Excluding the Covid-19 pandemic, we are in our first recession since the housing crisis of 2008-09. Companies like Wayfair, Peloton, 7/11, Ford, Twitter, and Tesla, to name a few, are already laying people off. There is no denying more will follow suit.
What does that mean for salespeople and account managers? Companies will put more contracts out to bid rather than just extend. They will challenge mediocre relationships and look for something better.
So, what can you do to avoid the “Great Cancellation” of your contract? There are key things you must understand and five actions you must take during down economic times to protect your key accounts:
A. Understand your customer’s operating reality. With capital more expensive (thanks to inflation and the Fed), they need to increase cash flow by reducing costs and improving productivity. Ask yourself: Are we performing up to contractual standards? How can I create a win-win?
B. Understand that a contract is nothing more than a string of 90-day escape clauses. Sad, but true for most companies. Most customers are able to negotiate an “Early Termination for Convenience” with their suppliers because the supplier is so enamored with winning the business. Now, when you consider client acquisition and implementation costs—this puts you at an extreme disadvantage from a negotiation standpoint; what you should have negotiated was "Early Termination for Cause with Failure to Cure” (Negotiating this key term is another blog).
Here are five actions you must take:
1. Communicate and ensure everyone must understand that protecting your position from the competition is an everyday sales strategy. You won the account with perceived value v. the competition. But that is not a permanent place. You must be able to evolve over time with personnel change, shifting priorities, and advancing technology—not by being reactive, but rather by being proactive through effective questioning, active listening, and being 3 X 3 within your key accounts.
2. Schedule a Quarterly Business Review ASAP. The two biggest problems in business and any relationship for that matter are a lack of communication and miscommunication. No news is not necessarily good news. Just consider the lack of communication or miscommunication before a personal relationship breakup. People are still people in business, and the same thing occurs. Be proactive and learn where the gaps are and where you can fix or add value from a customer perspective. Invite new key players, especially those who can potentially impact revenue.
3. Go on offense—deep and wide—3x3x3! Expand your relationships! Expand relationships to three people on your side to three people (Manager, Director, and VP) on their side across three functional areas (Purchasing, HR, Operations). Meet with new players and key decision influencers. Get the "lay of the land" from their perspective. Seek to understand, then to be understood. (Covey reference).
4. Make Cross-Selling the TOP PRIORITY. As the title says, the best defense is a strong offense. Customers would rather deal with fewer suppliers than more. That is a fact. The problem is most sales leaders don't take advantage of this fact. Client retention and expansion is the new "acquisition." It costs six to seven times more to sell to a new customer than to cross-sell into an existing one (Bain & Co. reference). So, what are the highest ROI and best approach to cross-selling? Of course, it starts with effective communication with your sales/account management team from leadership. Here is a simple model to follow:
5. Recognized Behavior Gets Repeated. Unrecognized Behavior Goes Away. If you put in a “system” that recognizes both the paycheck and the “psychological paycheck” through consistent reporting, communication, and recognition, you will drive the desired behavior and your people will come to understand the importance of the program through that consistency.
At Butler Street, our leaders have been through multiple recessions and have the historical perspective, tools, and training to ensure we can help our clients through challenging economic times. Contact us to learn more about how we can help your organization be proactive during recessionary times.