Article originally published in the American City Business Journals on March 5, 2019
All business leaders face the issue of how to win business in a competitive marketplace. Price the product or service too low, and you are leaving money on the table. Price it too high, and the customer or client will go to a competitor.
While I was national sales manager of PQ Corporation, a producer of both commodity and specialty chemical products, they constantly faced competitive pricing decisions to retain current customers’ business was well as win the business of new customers.
Many of PQ’s customers and the customers of our competitors were supplied under the terms of sales contracts that were one or more years in duration. Before the end of their supply contract, many of these customers would put their business out for bid for the next contract term.
In the competitive marketplace, this was an opportunity for us to win a future customer’s business currently supplied by a competitor, and an opportunity for a competitor to win the business supplied by our company.
We worked hard to differentiate ourselves on customer and technical service, as did our competition. Price, however, played a large factor in whether we won or lost the business.
So, as a business leader, how do you increase the probability that you will win in the competitive marketplace?
Work to be the preferred provider
At PQ, we were always on the journey to be the preferred provider by providing a great customer experience. We wanted to be the company that every customer would preferentially buy from. Our goal was to help our customers be successful in their businesses by being a great supplier.
Our products always met specifications, our plants were responsive to emergency deliveries and our sales and customer service people worked to resolve any issues with the account.
Build strong customer relationships
The larger and more strategic the customer, the more we called on them and developed relationships with the leadership hierarchy within the customer’s organization.
Our sales representatives “owned” the customer relationship — they were the ones who kept in frequent touch with the customer to understand trends in their business and any issues they faced with the use of our products. They brought in our knowledgeable technical service people to trouble-shoot and resolve issues.
The regional sales manager as well as the national sales manager would develop relationships up through the customer’s organization. After I was appointed the CEO of PQ, I developed a relationship with my counterpart —the CEO, or if more appropriate, the group president of the business purchasing our product.
Get the “last phone call”
If a competitor out-bid us for a customer, we needed to know about it before the competitor was awarded the business. We wanted the opportunity to convince the customer of the value we brought to the supply relationship beyond just the product price, and if necessary, meet the competitive price. That is the value of developing a strong customer relationship — to get the last phone call before the business is awarded.
When I was president of PQ’s Canadian subsidiary, we were working on a 10-year contract to supply a pulp and paper mill in Whitecourt, Alberta, with product used in pulp bleaching. Our plan was to build a production plant adjacent to the customer to ensure a reliable supply of product.
One afternoon, the business manager responsible for negotiating the supply contract with the customer came into my office in Toronto and told me he just learned that we had competition for the business — a U.S.-based supplier.
This customer was strategic for us. The plant we would build to supply their pulp and paper mill would be strategically placed to supply other pulp mills throughout Alberta. We didn’t want this opportunity to go to a competitor.
I asked our business manager to make an appointment with the customer’s CEO. I wanted to meet with him to close the deal.
We arrived in Whitecourt the next day and sat across from the CEO and his team. We presented how our company was in the best position to supply not only their product requirements but also their technical service needs, and how our multiple plants in Canada would be there as backup to provide product to their pulp and paper plant.
We didn’t need to cut the price we originally offered — all we needed to do was freeze the price for three years, something the U.S. competitor wouldn’t do. At the end of the meeting, the CEO and I looked each other in the eye, stood up and shook hands across the table. I knew we had a deal.
Without the relationship previously established by our business manager and the non-monetary value we could deliver to the customer, in addition to being able to freeze the price for three years, I am not sure we would have prevailed in winning the business.
Be dedicated to continuous improvement
In PQ’s commodity chemical business, where our products and those of our competitors were the same chemically, price was an important competitive differentiator. A strong commitment to continuous process improvement to drive costs down was critical to the ability to compete.
In our specialty chemical business, where our products and those of the competition were differentiated based on product cost/performance, this metric must continually improve at a pace greater than that of competition. Continuous improvement can be incremental or step-wise, with large improvements based on innovation and a change in paradigms. This permits greater pricing flexibility than a competitor, whose improvements may lag, and is key to long term competitive success.
When going up against a competitor, you want them to think, “Oh no. Not those guys.” That’s how good you want to be. That’s how you win business in a competitive marketplace.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.