Archive for August, 2007
Does this sound familiar?
A contractor-client notes an increase in Requests for Proposal (RFPs). Normally lots of RFPs are a good thing. However, these RFPs aren’t what they seem.
He feels many customers are only going through the motions. They’re not honestly considering contractors’ responses. He calls these bids “hollow RFPs”, and says customers aren’t listening.
His logic goes like this:
- Enron’s, WorldCom’s & Adelphia’s corruption - led to ->
- Increased corporate governance (Sarbanes-Oxley) -which led to ->
- Customers testing contracts against the market -which led to ->
- More RFPs more often
He says the problem occurs when customers aren’t truly testing the market, they aren’t seriously working the RFP process.
Here are his clues for spotting hollow RFPs:
- No pre-qualification - any & all contractors can bid (lots do)
- No presentation - just drop off the bid doc
- No site tours
- Short turnaround times when many sites are involved
- Basic qualification questions only, nothing specific about working the site
- Poorly written RFPs; outdated, incomplete, disorganized, misspelled
You’d think contractors would respectfully decline to participate in hollow bids. But many feel they’re in a bind. If they decline to bid they’re concerned the customer will exclude them from future bids, maybe even pull existing contracts from them. Of course, incumbent contractors love hollow RFPs. They’re golden.
This idea of hollow RFPs got me thinking.
- Why might customers use RFPs that way?
- What are the costs of hollow RFPs?
- Are contractors paranoid thinking customers have evil intentions?
In response to the question of hollow RFPs, I’ve written an open letter to customers in this month’s Revenue-IQ article. In it I take a look at other potential reasons RFPs are used. And I put a few alternative solutions out there.
Look for the article in your inbox. If you’re not already receiving our monthly article, subscribe to 2) Subscribe to our FREE Monthly Article.
How often are you seeing hollow RFPs ?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: RFPs, Contracts, Buying
August 20th, 2007
Business cliches never die. We first published a contractors version of business cliches as “Quicksand Words & Phrases“.
Seth Godin points out they’re used primarily to talk and say nothing. Take a look at his Encyclopedia of Business Cliches , which he’s setup to capture an ever expanding list.
If we’re talking and saying nothing (business cliches) amongst ourselves, how harmful is that to customers?
In case you missed our contractors version, I’ve reposted our take on industry cliches below. Feel free to add yours in the comments section at the end of this post. (Marketing Tip: blogs have the advantage of two-way communication over traditional outbound messages). Enjoy.
“Exceeding expectations”
Defining expectations is tough enough - let alone meeting them. Remember they’re services; intangible, changeable, invisible.
So customers are to believe contractors define expectations explicitly? Then go beyond meeting them, but exceed them?
I seriously doubt it. So do most customers. They see this claim, and you’re lined up and shot. Alongside everyone else selling kitchen knives that never need sharpening.
“Our service is second to none”
What can I say? Sounds right out of the 1950s doesn’t it? No matter how you dress it up, it’s still a plaid-jacketed used car salesman. Deadly at all costs.
“Customer-focused”
“No, we’re not customer-focused! We work hard to upset anyone gullible enough to be our customer.”
Sarcastic obviously, but “customer-focused” is quicksand. Avoid it. Even though it may be true. Customers step into it and vanish from sight.
“High quality”
Who doesn’t say this? How many contractors say they provide mediocre or low quality? High quality is a great internal business strategy. But quicksand as a marketing term. Step around it.
“People are our most important asset”
Over use washes out meaning, along with past experiences that don’t live up to promises. Together, they make “people = important asset” quicksand.
And that’s unfortunate for contractors who live this credo with employees. Because it’s admirable. And it’s an excellent business strategy. Don’t say it - just do it. Customers will know.
“Solutions provider”
I’m guilty - I use this one. Too bad too. Real solutions are what customers buy. Again, over usage and failure to deliver has made “solutions provider” a message sink hole. “Mam, please step away from the solutions provider”.
It’s Not Just Us
Cliches aren’t just used by contractors. MBA freaks and technology geeks are infected too. Check out Dilbert’s Mission Statement Generator. Or, try playing Buzzword Bingo.
What Cliches are in your Marketing Messages?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: communication, messaging
August 15th, 2007
Customers. We don’t make them customers. They are that way themselves. We don’t make them buy. They do that on their own. They buy:
- Solutions to their problems
- Improvements to reach their goals
- Experiences they want to experience
We think we’re selling them. We’re not. The best we can do is help customers buy. Everything else is self-delusion.
Chrysalis
Before they’re customers, they are prospects.
They evolve from prospects into customers. They move from obliviousness to awareness to motivated buying.
They’re going to buy anyway, why not buy ours?
Volition
Prospects and customers are self-serving.
They buy ours for their reasons, to get what they want.
We can help them do that. Here’s how:
1) Give
Give to engage prospects and customers.
Give to help them move to the next step in buying. Moving from:
- Obliviousness: Do I have a problem? -to-
- Awareness: I have a problem. Do I want to fix it now? -to-
- Motivated: Now I’m going to solve my problem. Who can help?
Give to move them to the next step. They can’t leap frog. They can only go one step at a time. They buy when they’re motivated.
Give as often as needed to help them buy ours.
Give often means free. But not always.
2) Value
Customers want what they want. They must truly want what we’re giving. Or they won’t take it.
If they don’t take it, we’re not part of their process, and ours won’t be bought.
Give value that helps them move from “Do I have a problem? -to- Do I want to fix it now? -to- Who can help?”
3) First
To receive, first give. Before prospects and customers give us what we want, we must give first.
Counterintuitive and scary.
They may take and not give us what we want. True. Some prospects and customers will, but we weren’t going to be doing business with them anyway.
What if we give away the farm and have nothing left when they’re ready to buy?
Value given must be relative to value received. Not always one-to-one, but close. Give valued information of limited scope, and in return get an appointment, email permission, or whatever helps move customers closer to buying ours.
What do your customers want - that you can give - that moves them closer to buying?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: buying, marketing, selling
August 9th, 2007
There are only three strategies to develop new business: Rainmakers, Acquisitions, and Organic Growth.
None are mutually exclusive of the others. Contractors can use some degree of all three at the same time.
Though each strategy can contribute growth, each has some baggage. Here’s a brief look at them.
Rainmakers
ﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯ
Rainmakers were defined in last week’s post as hiring someone for the business theyﾃ｢竄ｬ邃｢ll bring. The rainmakers’ upside is new business comes on fast, and the ROI is clear.
New business should be almost instantaneous, at least something significant in three months. That’s what you expect. You hire a rainmaker to make rain now. Not a year down the road.
Contractors can gauge the cost of the rainmakers expenses (salary, taxes, benefits, bonus, & commissions) against the value of the expected new business. Should be an easy ROI calculation. Helpful before bringing on a rainmaker. And when they’re on board, it’ll be easy to see if its not panning out.
The downside of rainmakers is if they can bring business with them, they can also take it away when they leave.
And they will leave. Their primary worth to contractors is leveraging their relationships, past positions and notoriety. Once they’ve gotten what they can, they’ll be looking for greener pastures. Just expect it and you won’t be hurt when they leave you.
My preference is to use monies targeted for rainmakers towards building contractors’ capabilities for organic growth. But there will be the rainmakers with exceptional ROI that’ll convince any contractor to take the plunge.
Acquisitions
ﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯ
Upsides can include big jumps in scale, instantly. Buy a firm as big as yours and you’ve grown 100% when it closes. Takes a lot longer to sell that much.
Overnight acquisitions give instant credibility in new geographic areas and vertical markets. Acquisitions can also bring high-caliber management, expertise, and offices.
The downside is retention of customers and that high-caliber management. Depending how or if the acquired firm is integrated into the buyer’s firm.
If nothing is changed (original contractors’ company name and customer service contacts stay the same) then retention can be high. Some Mergers & Acquisition people believe as high as 90%, which means only 10% is lost in the first year.
However, if the acquisition is integrated into the buyer’s company, retention rates plummet. Sometimes as low as 50% after only three years. That means looking back, only half the acquired customers stayed. Yikes!
Several factors affecting retention rates of acquisitions include:
Change in Brand
Is the acquired company’s name changing to the new buyer’s, or does it remain the same? Branding can spook some customers, even though operationally everything remains the same.
Customer-touchpoint Personnel
How many of the personnel who serve customers stay with the acquired company ? Owners may leave immediately, or stay during an earn-out period. However long an owner sticks around, customers care more about the people they deal with on a daily basis. It’s really the service reps who determine whether customers stay or leave.
Limited Options in Local Market
Customers in local markets typically want three to four viable contractors to feel they have options. Sometimes they’ll want more.
If an acquisition occurs in a market where the contractor-buyer is already strong, customers may seek other contractors because they don’t like the buyer’s firm. Or don’t like the idea of a monopoly or oligopoly.
Sometimes customers will help bring in a new contractor into the market just to ensure there’s enough competition and free choice.
The bottom line is when customers’ choices are few, they leave and contractor-buyers’ revenue seriously drops.
Organic Growth
ﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯ
This means a contractor has the capabilities to bring on new customers and contracts. It’s the most valuable and effective strategy. If a contractor can bring on new business by itself, it’s protected against the downsides of acquisitions and rainmakers.
However, organic growth is also the most management intensive strategy as well. Contractors need to have a number of components in place for the entire system to work. There must be:
* Competent sales people & on-going sales training
* Proposals & presentations that win contracts
* Sales management, reporting & accountability
* Marketing to bring in leads & raise awareness
For these reasons, organic growth (healthy, successful organic growth) is the slowest to get in place compared to acquisitions and rainmakers.
From the Menu
ﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯﾃつｯ
All three strategies have their place. Rainmakers and acquisitions, if used cautiously, are steroids for any contractors growth curve. But like steroids, the constant use of them can produce deadly results. Organic growth is worth the investments, whether or not the other strategies are used.
What’s your mix of strategies?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: buying, contracts, retention
August 2nd, 2007
