By Bob Rickert
This story is a condensed version of the case featured in Bob Rickert’s book, Profit Heroes: Breakthrough Strategies for Winning Customers and Building Profits. While the story is fictitious, including all company names and characters, the situation is frighteningly real and offers an invaluable roadmap for how to win over an entrenched incumbent with value selling.
Vince Billings is a highly talented and successful salesperson. He achieves quota nearly every year, always in the top 10% of sales performers. He builds strong relationships, understands the buyer’s business and knows how to navigate the decision-making process. He knows his products as well as anyone in the industry. He is a student ofthe technical aspects of the customer’s business requirements, and he knows how to translate that into value for his customer. Last year alone, one customer experienced millions of hard-dollar savings because of Vince’s ability to fix a problem that prevented a production-line shutdown. And he’s a salesperson! That’s credibility.
Vince also knows how to leverage the talent on his team to solve customer problems. His selling approach works, and it has worked for years. Yet, when he lost the biggest deal of his life at his National Products account, he was devastated, confused and a little bit angry. After all, this was the customer he spent 5 years building and delivering tremendous value for. And yet, in the end, that company threw him to the curb and cost him millions of dollars in revenue. He was angry at himself, but more than that, he was angry at his customer. Vince felt that he delivered tremendous value and still the company cut him loose. To add insult to injury, the customer chose a competitor, who had very little track record, or relationships, at National Products. And their products weren’t as good.
Vince was trumped by a Profit Hero.
National Products (a fictional company) is the customer that broke Vince Billings’ heart. The company manufactures sinks, tubs, washing systems, and many other products for residential, commercial, construction and industrial applications. It sells direct, through distribution, and a large part of the business is done through do-it-yourself, big-box retailers.
National Products embarked on a quality improvement audit of its manufacturing facilities to address product quality problems, defects, and refinishing problems resulting from outdated spray gun equipment. That is the inside story of how 2 strong competitors, Quality Brands (Vince Billings) and High Beam Industries (Susan Stafford), vied for a large project to upgrade the manufacturing process at National Products.
A sure thing – until it wasn’t
Vince was in the proverbial driver’s seat because he knew every decision made in the last 3 years was made by the production team and rubber stamped by the economic buyers, typically the CFO John Fuller and Head of Manufacturing Rich Bacus. Vince had earned nearly 50% of the business, and he knew that changing out the remaining spray gun systems (20 of the 42 systems) would be very costly. He felt that if he could demonstrate the cost of the equipment change-over and the new level of support it would require, combined with the value he had delivered over the years through better performing products, this deal was his. And he had solid relationships and high respect from the manufacturing leaders who would recommend their preferred supplier.
The winner celebrates
Susan Stafford at High Beam Industries was, in her own right, an excellent, high-performing salesperson. She too made quota consistently. She actually built a reputation as someone who could take an under-performing customer and resurrect the business. She approached the discipline of selling in a very different way. In fact, it was her signature approach (selling ROI) that won her the biggest deal of her career. The National Products deal was her masterpiece, the high water mark in her career. The exhilaration she felt was in direct contrast to the despair her competitor Vince Billings was experiencing at Quality Brands after he lost the deal of a lifetime.
Relationships do matter; installed base is a competitive advantage. But, in today’s economic climate, absent a way to quantify the impact you have on profitability, you will run the risk of focusing more on what you sell, and not enough on the impact of what you deliver.
Changing the game
When Susan was given the account, there was little business to build on and few relationships to inherit. It was luck that a low-level purchasing manager mistakenly let her know about a big spray gun retrofit project, which resulted from a quality-improvement audit that outlined serious problems impacting National Product’s financial performance. She thought, “How am I going to compete for a large project, against a strong incumbent, and be able to win this business in 60 days?” She didn’t have go-to people who could inform her about the requirements, the buying process, or the political environment.
Susan knew she needed to find a way to change the game, to move the decision from the manufacturing operations team, who had control and influence, to a senior-level decision maker. She needed to find someone who would make it about profitability and ROI and not relationships and technical factors. Susan’s approach, which helped her become a “turnaround artist,” was her understanding of business finance and profitability. She learned that every business decision is based on return on investment. After all, that is what every CEO is concerned about: how well they deploy shareholder capital; how efficiently they manage costs; and how successfully they grow their business and profitability.
The loser’s ‘lure-win’ strategy
Once Vince got the details on the project, he knew it was in Quality Brands’ wheelhouse. They wanted to increaseproduct throughput by 5%, reduce defects by 5%, and reduce downtime by 10%. They also wanted an updated maintenance software system to accompany the solution. To do that, they would retrofit or replace over 40% of their spray gun systems at a cost of $5 million.
Vince created 3 ironclad strategies. First, he documented all of the value he delivered, including solving production problems and keeping assembly lines up and running, which added up to $1 million in savings. Second, he leveraged the ease of integrating new spray guns into the existing Quality Brands systems worth $500K. Finally, he would leverage his strong relationships to get inside information that his competitor couldn’t get and control the decision and the outcome in his favor. It seemed like a perfect plan, until it wasn’t.
When he learned that he lost the business to an upstart with no relationships, no installed systems and an inferior product, he asked the customer to reconsider their mistake.
The winner’s bold strategy
Susan knew that if she could quantify the impact that product defects, downtime, lost revenue, increased inventory costs and higher operating costs had on profitability, she would make the decision a financial one. In short, she forced the customer to choose between a solution that meets their technical needs and a solution that delivers significant profitability. Susan’s first step was to analyze the customer’s financials.
Although Susan doesn’t have a financial background, she has learned that there are 3 questions she needs answered to help her align with a customer’s financial goals:
- How can I impact revenue growth? (i.e., speed-to-market, higher quality, new markets, new products, customer acquisition)
- How can I help a customer reduce costs? (i.e., operating expenses, including labor, technology and operating efficiencies, and COGS, including raw materials, lean practices, and new equipment)
- How can I impact capital? (i.e., inventory levels, receivables, optimizing facilities to lower capital, and increased cashflow)
She knew she couldn’t compete one-on-one without a game changer. Then she found one. She came across a YouTube video (of all places!) of John Fuller, CFO, talking about the need to integrate ERP (enterprise resource planning) technology with real-time monitoring systems for better decision-support. Eureka! High Beam had just released a leading-edge software program that did just that. With the YouTube video insight and a LinkedIn connection that helped her get a meeting with John Fuller, she was positioned for success.
Next, she calculated the ways her solution impacted profitability.
Then she got bold. It felt like a Hail Mary, but in fact it was a brilliant game-changing move. She proposed that National Products not just invest in the retrofit of 20 plants, but rather, install an enterprise-wide solution by changing out all 42 of their spray gun systems, regardless of age.
She knew that by using High Beam’s new IntelligentMonitor Software, her solution would reduce quality issues and re-painting. That was huge. It would lower labor costs, speed product to retailers (recapturing millions in revenue), and it would speed up cash (lowering inventory of defective products).
The total impact was $39 million. The cost to deploy the enterprise solution would be $12 million (versus the planned $5 million), so the ROI would be $27 million. National Product’s decision came down to a $5 million cost (Quality Brands – goodproduct, efficient installation), or a $27 million ROI (High Beam – decision support, efficiencies, huge profit impact). They chose the latter.
Why Susan won the business in the customer’s words
In a trade magazine interview, CFO John Fuller talked about why they chose High Beam:
It was the way Susan presented her ROI. She didn’t just take the operational data and show how being more productive or efficient would justify the costs. She translated the improvements into profitability. She took a corporate view and not just a project view when she presented and defended her profit improvement solution. We often have to sift through reams of technical data and pricing tables to figure out what our investment will be. Seldom do we see it both up front and then well-defended using our financials and internal data.
As the guy who has to go to the board of directors to get funding for a project that was supposed to be just a spray gun systems replacement and was now an enterprise-wide retrofit plus new monitoring software integrated with ERP, I appreciated the attention she gave to justifying the ROI in corporate board language and not just in the language of the production line.
Vince Billings did not lose the business because of the things he did wrong; he lost because of the things he didn’t do enough of. Relationships do matter; installed base is a competitive advantage. But, in today’s economic climate, absent a way to quantify the impact you have on profitability, you will run the risk of focusing more on what you sell, and not enough on the impact of what you deliver. That is the new language of business.
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