The prospect of selling your products or services to the big corporations can be a daunting prospect, but the means for making it happen are well within grasp. In this guest post, Neil Radley, non-executive director of cloud-based payment company Invapay, shares five easy steps for getting the big guns to make their first order.
You go into Poundland and the proposition is clear. All those things you ever wanted and all for just £1. Buying is not a difficult decision and it’s not like you can find it cheaper elsewhere. But is it? A recent review showed that Poundland can charge up to 50 per cent more per unit than other shops through the clever use of marketing and differing pack sizes. Poundland knows exactly how to price for the proposition they are offering and who they are offering it to.
Knowing the value of your proposition and who your buyer is are two of the hardest things the owner of an SME can ever learn. So many businesses have failed because they didn’t understand the sales dynamic. In the business to consumer (B2C) market the feedback from a sales proposition is rapid, but in the business to business (B2B) market there can be factors that make it more difficult to sell your product, making it seem as though what you’re offering is poor, but this isn’t necessarily the case.
In a B2B environment the sales dynamic is distorted because the lifecycle of sales is very different (longer) and there is an imbalance between the size of buyers and sellers.
Typically, a small business looks at its product and works out how much it costs to produce. The immediate reaction is then to add a margin to cover overheads and then another bit more for profit to get to price. Invariably, the SME wants its product to be as cheap as possible in the belief it will be easier to sell. Wrong! Understanding the interaction between product value, its pricing and the buyer is critical in the B2B selling cycle.
Price for value
Always start by pricing for value and forget the cost of the product (if cost is higher than value then you’re on to a loser anyway!). Spend time working out the value to the buyer. If your product addresses a £10m problem then a £1m price tag to solve 50 per cent of the problem is a no brainer maths equation for the buyer. Forget that the product cost £100 to develop in the workshop at the back of the office.
Target your buyer
Once you have your product proposition, remember that product buying decisions correlate closely to the status of an employee in a large corporate. Instead of ‘You get what you pay for’ it’s ‘You get who you price for’. All corporates have approval hierarchies and naturally, the higher the spend, the more senior the employee. Pricing your goods at £100 gets you to someone whose budget is commensurate. Given its proportion of their budget, they will likely take as much time as the CEO takes to make the £1m buying decision. The difference is that the £100 decision still needs to get ratified up the chain which adds complexity, layers and ultimately, time.
Be prepared to answer some questions
It never ceases to amaze me what size of transaction a corporate procurement department will get involved in, if you are lucky enough to be on the preferred supplier list in the first place. By and large they will go through the same process as if you were IBM. They will ask to see your statutory accounts, about your forward trading prospects, whether you have enough cash, and who your directors are. The contracts that come out of the back end read like War and Peace.
Get your CEO to endorse the product
Getting your products endorsed by the CEO makes selling your product much easier. The head of procurement is always more amenable when the CEO is endorsing a product! However, I can’t count the number of times I’ve heard the sales team in an SME bemoan the fact they can’t get access to the C-Suite executives.
Stand by your price tag
Don’t be apologetic: ‘sell the dream’. How many times has a sales pitch started or ended with the immortal line ‘It only costs…’? I despair of that sales pitch. Be bold and support your £1m price tag. Tell the buying CEO that the £1m spend will save the buyer £5m of problem. Put it like that and the CEO turns to their procurement chief and says “Why aren’t we buying this product?”.
Paint the picture of where the buyer will be once the product is bought and being used. Even the most mundane products can sell a vision. Selling that new office chair becomes selling an ‘ergonomically designed productivity enhancer’.
The one, sure-fire way of selling your product is to price it for the CEO to decide whether they’d buy it. Of course, the £1m chair is unlikely to get far… but you never know!
Neil Radley is a non-executive Director at Invapay. He has operated as a CEO and CFO of several international businesses including Barclays Bank, Barclaycard and PWC. He has a track record of growing, and developing, international businesses in retail financial services and the payments sectors. Neil has Private Equity experience, is ACA qualified and an FCA approved person.
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