When it comes to winning business, many sellers believe it’s all about price – but in B2B sales, that’s really not the case, says Sean Geehan, CEO and founder of the Geehan Group and author of The B2B Executive Playbook: The Ultimate Weapon for Achieving Sustainable, Predictable and Profitable Growth. During a session at Ariba LIVE 2014, Geehan outlined the unique characteristics of successful B2B sales organizations, why they need to strategize differently than B2C companies, and steps they must take to gain customer loyalty and drive lasting growth.
What makes B2B so different?
While B2B and B2C companies share many similarities, they differ in several key ways. First, B2B companies typically have far fewer customers than B2Cs—so when you apply the 80-20 rule to a B2B, 80% of revenue may come from just a handful of key accounts. And because of B2B’s high concentration of revenue, Geehan says, success “is going to be won or lost at the top: how we treat our major accounts, how we engage them, and how we design our future with them.”
Accordingly, best practices for B2B also differ markedly from B2C. “How you drive this difference within your B2B is what separates the decent companies from the great ones,” Geehan says. He recommends a proven, market-focused approach that engages customer decision makers in long-term strategic planning. The result? Retention rates improve by 25% and account growth triples. Here are 10 tips to help get you there.
Sell smarter, not harder: Maximizing ROI
Tip #1: Focus on retention and growth, especially at the top tier. While sales organizations typically spend about 60% of their budget on acquiring new customers, they could achieve much better ROI by growing existing accounts – with twice the margin, half the hassle, and no onboarding costs. “VMware grew from zero to about $6 billion in 14 years, and 80% of their marketing and sales efforts are going into current customers,” Geehan points out. “They know they can get to $10 billion by cross-selling and up-selling their current customer base.” Nurturing current customers – and paying extra attention to the profitable, top-tier accounts – makes more sense, especially when the cost of new acquisitions can be five to seven times greater than retention and renewal.
Tip #2: Capitalize on technology to maximize value from lower-tier customers. You can increase profitability with smaller customers by taking advantage of technology platforms like the Ariba® Network, which makes it easy to drive transaction efficiency and capture recurring revenue streams.
Use branding and positioning to drive margin opportunity
Tip #3: Avoid margin compression. Winning B2B sellers focus on margin more than price. “Make no mistake, the game is about getting a premium at the margin level,” Geehan says. You want maximum margin—more than anyone in your category—so you can continue to reinvest for the future, add value, and beat the competition.
Tip #4: Learn how customers see you, and align perceptions with reality. The way your top clients view you is pivotal to sustaining growth. In their minds, where does your company fall on this continuum?
Commodity supplier: These firms have achieved a level of operational efficiency.
Reliable supplier: At crunch time, you can really depend on these sellers to get the job done.
Problem solver: These event-driven thought leaders can help you figure things out and create best practices after a major change (e.g., technology disruptions or new regulatory requirements like Sarbanes-Oxley).
Trusted advisor: Without these really smart sellers, you’re likely to miss something essential and lose a competitive advantage.
Independent: A symbiotic relationship where if one partner isn’t successful, neither is the other.
Any mismatch between their perception and your capabilities is a lost opportunity to maximize margin—the Holy Grail. “This is where branding counts,” Geehan notes. For example, positioning your company as a problem-solving thought leader will make top customers more likely to want you to have margin, because they need you to stay in business.
Planning the future together
Tip #5: Educate customers about reinvestment and long-term value. By positioning yourself accurately with customers, you open the door to a new level of discussion – one that focuses on the best ways to bring them value. For example, you might say, “‘I’d love to do this for your company, but if I do, I’m not going to have the margin to reinvest,’” Geehan explains. “’So do you want to think of the short-term partnership, or do you want to think of the long-term partnership?’” When you engage customers for the long term, they stay with you “because they’ve got skin in the game, they’ve got emotional equity,” Geehan says. “They’re an extended part of your organization at that point in time.”
Tip #6: Adopt a forward-looking perspective. No more than a quarter of your time in customer meetings should be about what’s happened. “SLAs being met, on-time delivery? Send it in a report,” Geehan says. Instead, focus on what’s important to them right now and how you can help them get to a better place. “The only reason you’re going to be invited back to that executive meeting is because you’re forward-thinking, you understand their issues, and you’re going to help them think through that and enable that process,” he notes. “And it needs to be systemic across your company, and not just ‘we need these two gurus that fly around the country all the time.’”
Tip #7: Base your plans on customer and market input. “Listen to your customers at an intimate level, and plan accordingly,” Geehan advises. “But the plan needs to go through them.” And instead of letting a few heavyweights drive your direction, engage the market in the aggregate. For example, you can bring together an advisory council of 20-100 people who represent a sampling of the markets you serve. You need to understand what they want to do and why, what the payback is, and how it can differentiate them. This approach delivers:
- Industry insight and direction
- Sales, margin, retention, and account growth
- Ideas for relevant innovation
- Internal buy-in and external advocacy
Tip #8: Engage effectively with decision makers. Connecting directly with the appropriate decision makers on your customer side – purchasing, users, middle management, and/or top-tier executives – is essential to enable critical big-
picture conversations. If your sales team isn’t quite ready to have complex strategic discussions with their customers, they can:
- Arrange expert presentations or offer consultations to give customers confidence in their ability to help them think things through
- Suggest assessments, share research results, or walk customers through intelligent questions to spark future-oriented conversations and show market awareness
Tip 9: Follow the leaders. Successful B2B sellers make acquisitions and investments that directly align with the direction their main customers are going—but first, they ensure that those customers are outpacing their peers in both sales and margins. “It’s not just about doing innovations, but innovation that adds absolute value to the customer environment,” Geehan says. If customers don’t know what they want, you can reverse engineer by looking at their pains to determine the best ways to support them. “Maybe they’re not going to tell you ‘Go buy this company,’ but what they can say is, ‘Here’s a category we need help in.’”
Tip #10: Assess before you invest. Mitigate risk by carefully vetting the customers you partner with. “There’s bad business you need to walk away from; don’t sign for the dollars,” Geehan advises. Instead, make sure you align with customers on 1) feature and function, 2) trust and credibility (can they do what they say they’ll do?), and 3) whether their culture fits with yours. “You’ve got to make sure that the people you’re getting in bed with are going to be somebody you want to be in bed with for a long time, if they’re going to be 10-20% of your revenue,” Geehan notes. “If I’m going to invest in their company as a supplier, I don’t want to take on the business unless I know they’re going to be successful, and we have a long-term relationship that’s built in.”
For more information on B2B success strategies you can use in your business, watch the full session on the Ariba Slideshare site.