Written by: Steve Marks
In business, loyal customers are paramount to success. Along the way you will undoubtedly lose customers for a variety of reasons — they go out of business, they discontinue the product or service you were providing, they switch to a competitor. When you can obtain a loyal customer, it’s basically an annuity and an important aspect of growing a business.
When pursuing a prospect, it’s important to make sure that you are doing everything you can to both procure the prospect and try and turn them into a customer that will be with you for many years. It’s no secret — and I am not breaking any new ground here in sales philosophy — that the easiest sale you can make is to your current customers. Obtaining that new customer is the hardest part and can be wrought with land mines. One such experience emphasizes this.
A potential customer asked us for a quote on a product that one of our competitors was producing for them. We were told that we would get the business if our pricing was competitive. It was shaping up to be a very large sale and we were foaming at the mouth.
The customer gave us the recipe and asked how much we would charge to make it. After analyzing the recipe it was clear we could make the product considerably cheaper than they were paying. We knew we could win on price because they sent us the bill showing what our competitor was charging them.
Having the bill in hand created a bit of a dilemma. So the debate began internally about whether to quote an amount slightly less than what they were paying or quote our standard gross margin pricing. If we quoted our standard margin, we would be forgoing several tens of thousands of dollars. If we quoted a price just below what the customer was paying, we would maximize our profits.
On the surface, maximizing profits seemed to be the obvious decision. Or was it? We began to ask ourselves why were we getting the chance to quote this product? Maybe the prospect realized that they were being gouged. After all, they had the recipe and they undoubtedly had an idea as to the cost to produce it. How would it look to them if we came in with a price just below what they were paying? What if we came in with a price that blew them away?
We decided to go with the lowest price and try to be the customer’s vendor for a long time. Lucky for us, it was the right choice. Greed, we discovered, is why our competitor lost the business and why we had the chance to take it over. The customer is currently one of our largest, accounting for millions of dollars in annual sales. Had we been short-sited, we would have ultimately lost out on long-term profits. Don’t let greed kill what can be a far more lucrative relationship from a loyal, trusting customer.