They’ll Come Back. Oh No They Won’t!

by Chris Arlen on February 27, 2012

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What Can Sellers Do When Customers Make Bad BuysAs sellers, we’d like to think that customers eventually see the error of their ways. Customers, being the customer, have the right to make bad buys.

And they do, whether it’s recessionary tough times or not.

Sellers, being legitimate and honest sellers, take the high road and accept it when customers make those bad buys.

So now you have customers in a bad situation and good sellers looking in from the outside agreeing its a bad situation.

4 Certainties Today

#1) Cumulative Bad Buys Harm the Market Place
#2) Customers Do Not Fix Bad Buys
#3) What Sellers Can Do About BIG Bad Buys
#4) What Sellers Can Do About SMALLER Bad Buys

#1) Cumulative Bad Buys Harm the Market Place

During this recession customers probably made more bad buys than previously. However, they did it under the veil of reducing cost.

A bad buy is one where the requirements, specifications or expectations remain the same but customers buy at lowered prices.

Something’s not right. Sellers’ margins had been skinny per-recession, there’s little to no fat to remove. Fuel prices and health care costs did not go down. No new technologies have increased supplier productivity by multiples.

Lowering prices but keeping the same deliverables means something’s not delivered.

Therefore, customers are not getting what they’re promised contractually even though they’re paying less for it than in prior years. This is the definition of a bad buy.

The cumulative effect on the market place is to bring pricing down yet still keep deliverables where they were.

Now as the economy is crawling out of the doldrums, pricing levels are where they were 10 or more years ago.

Yet the hypocrisy of over promising and under-delivering is greater.

Customers making bad buys from desperate sellers. Where will it end?

#2) Customers Do Not Fix Bad Buys

Do customers admit they made bad buys and rectify them? Do they terminate the failing contract and hire the suppliers they should have?

In most cases the answer is no.

Customers Don’t Fix Bad Buys When it’s Big Dollars & High Visibility

Customers will not correct a bad buy if the price was large and the purchase highly visible within their organization (i.e. Procurement was involved).

This is more than loss of pride by admitting they made a poor choice. This is their job security. Customers get very sensitive to keeping their jobs the higher up the purchases reach.

Real World Example

In one example of a big bad buy, a global facility management firm swallowed the sales pitch of a questionable supplier when bidding out a $60 million dollar contract.

  • Of course the supplier would work without profit for two years
  • Of course the supplier would exceed contract specifications
  • Of course the supplier had references willing to confirm this

So the management firm bought, and it was a bad buy. From the first day of service the supplier couldn’t deliver. No supplier could. But the deal was too big for the management firm that bought it. They couldn’t admit to their customer they’d been had.

So what did they do? They spent three years grinding on the bad supplier to wring out the barest minimum in contract compliance. This meant they were distracted. It meant they weren’t delivering as much value to their customer because they were busy holding a shotgun to the bad supplier.

At the end of the three years the management firm rebid the contract and a legitimate supplier won the bid.

The moral of the story is customers with large dollar purchases will not fix a bad buy. They’ll let the contract run out and then change.

The exception to customers fixing a bad buy is in the public sector. Because if it looks like the bad buy is the customer’s fault it could also look illegal. In those cases, customers will definitely boost out a bad buy. They’ll show how the supplier misrepresented its offer or egregiously did not perform. That kind of bad buy could earn customers a stay with free room and board in prison.

What Sellers Can Do About BIG Bad Buys

Honestly, after the fact there’s not a lot losing sellers can do when customers make large dollar bad buys. Here are a few things that can be done.

Stick Close

If it’s a big dollar opportunity, sellers must stick close to customers even immediately after losing a sale.

Obviously this doesn’t mean crowding or stalking lost customers, but respectful relationship building. This does mean continuing to provide customers valuable information, and keeping them apprised of industry trends and advancements.

Stay Non-Judgmental

Take the honorable high-road and believe customers made the best decisions they could at the time, with the information they had. There may have been unknown circumstances that forced customer’s decisions; circumstances suppliers were unaware of.

If sellers allow disgust or disrespect into their feelings, those feelings will eventually leak into future interactions with that customer. Disgruntled sellers may even retaliate in their pricing next time.

Find Lateral Sale Opportunities

Research smaller add-on sales. Talk with the customer to tactfully learn their level of acceptance and acknowledgment they made a bad buy.

Seek to engineer a small break away portion of the larger sale, if possible. If the customer is openly unhappy, ask them for a smaller piece of the sale pie. Additionally, ask to sell them a peripheral service/item, one the incumbent supplier typically gets by default.

What Sellers Can Do About SMALLER Bad Buys

There’s more room for losing sellers to make things happen when customers make small-dollar bad buys. The exit barriers for customers are lower.

Ease Cost of Repurchase

Customers are already out of pocket the purchase price. Make it easy for them to swallow the bad buy and get happy with your good deal. Consider:

* Extending payment terms (smaller payments over longer term)
* Offering rebates & show purchase price net rebate
* Offering volume discounts & show lower per unit price
* Providing money back guarantees – what have they got to lose?
* Granting special client status with aggressively low pricing – if they’re worth it

Stick Close

So it’s a small dollar opportunity, it’s still critical to stick close to customers after losing a sale.  Again, no crowding or stalking, just respectful concern and relationship building.

As a smaller sale opportunity, you’ll spend much less time providing information, industry trends and advancements. However, if these customers liked you, ask for referrals.

Stay Non-Judgmental

Take the honorable high-road and believe customers made the best decisions they could at the time, with the information they had.

Find Lateral Sale Opportunities

Research smaller lateral sales.Tactfully learn customers’ level of acceptance and acknowledgment they made a bad buy. Try to sell them a smaller service/item to get them on the books.

Bad Buys into Good Hellos

The reality is that sellers must live with customers’ bad buys. Don’t worry, many customers knowingly suffer from their bad buys and are waiting for the next chance to fix them.

Sellers can help out. It takes longer with large dollar buys but still there is seller work to be done. Smaller dollar buys are more malleable and sellers can do some creative things to help customers fix bad buys there.

  • What’s your experience in getting customers out of bad buys?
  • What did you do?
  • How long did it take?

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