Friday, March 29, 2013

Successful Contract Renewal Strategies

If you’ve been selling for any period of time, you’ve learned that contract renewals, even with your very best customers, are far from automatic. That’s why you should develop a renewal strategy that’s as complete as your plan for selling a new major account.

First, when you start working on that renewal, try to move the decision date earlier every time. There’s a real pragmatic defensive reason for this. Just as you monitor your competition, they’re constantly monitoring your accounts, too. And they’re probably just waiting for the opportunity to get in there with your biggest account at renewal time. Can’t you just see them lurking in the shadows?

The best way to foil their attack is to preclude it by locking up the renewal early. If you wait for the prospect to tell you it’s time for renewal, it’s too late. You should be the proactive party in the transaction.

Do your estimate (or re-estimate) of their spending potential, study their needs as you now know them, and put that proposal for the renewal on the table as early as you can. You’ll stand a good chance of getting an early renewal at the best and will have set the standards for the competition at the worst. It’s generally better to be defending your position than assaulting someone else’s.

And when renewal time rolls around, make sure you set your sights high enough. Don’t let your expectations be limited by the size of the last contract. Human beings have a bad tendency to categorize each other. In sales, you tend to sort your current customers into boxes—and the size of the box is not based on their total potential as a revenue source but on what they spent with you the first time you sold them.

This system of classification is even worse when you take over an account that had been handled by someone else, like your predecessor in the territory. There’s a particular danger of improper classification, by the way, with some computerized sales automation systems since they can’t take into account what should be, only what has been. And many time management systems  encourage you to rank your prospects by dollar volume and allocate your time accordingly, so the error can be compounded.

If you sort your customers into boxes based on their previous spending with your company, you’re putting yourself into a box, too. And that box limits the potential for growth in your commission check. You should have no more pre-conceived ideas about your current customers than you do about new prospects. You must not let past spending be the sole determinant of the size of future proposals.

Remember, too, that the stereotyping process works both ways. Just as you’ve classified the account based on its past spending, the buyer has probably classified you based on the size of the proposals you have offered. If you’ve been selling them small deals, you’re grouped (mentally at least) as an unimportant vendor. If the amount they spend with you “moves the needle” on their income statement, you’ll be in a much larger box.

I recommend periodic reviews of current account potential along the lines of the initial research on prospective new accounts described in The Dynamic Manager’s Guide To Sales Techniques. There’s no law that says you can’t do that same kind of research into your current accounts. In fact, you would be doing the customer a real service if you took the time to analyze them that way.

Start with a fresh needs analysis as if you were getting ready to pitch a new account—then add the knowledge you’ve gained during the term of the current contract. Has the competitive scene changed? Has the customer made any changes in their business? The list of questions is endless but they should all give you a clearer map of the route to a sizable renewal.

Then look outside the box and estimate their revenue potential. If there’s a discrepancy between the estimate and their actual spending, you may have identified an opportunity.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.

Friday, March 22, 2013

Continual Selling Cements Customer Relationships

The best way to make sure the long term customer knows you’re not taking them for granted is to make it a practice to continually sell them. Advertising works best when it’s presented constantly over time. The message and the medium are important, but the repetition of the message—the frequency with which a customer sees the ad—is paramount. Good customer relations are built the same way: continual selling.

As you practice continual selling, watch out for a few pitfalls. In most businesses, long-term orders are encouraged. A contract to deliver the product or service in increments over a period of several months is generally considered more valuable than a series of contracts to deliver the same volume written one month at a time. The security of the long-term contract is often so important that the vendor will grant a discount or other special terms to the customer who signs one. Salespeople recognize the value, too, because they know that it’s much more efficient to sell one contract than twelve.

But there’s a downside risk in long-term contracts, too. The salesperson often believes, either consciously or subconsciously, that they’ve secured all the business they’re going to get from that customer, so they stop selling them until contract renewal time comes around. In some cases (which are all too frequent), the customer won’t even hear from the salesperson again until it’s time to renew. This attitude not only impairs the relationship with that customer, but it blinds the salesperson to many good opportunities in the interim.

I’m sure that your company has a continuous stream of new products, repackaged lines, sales promotions, and maybe even a price change or two. The first place you should prospect to sell these is among your current customers. They’ve already shown their willingness to buy from you, so keep the boiler stoked by continually feeding it new fuel.

Your customer’s needs may have changed or new ones arisen since they signed that long- term contract. The contract itself may have left some money on the table or there may well be a “contingency fund” in the customer’s budget held back just for last-minute opportunities. You’ll never know unless you constantly offer them additions to their contract.

Another advantage of continual selling is that you are trying out new ideas on the customer all the time. That gives you frequent feedback on what the customer likes and doesn’t like, needs and doesn’t need. Whether you sell any add-ons or not, this is very useful information when it comes to renewal time.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.

Friday, March 15, 2013

Customer For Life? Maybe!

Your goal for every customer should be to turn them into a customer for life, a popular concept that’s made the rounds in the last few years. Bowl them over with your service. Become such an integral part of their company that you have your own desk in their office. Know their needs so intimately that you develop solutions before the customers even discover the needs themselves.

Out of all your customers, you won’t have very many with that kind of relationship, but when you do, you’ll profit from it. I’ve been fortunate enough to have a handful of such customers with whom I’ve done business both when I worked for other companies and after I started my own. A few of them have represented millions of dollars in income over the years. You can enjoy the same kind of long-term relationship with your best customers if you practice just one thing: never stop selling them.

They may become your friends; in fact, I hope they do. They may come to rely on your service or products to the exclusion of all others. They may tell you that they’ll always be your customers and sign long-term contracts to prove it. But if you take them and their business for granted, you’ll regret it someday.

You’ll also be sorry if you rely on them as your sole or main source of income. Having one dominant customer is a dangerous situation because there are too many variables outside your control—and theirs. “For life” is a long, long, time.

Situations and people change. What was the foundation for a wonderful relationship two years ago may not mean anything today. Your relationship with your customer for life has to develop and change the same way your relationship with your spouse or significant other evolves over time. That’s the only way the relationship will stay vibrant, alive, and satisfying to both of you.

So never stop selling them. Every time your company comes out with a new product or service, pitch it to your current customers first. If it’s really a “new and improved” model, don’t you owe it to them? If there’s a limited supply, shouldn’t your best customers get first shot at it? That should be one of their rewards for being a loyal customer.

And always look for ways to add value to their current purchases from you. If your company sees fit to offer an inducement to new customers, shouldn’t your best current customers get the same deal? It’s a real slap in the face if they don’t. And if the new business incentive is a small price to pay for a new account, it’s an even smaller price to pay to keep a current one. That’s one of the management dilemmas behind sales promotions.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.

Friday, March 8, 2013

Existing Customers vs New Prospects

Your current customers are your best single source of new business. They know you, they know your product, they have demonstrated their willingness to purchase. What’s more, you know them, you’ve learned about their needs, and you’ve invested a significant amount of your time in the success of their business. You should work to protect that investment and encourage it to grow the same way you manage your investment portfolio, making adjustments periodically to maximize the return on your investment.

Your current customers are also your company’s most profitable customers. The heavy start-up costs have been absorbed and written off already. The current customers have passed the credit checks, had their account data fed into your computer, been educated about your billing practices, learned how to use your customer support and service staffs, and otherwise incurred the typical back-office expense necessary to start doing business with a new account.

They’ve probably also passed the most expensive stage of incurring initial selling costs. You’ve used the get-acquainted offer, the short-term trial contract, and the sales promotion expense to bring them into the company. You’ve done your basic research, invested your time in preparing the initial proposals, tracked down the decision-makers, and made all the follow-up presentations to make the first sale. Once you’ve done these things, you generally don’t have to do them again. You can skip or abbreviate at least some of these time-expensive tasks.

You can concentrate on keeping the current customer happy and increase your business with them while you go about developing other new accounts. As you’ve probably guessed by now, you have to do both tasks to build a successful account list or territory. There is no rest in sales unless you decide you’re not going to grow your business both ways. And if that’s your decision, you’ll have plenty of time to rest—in the line at the unemployment office.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.

Monday, March 4, 2013

Free Sales Training

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One of the great myths of selling is that you must make a series of calls on a prospect to determine their needs before you can make a proposal. This is generally time-wasting nonsense based on a misunderstanding of consultive selling. Why wait? You’ll speed up the prospect’s decision-making process if you present an actionable proposal on the very first call. Here's how to do it.

For a limited time, this ebook in the Dynamic Manager Handbook series is available at no cost to Kindle owners or anyone with a device that can use the Kindle app. It's my way of saying thanks to all the readers of the Dynamic Manager series and an introduction to aggressive, progressive sales people who haven't tried it yet.

Dave Donelson distill the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.

Friday, March 1, 2013

Getting Past The Flak Catcher To The Decision Maker

One of the most frustrating situations in sales is getting your proposal to a decision maker who is protected by an army of underlings or flak catchers who can't place an order but can shortstop your pitch.  You can overcome this problem, if you approach it carefully but aggressively, following the steps I recommend in their exact order. If you try to jump ahead, you’ll suffer the consequences.

Step One: First, establish contact with Mr. Big, the real decision maker. Contact doesn’t have to mean a face-to-face meeting. In fact, in this stage you don’t really want a face-to-face. Put Mr. Big on your company’s direct mail list. Make sure he gets your newsletter, press releases, and new product announcements addressed to him personally and with a brief “FYI” note signed by you.

Step Two: When you present a proposal to the flak catcher or buying agency, follow it up with a “thank you” letter and carbon Mr. Big. Make sure the letter praises the flak catcher for their perception and professionalism during your meeting. Do the same if they somehow give you a little order. Lay it on real thick. It’ll make them look good to Mr. Big—and how can they object to that? That letter, of course, will also put your name in front of Mr. Big, establishing a human contact in your company he can call if he wants to. It’s also a good idea to send an actual, physical snail mail letter; they’re not only classier than email, but much less likely to get lost in Mr. Big’s spam folder.

These steps can’t be rushed. Together, they’ll probably take at least four to six weeks. You have to judge the time you need according to each situation, of course, but remember that the relationship has to evolve over a little time—weeks, not days—and work like water dripping steadily on rock. After enough drops have struck the surface, a hole will appear in the rock. It takes a lot of drops for that to happen.

Step Three: After you’ve laid the foundation, start to build the relationship. This step will probably require at least another four weeks. Now is the time to get some face-to-face contact with Mr. Big. Invite him (and the flak catcher) to any of your company functions where customers are welcome. If you don’t have any, think about staging one. Maybe you can throw a cocktail party to announce a new product or a buffet lunch in appreciation of past business.

If your company gives away any goodies—coffee mugs, T-shirts, caps with your logo—be sure to give one to the flak catcher and one to Mr. Big. Hand-deliver them if at all possible. Your goal is to put your face with that name Mr. Big has been seeing on correspondence for the last eight weeks. If you have to leave Mr. Big’s gift at the front desk, put a hand-written note with it.

Get your management involved, too. If your boss invites Mr. Big to dinner, the flak catcher can’t take it out on you, especially if the dinner is a purely social affair, which it should be at this point. Most top management recognizes the importance of these occasions and considers it part of their job.

Step Four: After you’ve established a pattern of contact with Mr. Big, he’s seen your name and face a few times and has been exposed to your company and its products, it’s time for the next step, which is to pitch an idea to him. Send a letter to Mr. Big much like your cold call telephone appointment pitch—promise him an idea and ask for 15 minutes of his time. Send a copy of the letter to the flak catcher. Then call the flak catcher and ask him if he’s available for that meeting assuming it happens. Don’t ask his permission—assume the close and invite him to the meeting. Then call Mr. Big to set the date and time.

The worst thing that can happen is that the flak catcher gets irritated by your end run. But what’s he going to do? Tell Mr. Big that he shouldn’t meet with that nice person who gave him all those gifts, invited him to dinner, and sent him that wonderful letter praising the flak catcher’s performance? It’s pretty hard for him to do that without sounding petty and defensive.

Is he going to tell you not to call Mr. Big? He can try, but if you remind him that you’re not going behind his back, in fact you’re inviting him to the meeting because you know how much Mr. Big values his opinion, he’ll have a tough time justifying his demand.

Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for business owners and managers in the Dynamic Manager's Guides and Handbooks, a series of how-to books about marketing and advertising, sales techniques, and management strategy.