Question

Empire Safety Rental rents construction site safety fencing and related products, like those orange drums and traffic cones you see at highway construction sites. The company will also install safety fencing at a construction site, whether rented chain link or purchased plywood wall fencing. Laura Wohlers, Empire's owner, was faced with a dilemma. Mike Caldwell, Empire's VP of sales, offered this information: "Laura, right now about 40 percent of our business, or $3 million. comes from three customers Apex, Logan, and Eagle. The rest comes from 400 customers, of which 40 percent are one-time sales. That means 160 customers account for just over $1 million in sales every year but we'll never get business from them again." "Yes, I know," she replied. Looking at her computer. she said. "And the margin on Apex. Eagle, and Logan is never nmore than 6 percent, while it can be as high as 15 percent on the midsize accounts ànd 30 percent on the small ones." "That's because Apex. Eagle, and Logan always put everything out to bid. I keep telling them that there are hidden costs in that system like the time and effort spent on bidding, managing multiple suppliers and their billing systems, and the like. I think we've got Logan convinced that if it gives us a margin of 10 percent for all of its business, we'll actually save the company money Yes, but my question is really about the midsize accounts. Our business is based on price, reliability on delivery and installation, and safety. So how do we go about building a sales strategy with our midsize accounts so we can get away from commodity-based pricing and bidding wars on each project to contracts that span a year or two? We have to get our margins up increases in health care and other types of insurance are killing us." "Our salespeople know only two things: how to bid a job and where to take customers for lunch or for a cold beer. I don't know what else we could do."

1. What would you do? Assume that Empire has six salespeople calling on geographic territories and that Mike has responsibility for Apex, Logan, and Eagle. Be specific about the steps you would take.

2. Now assume that another salesperson has responsibility for Logan because it is in his geographic area. That person just told you he's going to quit to go to a competitor. What would you do, assuming that there is no non-compete clause that prevents him from selling to Logan for the competitor?

Answer 1

B2B business environment is mostly about price negotiation and meeting the specifications given by customers. However, few businesses build long term relationships with their customers which helps them to reduce the transactional nature of business with their customers and increase the business partnership approach. B2B business as in the case of EMPIRE is based on price, reliability, Installation, and Safety. The existing sales team of Empire is mainly focussing on the price to win the negotiation and over the period of time, they have lost their control over margin and tending towards being unprofitable if the same approach is continued. In B2B business salesman must concentrate and focus on creating the differentiation with respect to the competition in terms of reliability, installation, and safety. These attributes need to be quantified and clearly communicate to the customers like how this is going to save money for the customers and a quantified and measured saving figure will help the customer to make their decision. For example, a supply of the reliable machine and rapid response in after-sales support helps the customer to reduce their downtime and reduction of downtime need to be converted in monetary benefit.

Now based on the above context we will answer the questions.

Question 1.

Moreover, if the salesmen are forced to work on reliability, service and safety components in sales pitch rather than price, the customer will start valuing their relationship with the company rather than the person who is doing the negotiation. because of the reliability of the machine, the Service capability of the organization and safety standards of the machine is built by the organization, not the person who is making the sales. Therefore, customers get attached to the company rather than depending on the salesperson for lower prices for the products. It helps the organization to build a strong bond with their customers and reduces the dependency on the salesperson to a great extent.

First of all, all the three biggest accounts should not be given to one person, it must be given to different people as they will have a different approach to their customer and will help us in determining the best approach which serves the organization's interest. These big accounts must be approached with the capability built around the reliability of products, Installation capability and safety standards of the products rather than the only price. Moreover, there should be company level engagement with customers rather than the only salesperson is meeting the key customers.

Question 2.

In this situation, if the company only focuses on a price-based approach to the sales then it would be very easy for the competitor's company where the salesperson is moving to get the customer for their new company. But if the Empire has woked on reliability, service and safety differentiation with respect to the competition then the customer would not easily move to a new company even though he is familiar with the salesperson because the customer is valuing their existing relationship with the company more than the relationship with the salesperson.

Even if the approach was not right before, customers should be immediately contacted by the company and explain to them their value of relationship and communicate the company's capability in terms of reliability, service and safety standards that it meets. Possibly customer will start realizing the value of a relationship with Empire company and will not go to the competitor without any strong compelling reason.