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[Click for Spanish Version] To all those professionally dedicated to B2B selling, particularly in the area of complex clients and consultative selling , I think these two processes deserve a careful look.
Las Vegas Sands in Madrid or the “No Go” decission …
[for the non Madrid residents, I do explain that Adelson is an AMERICAN billionaire that was negotiating with Madrid’s Goverment an especial tax, money and legal agreement to make a new Las Vegas resort in Madrid with an investment estimated on 30.000 M €].
I begin by saying that I am personally very glad with the Spanish Governement decission of not accepting Adelson’s blackmailing, and the Adelson’s withdraw. I know it was a huge investment, but I had the impression that this remake of “Welcome Mr Marshall ” (a classic spanish movie) would surpass the famous Spanish film when (in the 60s) the Americans were expected to come with a lot of dollars to a poor spanish small village, and after all the time and effort they pass by the people through the middle of the town with their big cars without stopping. And what is going to look like really is to “the Sting” with Newman and Redford, in an updated version where public money is swindled, and more tricks than the Gordon Ramsey TV program “Kitchen Nightmares”
Skilled negotiator and dangerous. Our politicians have acted with a fine appearance and nobility to Adelson’s hook. It is granted, if a politician sees a big candy, shaped with a ceremonial ribbon, and they compete with another politician … the mess is guaranteed.
My critic is very simple. We have been deceived very easily, the goverment has dedicated many resources , time and money on this issue. It has been a mistake and that is why sometimes there is the “No Go” decission in Complex Selling. From what I ‘ve heard Adelson was playing several decks at once, and Madrid was not the table of the money. When he had secured another table, he showed as a bluff to see if we take it, and luckily we have not do it. By the way, I never gave a lot of confidence on Adelson , his approach to real investment was much less than what he originally said, and the total promised investment did not fit very well with the solvency and size LVS.US ( Las Vegas Sands) , large cap company (63,000 M USD) , but with a high PER ( 28)to which these projects involve double balance ( Total current assets 22,000 M USD) , which that in mind the bluff is normal.
Oh, and luckily on the sting was selected Madrid and not Barcelona. As the government “prevented” the project , that would have been considered another “attack from Spain to Catalonia” Does anyone doubt it?
An Olympics RFP … or how to confuse ” influencers ” with ” decission makers”
Although it has rained a lot since the decision of the Olympics , I do take the opportunity to comment . This process seems a nonsense to me.
It is obviously a very complex sale , long cycle , there are many “buyers” many “influencers” , but certainly what seems clear is that, just as in any business process there has been mistakes identifying the center of the decision and some strategic points. I think in these process we (Madrid candidature) have been nerds .
First, who decides the vote ? Is the Olympian, who has spent several years traveling from aspiring city to aspiring city, travelling like a king and having a great time? Does decides Nawal El Moutawakel, Olympic’s Morocco medallist the vote ? I’m not sure . They are totally influenced by governments and therefore the decission maker is the government of Morocco. Therefore, it seems we spent a lot of time convincing who does not decide. After the vote in Buenos Aires we said … “They have deceived us ,” those who have pledged to vote for us, finally did not … if it was the first time , but it was the third !
Second, I think even the leverers of the claim and message have not been the adequate. I heard the message “It makes sense” it as an austere message to do Olympics. But gentlemen , who thinks that the concept austerity is a good selling message for the Olympics ? If you decide to organize a world party every four years, and it will costs to you nothing , will you buy the austere one?
Third point: How is it possible that we have not been Taliban in the previous two years with issues such as doping preventing harm to our image. We had time for a real zero tolerance policy on this issue. Red card for COE (Olympic Spanish Comitte) …
It is clear that the vote is decided very high, and the whole show (necessary but useless) in Buenos Aires, has had unacceptable flaws. The lack of language skills in some of our senior representatives in the process disables them to be there. Our Chairman of the COE does not speak English , I do not understand. What happened with our mayor has been fun and comic. Well, at least it has served for some fun song .
I think a resignation would be necessary , but that will be a great surprise!
[Click for Spanish Version]
Fifteen years in Executive Committe positions, and now I do realize how hard it is to find and attract talent in that strange world that is the programmers one … I wanted to share with you two additional reflections:
1) “escapethecity.org” are some wackos in London that defend a very real theory. When talent and spirit of sacrifice is mixed, the combination is very dangerous. This profile is sought after by many companies, and the result on one side of the coin is to have a highly effective and committed team that delivers results and pushes the organization forward. On the other side, on the personal one, can result on a frustrating job. Just imagine, highly trained young talented people can successfully perform multiple jobs, and if they are capable of sacrifice the situation can be as follows. I get to do any work, take it out very well and achieve success in this task. They do not really like the work they do, but as it is assumed that the work does not have to be fun at all because working is tough. Over time they gain more money (that is the trap), and even start to like them to be “experts reconcile thousands of accounting movements in an ERP automatically”, with all due respect, a work not very motivating at a personal level, but … conclusion: you can end up doing what you do not like, or you may end up liking it (perhaps that is even worse … 😉
2) Programmers, tekkies! (I say that with affection). The first point is that in traditional companies they are invisible (in a software company, at least they are in the core of the company). Now I do recall with true repentance, in companies where I’ve worked, where there were large teams of programmers, if you ask me who was the geniuses, the number one, etc., I cannot tell you. It is an invisible caste organizations, which I think now is an incredible injustice. Programmers can solve complex problems, they can do the work of several (you all know that a really talented programmer worth 10 normal ones), and that they make organizations go forward and are absolutely invisible to senior management level. I bet you that if we ask to 10 CEOs to tell us its three brightest programmers, and their three brightest salesman, and is more than likely to tell us all the sales guys, but they will ask … Oh, but we do have programmers? I assure you that in the Steering Committees (traditional business) all kinds of things are spoken (even very useless one) , but never ever we do talked about programmers …
Well, a little light on the way! As many of you know, we are launching a fantastic company, and we are now looking for two programmers to our adventure! How hard! We want the best, and we want to offer the best, good economic conditions, and a vital adventure to shine and grow. If you can be that person, call us! We look forward to meeting you! And if you’re not, but you know that profile Share us www.tmt.info, “twit us”, resendus, I will appreciate it and thank you very much!
Good morning / afternoon, I have 15 years in positions of the Steering Committee in TMCs (Travel Agencies Company), and therefore with (I think) a deep understanding of the industry, both locally and globally. I leave my Linkedin profile for more information: http://www.linkedin.com/in/inigovalenzuela
A few years ago, a large and smart client, when I was explaining to him how prices are constructed from different vendors in the world of airlines, and how these were managed through the GDSs, the cabin game (yield management) and the various channels, he said to me the phrase … “Inigo, but what you’re telling me is that the road to a perfectly competitive market is unstoppable.”
The truth is, and has been more than 5 years since that meeting, he gave in the target (market talk point to point travel, travel not complex multipath). Perfect competition meant that if I buy a ticket at one point, the same price is easily accessible by any user who is looking for the route at the same time through different channels. Therefore, the final suppliers are forced to admit that the price per channel segmentation Reserve lose weight every day (not saying that there is, I say that is down). Who really is the price segments especially the time of purchase and supply and demand for goods, and the flexibility of the traveler, not the road reserve. This seems obvious, it was not before, and paradoxically, firms in an imperfect market and despite his ability to purchase adequate travel did not buy because the opacity of the market segment allowed the supplier itself much more, aided also by a supply and less competition.
The key is to “be just a click away” than 1000 different ways to book the same service, put a terrible strain to the manager and the provider to set the rate, and gives a guarantee of transparency in the price. The paradigm of access to information is Google, I guess you know Google Flight (still only operating with U.S. origin) and Google Hotels, two amazing tools that can change the way you manage in many organizations. The funny thing is that the search traffic routes we are on Google Flight a zero price differences between different suppliers (same product). It is obviously a sign that we are in a market so transparent that it is inevitable that the price formation tends to equalize. There is noise from the prior untouchable GDSs indicating that Google tools anti-competitive (and probably right because Google still is not an NGO, and therefore may prevail paid content visibility), but it is undeniable who have sought a search model exceptional.
[Delta / Virgin and United advertised exactly the same price for a San Francisco – Los Angeles … apparent total commoditization (note the ancillaries)]
Obviously, there are negotiated rates. But the consideration of its use has become a “cap” for most companies. This is worth several blogs and I dwell on the world negotiated later. It is true that the segments transportation, hotel and car are very different in their behavior and analysis.
What does that mean? Is there not looking for price differential? Nor so, there is content that is not as readily available (LCC), and there are destinations and destinations. But it is clear that there are critical issues that affect those purchase prices (especially early), working on them for optimal management is part of the ham. That a provider offers me the best price at a given time, have long been considered a hygiene factor (ie non-differential and minimum), if you also talk about simple products without too much value in their management, it is clear that the client does not pay for the management of the reserve. When anyone can get that price, the management has little value (book an air bridge or a train ticket). And if we also implemented a tool-Fallback, it is clear that the valuation of my provider is not on the management fee. Customers pay for the added values such as: the management of the travel policy, billing, reporting, security, ease of payment and process, troubleshooting, etc, and not by the simple booking flights.
Do all this well and efficiently is not easy, and only the good are able to provide value without incident in the relationship, and above all act as contributors to the best solution tailored to each client, reducing costs in the process, and adding creativity and flexibility. What is the value that is another topic for another blog giving.
I hope you have served,
El negocio de las empresas … y un cliente muy listo …Posted on 17 de julio de 2012 | 13 comentariosBuenos días/tardes, supongo que los que me estáis leyendo conocéis mi perfil (sino es difícil que estuvieseis aquí , en dos líneas, llevo 15 años en puestos de Comité de Dirección en TMCs (Agencias de Viajes de Empresa), y por tanto con (creo) bastante conocimiento de la industria, tanto local como global. Os dejo mi perfil de Linkedin para más información: http://www.linkedin.com/in/inigovalenzuela
Hace unos años, un gran cliente muy listo, al explicarle como se construían los precios de distintos proveedores en el mundo de las aerolíneas, y como se gestionaban los mismos a través de los GDSs y de los distintos canales me dijo una frase de las históricas … “Iñigo, pero lo que me estás contando es que vamos a un mercado de competencia perfecta de forma imparable”.
La verdad es que, y han pasado más de 5 años desde esa reunión, dió en la diana (hablamos del mercado de viajes punto a punto, no viajes complejos multitrayecto). Competencia perfecta quería decir que si yo compro un billete en un momento determinado, ese mismo precio es accesible de forma sencilla por cualquier usuario que esté buscando dicha ruta en el mismo momento a través de distintos canales. Por tanto, los proveedores finales se ven forzados a admitir que la segmentación del precio por canal de reserva pierde peso día a día (no digo que no exista, digo que está a la baja). Quien segmenta el precio realmente es sobre todo el momento de la compra y la oferta y demanda para un bien, así como la flexibilidad del viajero, no la vía de reserva. Esto que parece evidente, no lo era antes, y paradójicamente, las empresas en un mercado imperfecto y a pesar de su capacidad de compra, no compraban los viajes adecuadamente ya que la opacidad del mercado permitía al propio proveedor segmentar mucho más, ayudados también por una oferta y competencia menor.
La clave es que “estar a un click” de 1000 formas diferentes de reservar el mismo servicio, mete una presión terrible al gestor y al proveedor que pone la tarifa, y da una garantía de transparencia en el precio. El paradigma del acceso a la información es Google, supongo que conocéis Google Flight (aún sólo operativo con origen EEUU) y Google Hotels, dos herramientas increibles que pueden cambiar la forma de gestionar en muchas organizaciones. Lo curioso es que al buscar rutas de mucho tráfico nos encontramos en Google Flight unas diferencias de precios nulas entre distintos proveedores (a mismo producto). Evidentemente es una señal de que estamos ya en un mercado tan transparente que, es inevitable que la formación de precios tienda a igualarse. Hay ruido por parte de los, antes intocables, GDSs indicando que las herramientas de Google atentan contra la competencia (y probablemente tienen razón ya que Google aún no es una ONG, y por tanto podría primar el contenido que pague visibilidad), pero es innegable que han buscado un modelo de búsqueda excepcional.
[Delta/Virgin y United publicitan exactamente el mismo precio para un San Francisco – Los Angeles … comoditización total aparente (ojo con los ancillaries)]
Evidentemente, existen tarifas negociadas. Pero la consideración de su uso se ha convertido en un “tope” para la mayoría de las empresas. Esto merece varios blogs y me entretendré en el mundo negociado más adelante. Es cierto que los segmentos transporte, hotel y coche son muy diferentes en su comportamiento y análisis.
¿Y esto que significa? ¿Ya no existe diferencial en búsqueda de precios? Tampoco es así, existe contenido que no está disponible tan fácilmente (LCC), y hay destinos y destinos. Pero resulta evidente que hay aspectos críticos que inciden en esos precios de compra (sobre todo la anticipación), trabajar sobre los mismos para una óptima gestión es la parte del jamón. Que un proveedor me ofrezca el mejor precio en un momento determinado, hace tiempo que se considera un factor higiénico (es decir no diferencial y mínimo), si además hablamos de productos sencillos y sin demasiado valor en su gestión, es evidente que el cliente no paga por la gestión de la reserva. Cuando cualquiera puede conseguir ese precio, esa gestión no tiene mucho valor (reservar un puente aéreo o un billete de tren). Y si además tenemos implementada una herramienta de autoreserva, es evidente que la valoración de mi proveedor no está en la gestión de la tarifa. Los clientes pagan por los valores añadidos como son: la gestión de la política de viajes, facturación, reporting, seguridad, facilidad de pago y proceso, resolución de incidencias, etc, y no por la propia reserva en vuelos sencillos.
Hacer todo esto bien, y de forma eficiente no es fácil, y sólo los muy buenos son capaces de proporcionar valor sin incidencias en la relación, y sobre todo actuar como aportadores de la mejor solución ajustada a cada cliente, reduciendo costes en el proceso, y sumando creatividad y flexibilidad. Cuanto vale esto es otro tema, que da para otro blog.
Espero que os haya servido,
Bill Clinton said, “is the economy, stupid!”, and I will take his style to say “is the balance sheet, stupid!”. I think it is appropriate to reflect further on the reasons for the fall of companies. Unfortunately Orizonia and Marsans cases will probably be given as “cases” for MBAs. Both will be great examples to learn from the mistakes, which often teaches more than successes! Perhaps one day I will take a step ahead and I will write a case. – For readers outside of Spain, Orizonia and Marsans were top players in the tourism industry in Spain, with more than 9.000 employees, and the biggest bankrupticys (Feb 2013 and Apr 2010) in tourism in the last decades in Spain.
I remember back in 2009 the stock market was in panic, and the CEO of a company listed in London, in an executive board of partners he informally asked me which was in my opinion the most critical factor for the crisis to succeed. The truth is that I was not expecting the question, and wander with the “classics”: agility, added value and profitability, but he said to me that I was wrong that in the crisis the most important thing was the cash … “Cash is the king my friend …” How right he was!
Companies develop in bonanza through the income statement and if a shark disguised as a financial investor helps you to grow with strong leverage through debt, without paying much attention to the risk of the balance sheet (because it is not his risk, but the banks , employees, customers and suppliers one), it is sowing further a drop in cold weather. Crisis arrives, and if your company has not got strength in the balance sheet (real assets, cash availability …), they fall. No matter if you have a positive EBITDA. The EBITDA should be within the acceptable ratios of debt (depending on the business, between 2 and 7), and the companies that have a lot of debt with an EBITDA going down, and a weak balance sheet, may be closed because credit shortage. The trip is even harder for workers who know they have a solid P&L (or at least not as negative to close down), and do not understand or expect closure. When you break seriously the limits of DEBT/EBITDA and there is no assets/cash, it is unstoppable, and in very little fraction of time, the managers focus on increasing the short term cash-flow, the suppliers get longer payment terms, thus increasing distrust and the solution is increasingly difficult.
In this crazy sport that consists in finding the limits of the human body in the records of apnea without fins, the easy part is going down … after a certain depth, the water pressure sink the diver into the abyss with no effort. The hard part is getting back. I give you an awesome video … with the debt is similar, there comes a time to get out of this vicious circle is increasingly difficult … and sometimes the air is not enough to get back. Loans do not get renewed, cash is needed, so actions for improvement of the cash take place, even if they hurt the EBITDA, as the EBITDA goes down, credit closure increases …
Orizonia, like Marsans were viable businesses. Of course they were suffering cash tensions, but it was not because of the EBITDA, but by difficulties in their balance. This tension provoqued in both companies that during the last year, daily management was focused on cash, and therefore could be heard sometimes uninformed potshots like: About Orizonia “sure, doing 2×1 (sale offer), they were loosing money”, or some nerds opinions about Marsans, whose argument against was that “they giving away hams” (an original marketing campaing to improve advanced sales). That was not the problem, the actions commented (and others) were the result of the lack of cash, and the weak balance sheet. The cash pressure pushed very hard and a company like Marsans or Orizonia could survive many years with zero EBITDA or even significant losses if they had a strong balance sheet. We are talking about companies that by their nature have half year with high cash surpluses, and therefore no financial need.
Marsans fell because the hole that a parent company made to them (an airline called Air Comet), the bankrupticy of the airline caused a hole of 250 M € on loans made from Marsans, causing bankruptcy in balance. For Orizonia the end is similar, but the cause was different. Growth based on a very agressive debt strategy leading the company to the limits of Debt / Ebitda in good times. The crisis come, Ebitda went down, and all (banks) alarms sounded, and created a shortage of loans renewal. The end is known, closed for lack of ability to pay, after selling it salable at bargain prices, but that was the least important.
Then there is an inside story especially sad, and I hope that time will put everyone in their place, with an offer of Barceló, subsequent delivery to another bidder who later step back and made it fall. I think very few people know what really happened, there are some gossips about personal distrust with the funds. 5000 people have suffered a lot, and if this could have been avoided it is terrible.
A couple of years ago, a great customer told me about his company. Great Spanish listed company and with a significant percentage of equity still held by the founders. The company has no debt, and also a balance to show off, some investors demanded at the shareholders’ meeting to distribute a special dividend, set the company into debt, with a multiple to EBITDA accepted by the investors, and distributing the remaining cash as an extra dividend … great from the point of view of equity optimization … but the CEO replied that he was not going to do it because he preferred that everyone, including himself, but also employees, suppliers and customers will sleep like a baby. What a vision! A manager is not only to optimize, but to ensure the future viability of the company. Of course, then there are extremes, like Apple, which not only earns $ 40,000 M year and a bigger free cash flow, but also has 130,000 M $ in cash … too much … their problem, and it is no joke, is that APPL does not know what to do with so much cash … Blessed problem!
By last but not least we do need a more agressive regulation regarding responsability from the managers, in Spain we can play it risky (if we want) as managers. In other european countries, the responsabilities are biggers, and managers (specially financial directors) face personal responsability of not informing about balance sheet needs on time. On the other hand, funds are guilty of pressing and caring only about the EBITDA, as a multiplier that will fill their pockets.
Finally, lots of encouragement to employees Orizonia, I’ve been there, and passed bad. In the end we believe that our companies are and are not … keep strong! As you saw in the video, there is air above …
[I dedicate this post to Poli, our spanish broken boxer that cannot stop getting into fights … somebody stabbed him a few days ago]
I think there are business relationships that are losing the sense they were born with. I have over 15 years experience in the industry B2B corporate travel, and have seen a radical change in the relationship with suppliers at this time in regard to special agreements negotiated, but I think today we are not where we should be.
Some years ago the measure of the “effectiveness” of the program was the volume (traffic) spend that was using nego fares, instead of focusing on ATP benchmarkings ADR air or hotel or rent a car.
The advent of internet, and fares transparency (that I called “perfect market” in one of my earlier posts) has completely changed the shot. Although vendors continue to push the volume traded, something is changing … in any case, before proceeding I must differentiate air from the other two categories (hotels and rent a car), as the sectors of “land” have a level of competitiveness very different. In fact perhaps the Rent a Car are those who are more serious about the negos, although today less than yesterday (in Spain).
With Yield Management systems very advanced for public rates, I’m still surprise why the suppliers, even those that have a dominant position (i.e. train companies), do not establish programs that prevail in a fair performance of a client. It is not a surprise to anyone saying that the negotiated rates have become a ceiling, and the TMCs are instructed to look for the best price, and use the nego fares when is the best (worst for the airline) option. But the question is simple, if I use those negos only when there is no other choice … so why give a discount?
I think this has to change. Some customers ask for a volume discount, but I think in this sector is not entirely fair, because if you always buy the cheapest available fare “no thrills” and not consider the airline’s product, the logic of the provider is “if you buy to me only becouse of the rate, you use the best available rate and that’s it”. If, however, the company values the product and want to make a preferred program and have a better product in different ways, then you should look for a model and price that will compensate both parties.
I see three scenarios:
1) Business as usual, unreasonable for suppliers, but interesting for the customer, but may not be the best option, even for the customers.
2) Some customers will migrate to unmanaged models (ie models that will approach the B2C model, pivoting the responsibility of the travel policy / company / travel agency to travel policy / traveler.
3) Some will enter into a new supplier relationship models, they will find a win-win model with a tradeoff between price/service and traffic, and providers will have greater certainty that only those tha gives preferential treatment receive a real discount. I see different key aspects:
a) It would be appropriate to have an automated discount model that according to the actual Mk Share performance establish a dynamic discount. A company could give a very good agreement for a medium sized company that gives entire volume … in a certain class. Suppliers could provide aggressive rates, in exchange for Mk Share. But with the cards face up. I give 50%, but you give me all the traffic. That’s a win-win agreement.
b) The OBTS [Online Booking Tools] should be parameterized to fulfill these agreements, limiting the content and the kind of fare.
c) Providers should be very transparent and rigid in this approach, removing the agreement automatically of the customers that are not serious with them.
d) Mk Targets Shares will be key. I think that is what the industry needs to professionalize the Turkish bazaar where negotiations have become. Arrangements with Global Agreements will be good as long as they bring a real value, which does not happens allways.
For all this, the TMCs should have a very consultative role in data management, and very transparent with suppliers and customers. Today all of them have the data, it is difficult to deal with intelligence information, integrated with the vendor for the customer’s benefit.
I hope I have served … ah, Poli (the boxer) was a hook … pun intended!
This english proverb (that means that your nature mandates, and that in spanish is “the goat is attracted to the hills”) serves many cases, I think it is perfectly applicable to the customer-supplier relationship in B2B service companies. I’ve always believed in transparent and honest relationships, but I have in mind the famous story of the vermin who is rescued and cared for their food, and one day attacked their savior, and when he complains replied “I’m sorry, is my nature “… to increase the EBITDA … A “good” manager maximizes results. Well I think that not always! As I will explain below.
I remember some years ago at IESE Business school, a phrase that stuck with me, “a manager goal is to ensure the long-term business”. That is, we have a strategic function beyond the very short term. Sometimes companies make decisions based on the short term (especially when using bonus), and I think it is a serious mistake.
The truth is that in every business there is enormous pressure for results, always ask for more, and the obligation is to “scratch” increasingly. Via upsellings sale, new services, further development, etc. Nobody asks to reduce the benefit of customers, whether they are much higher than expected. In my career, I have sometimes found with these dilemmas. Great customer, with which we are making a lot, basically more than expected, and of course, much more than you would win if the client come out to tender (RFP). What to do? Conditions may be competitive in their initial negotiations, but efficiency improvements, or proper development of the account have lead to an extremely profitable account, to the extent that the company is “get used to” that result disproportionate to the market conditions, or the logical EBITDA. Also, sometimes these accounts are what enable to gain other customers in a more aggressive “mode”, later improved and is a virtuous circle … So we do have to take care of the good accounts much, much, much more.
I should start saying that no two cases are alike. It is key to separate the truly captive customers, and in these the situation is easier (for the provider …). But I refer here to non-captive customers very profitable local contract 100% and I think you are reading like, “Wow, those are few”, but surely you have had the experience that I have. One of those ever called you to say the dreaded phrase “we will go out to tender in March, Iñigo sorry, but comes from above …” yours face is the poker one, or the circumstances, try the last lap, but very often is inevitable! If it is a surprise , the work has not been good, as one of the key points is to anticipate those processes, as we will see later. And on the way to the office, you think “we’re done” (to be gentle I will not use the “f” word), when customers see that we lower our price offer 35% … they will get more anxious to go by feel mistreated these years, especially when they will find deals 50% below its price from close competitors. True, but there are my considerations:
1) Customers must have the best service in the market and that is not a commercial phrase. The last thing to do is get good resources and a high satisfaction from those clients to others with less than half profit, but I have such confidence with the old one, and we need to look good to the new one. I do not mean that we should not rotate resources, I mean that dismantling a perfect customer is a serious mistake. The best customer of my company should have the best service in every way: level of resources, dedication indirect Depts, etc. It can not fail anything, and the client should feel that way.
2) The customer has to have that feeling of absolute priority, we should feel for him, and that remains our top priority despite the years we’ve been together. And tell him, sell to him the efforts we are doing.
3) More important than the conditions is the quality of the service, we should prepare the RFP schedule with a detailed business plan with actions to improve, with a full an complete dedication, planning and executing savings plans with a very nice and “easy” reward … an extension of the contract! I am talking of 18 months advance timing!
4) Within the savings actions, look for costs reductions that should be fully passed to the customer. For example optimizing service configuration, increasing the online adoption rate, etc.
5) Still, I think that respecting the correct timings, we should adjust the conditions. Certainly not radically, but planning it and looking for a win-win in such change. A contract extension approach with gradual reduction of conditions I think is a very good option. In this sense acting before the customer is highly recommended.
6) Do not break the cow, that is, if a customer is on the best side, do not try to win much more with upsellings, but rather do the opposite, let us sell those advantages to lower prices to increase more even the feeling of value, and that if the cost of the service is X, tell the customer that becouse we care for long term customers we will sell the product with a high discount but linked to an extension of the contract … Logically, upsellings that are meeting customers needs are always possible and desirable, but let’s do it at competitive prices.
7) Build exit barriers. This is critical, great service is useless if exit costs are low, but if we have a great service and we have built strong integrations and personal relationships with the customer, they will not want to change providers becouse the cost of change, and our RFP will be the last to be launched.
8) Bring on board the senior executives, it is important to create that relationship. The yearly agenda should include 2 times per year with that preferred customer segmentation.
Of course, in fifteen years of senior experience with leading companies in Spain in the B2B segment, I have learned something, the less the customer pays, the less happy he is … we may think it is the opposite, but it is not truth (I am talking about the TMC business …). Moreover, the very aggressive client with time slips on a slippery slope to the negative P&L zone of the supplier. Of course I am talking about services not products.
Still, there are clients (and growing) that go to a mandatory RFP every X years (usually three), although there are cases of annual RFPs process (crazy in some services). Customers with a high rotation rate if they act very agressively with the provider, they are in the risk zone and bidding is not allways a good decission (a clear NO-Go decission in many cases). To be in that group is “unpleasant” for everyone, especially because customer service is not excellent because it is not a priority and the customer is also aware that he is paying below market. Those customers with high rotation often are looking for a miracle, that is, one supplier that is losing money will solve all his problems. Curiously, some of these buyers give the speech that suppliers do not want to lose money, but their actions and words do not match, and are caught in a situation were a change will increase costs, so they can not change now. Even though the service and the final cost is not within the objectives. Often they do not start an RFP surprisingly no one goes!
In short, the leopard never changes his spots, but sometimes it is better trying a little bit …