Prepare for Low-Ball Pricing….On the Horizon

By Sid Chadwick

“The best leaders of all are ones the people do not know exist. They turn to each other and say we did it ourselves.”……………………Zen Aphorism

INTRODUCTION:

You probably need to prepare… for the following:

My client’s treasured customer just received a “low-ball, unsolicited proposal” from one of my client’s competitors.

Facing lower revenues and rising costs, my client’s treasured customer is now opening their account to “market bidding.”

After a moment of panic, how should they respond?

Every customer relationship has a “context.”

The following scenarios are presented to provide you with “Options” – that speak - to your company’s value – to this valued customer.

1. Your organization probably knows your customer’s work, and expectations, as good as or better than any competitor. Can you “hint at” or “list” unusual service steps you take to meet their expectations - and needs - outside strict specifications?
2. On their invoicing, you probably do not “nit-pick” them with minor extra charges. They need to learn that. Can you provide them with examples, with more examples on request?
3. There are ways to produce their work at a lower cost, which you tend to avoid – in order to meet their delivery, quality, and servicing expectations and needs. Examples include Order-Entry, Prepress, Press, Finishing and Shipping, and day-to-day communications. Are they interested in discussing lower-cost options? Do they have penalties for competitors who seize these options, without the customer’s permission? Are these “Options” in a bidding scenario?
4. Can you show examples of not compromising their requirements? My experience is that production teams know which customers have good and not-so-good margins. This awareness enters into how they treat each customer’s work, in subtle and not-so-subtle ways (though there may be denials).
5. Are they inviting you to offer suggestions for lowering costs?
6. Consistency and reliability of supplier performance tends to be taken for granted until something is not as expected. What’s your track record for reliability and consistency? (Three errors have a different perspective - if they are in the context of 900+ orders.) The customer’s unexpected, often unrecoverable costs, from a faulty supplier order, can eat up any potential cost-savings – times 100 or even 1,000X.
7. Can you show where your knowledge of their expectations allowed you to correct their specifications, and even proactively save them meaningful, unexpected costs?
8. Is your competitor profitable? About once a year I receive a cry for “Help” from a client being raided by RR Donnelly. Our client tends to not be aware that RR Donnelly has not been profitable for most of the last decade, paying dividends out of cash flow from depreciation – as evidenced in their published Annual Reports. My client’s customer usually is most appreciative of this important new information.
9. On this same line of thinking, how does your competitor pay their suppliers’ bills vs. how you pay your suppliers? Supplier total support can be “the difference” at critical moments.

My understanding is that you have invested steadily in (1) Employee Education & Training, (2) New and updated equipment, (3) New Technologies, and (4) Expert Technical Services. Such documentation would get your customer’s attention – with brief explanations of “economic customer benefits”. Most smart, “long-view” customers want to know they are using the best available supplier. A list of examples, with identified “customer benefits”, should be meaningful.

SUMMARY:

How do you “get out in front of a bidding war” to avoid inherent risks and potential losses?

There really are no substitutes for an Annual Review (and more often, if prudent) – with your Top 10 or Top 20 customers.

At these sessions – usually at the customer’s location, both organizations come prepared to review, with the supplier usually going first (and a post-review Report issued to both organizations):

1. What’s changed, and is expected to change.
2. What needs to improve.
3. What investments have been made – that benefit both organizations?

Tougher times are coming toward us. You can be proactive – preparing to continue to do well.

“You’ve got to take the initiative and play your game. In a decisive set, confidence is the difference.”…………….Chris Evert