Give your customers a reason to say “yes” on more than just rock-bottom prices.
There is a new reality afoot with customers. Customers have enjoyed the last few years of highly-competitive pricing, wide-open options of who to work with, favorable commercial terms and the pick of the right team with which to work. It has been a dream from the owners’ side.
Now the industry is changing. We have been in a slow expansion long enough for companies to begin to strip their benches of available teams. Typically that is one of the signals that prices are going to increase. Some parts of the country are at or above pre-recessionary pricing. Some continue to bid at very competitive levels, with subcontractors raising their prices before many general contractors. Even with the increased pricing of key commodities, upward pressure on wages, and so forth, industry pricing has yet to return to a level where contractors can be profitable and build their balance sheets back up.
As the industry continues to grow, the pressure to find the right work for available teams will increase. The “right work” includes projects on which you can make a profit — for customers who value what you are offering (rather than choosing solely on price). You need to proactively decide what is the right work for your organization based on your core capabilities and the work on which you can make money. Customers cannot make those decisions for you. They approach your involvement on a potential project to better their objectives.
Assessing the Cost/Benefit Relationship
At the heart of it, customers represent a cost/benefit relationship. It has to be good for them and also good for you. If not, there isn’t a compelling reason to continue to work with that customer over the long term. Simply put, you have to be able to make money working for clients or, by definition, they are not good clients.
Yes, that does put pressure on your company to continue to hone and refine your systems. Everyone expects things to be done cheaper, better and faster than last year; construction is no different. Customers have that expectation. Your people also want the company to run better, faster and with improved economics. If the company is not making money, your people are not likely to make bonuses or receive wage increases.
When contractors feel compelled to win work at the lowest possible price, it becomes difficult to invest in improved technology, systems and skills that will make the company better in the future. Winning the right work at the right price is the key. It gives the company the breathing room to develop its people, improve its systems and processes, and streamline operating practices.
To win profitable work, many contractors need to change the way they approach and sell to customers. Start with the outside view of the company to find a way to build value for the customer and win work that pays you just a bit more than the competition for what you do. You have to be able to add value for the customer. That means finding customers’ real hot buttons, the ones they will pay a bit more for, and crafting a unique approach that sets you apart from the competition.
Finding the Platform to Stand Out
At the heart of positioning work is finding out what the customer wants. Much of that comes from the specifications — if the project has progressed to that point. Specifications set the stage for the scope of the project, level of quality and customer expectations. You do not need to be an industry expert to know that there is a lot of interpretation left open in the specs.
End customers are quick to mention that most contractors know very little about why the customer is building the project, what it means for their business, what changing demands of their own customers they are trying to respond to, and how that impacts their customers’ competitive landscapes. Customers do not build projects because they have too much money or because they’re bored. Projects are created and built for business purposes, so finding the business purpose of the project is the key to building unique value. You need to learn more about the business purpose, what the key needs are and why those are important, what past experiences the client has had — good or bad, etc. That is what will help you build value so you will stand out from the competition.
If you ask most contractors, they feel like they are delivering a superior service to customers. On the other side of the equation, however, customers do not feel like they are receiving a superior service. One study conducted outside of the construction industry cited that 80% of companies feel they are delivering a superior service yet only 8% of customers feel they received it. Why the disconnect? Is it possible that the industry does not see value from the perspective of a customer? If we are going to deliver a superior service to customers, we have to know what is important to them, why it is important and the value that so-called superior service adds.
Stop Talking to Sell More
The key to selling more work at the right margin is to stop talking so much and just listen. Ask the customer good questions. Find out their perspectives on the project certainly, discover how they would define a successful project and ask how such projects benefit their companies (and them personally).
Build questions that fit your style and specific objectives. Below are a few of my favorite question to ask before the RFP hits the street. The more time you spend talking about their company, success measurements, business purpose behind the job, etc., the more points you’ll get. Far too many contractors ask questions only about the project without first finding out what the key project drivers are.
You might begin by telling them you know that they are busy and that you very much appreciate the time they are investing in meeting with you.
Make sure you explain your objective for the time together. Then dig into the questions, such as:
- How has your business has changed in the last two to three years?
- How have your customers’ expectations been changing?
- What do you need to do now to better meet customer expectations?
- What kind of competitive pressures does your company now face?
- What are the key drivers of your capital improvement plans/budgets?
- Tell me about the best contractors you work with.
- What are they good at?
- Where can they be a little bit better?
- Tell me about your perception of our company.
- What do you like?
- Where can we improve?
- What impact would that (improvements) have on you and your team?
- What else do I need to know to better meet your objectives?
- How can we be of better service to you?
Identifying the Sacred Cows
I was recently at an industry event where end project owners were presenting about what was important to them and their organizations. A speaker shared a question that owners need to hear contractors ask, and it was: “What are your sacred cows?” Isn’t that an interesting question? It is only a data point, not a customer perspective trend, but having a couple of key questions to get at the heart of the customer’s expectations and what you can do to add value is essential for selling based on value. Use that information to launch a conversation about how you can help their organization protect their sacred cows and deliver a successful project.
Think of all of these questions as a launching point for discussion. Don’t simply ask, “What kind of competitive pressures does your company face now?” Find out what that means, how their company is thinking of responding, how fast are the changes coming, how those changes could/should impact the project at hand, etc. Use the questions to listen carefully to what a day in the life of this customer is like. What are the priorities, what challenges are they facing, how has their job changed in the last two to three years? Those are the questions that you need to ask to find out how to sell more of the right kind of work.
In a future article, I will give you the six platforms for creating a lasting competitive advantage. For now, use these questions to create a competitive advantage at the project level. See what you can glean that will inform how you can approach the project differently, what additional services/approaches can you now suggest, how your team needs to change to make sure that the customer’s needs actually do get met and how you can assure them that you will deliver on all the promises that you are making. Keep the questions focused on them, the project and their organization. You have plenty of time later to tell them about yourself and your company.
Tip: Ask existing customers the same questions you would ask a new customer to find out more. Ask them what you do that adds value and how you can improve your service. Customers have insights into how you really stack up to the competition.
To get a customer to buy on something other than the rock bottom low price, you have to give them a business reason to do so. They have to receive something over and above what they would have received at the lower price. Use the questions to find out what is important to the customer and why it is important. And remember that you’re looking for things that you can do or an approach to take that provides value over the lowest price possible. Q
Cynthia Paul is a managing director with FMI Corporation. She can be reached at 303.398.7206 or via email at cpaul@fminet.com.
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