writing before the start of the auction. Some unscrupulous customers commit to one thing verbally then renege on their commitment later.
9. Use Major Account Strategy:
What is your strategy to WIN? Here are several strategy options to consider (Building Trust, Growing Sales Chapter 4):
Frontal Attack Strategy:
Do exactly what they want you to do. Play by their rules. This is NOT a very effective strategy. Use this strategy only if you are 160% sure you will win with this approach.
Disengage Strategy (see # 10 below):
Don't play their game. This is a very risky strategy and can only be deployed if you are seen as a clear front runner and market leader. Reminder, the Lone Ranger is DEAD. Use this strategy only after reviewing it with your boss!
Change The Game Strategy:
These strategies involve bending the rules in your favor and help you to offset the cost-cutting power of the auction environment.
- Change the Players: Find out who is involved in making and influencing the decision and put a strategy together to find others in the organization who could be added to the decision team to improve your competitive position.
- Change the Decision Criteria: Most customers focus only on price. It is your job to drive a huge wedge in the customer's thinking between sell price ("initial investment") and TCO (Total Cost of Ownership) and/or ROI (Return on Investment). Your goal is to persuade them of the importance of long term thinking (ROI, TC). This can only be accomplished if you begin to discuss pricing generalities early in the sales process because you will need time to change the customer mindset on this issue.
- Change the Process: This strategy involves changing the way they are going about their decision process. Here are three excellent recommendations to consider:
- On-Line Absolute Final Pricing: Offer to provide only one price, your best and final price on-line.
- Off-Line Absolute Final Pricing: Offer to provide only one price, your best and final price off-line.
- Assist with Generic Specifications: Just like any other sale, you should be assisting your "Mother" (client) with what can be a very chaotic buying process loaded with headaches. You should step up, convince your "Mother" that you are an experienced consultant in this field and offer to provide assistance. For example, help your client establish the "generic" bid specifications that will be integrated into the auction process.
Each sales scenario is different and unique but in general, my advice would be to use one of the "Change The Game Strategies".
10. Price Only Decision?
Just like the old days, if you find out early that the customer plans to use auction technology to make the final decision AND they will be buying low price, AND they will not allow you to establish minimum specification or receive any value for your unique competitive advantages....bye bye! Call them, thank them for considering solutions from your company and let them know that "We have a policy that we cannot participate in on-line reverse auction environments. Our clients are the main beneficiary of this policy as we have found that the process may result in a solution being deployed that does not meet the long term needs of our clients." Politely let your customer know that she will be receiving a Trust Triangle Selling™ "Disengage Letter" from your firm.
One final thought Edward: It is incumbent upon your marketing & engineering teams to develop solutions which are highly differentiated. It is your job to uncover pains, and to position the benefits of your unique capabilities, while justifying the value of your attributes with your client. When these tasks are executed properly, your client will not consider acquiring your solution with a reverse auction tool.
Good Luck, and Close 'Em!
About
the Author:
Daniel Adams, author of Building Trust, Growing Sales,
and creator of Trust Triangle Selling™ helps corporations
improve their profits by optimizing the performance of their sales
teams. He is a frequent and popular speaker at national sales
meetings, workshops and association events. You can visit his
web site and read his other articles at www.trusttriangleselling.com.
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