Competing with an Incumbent

A reader writes, "Recently, one of my best sales reps lost a deal we thought was a sure thing. She knew who we were competing against, and was told that our company was the first choice among all of them. After delivering the bad news, the decision maker informed her that he had decided to stay with the current provider. How could we have seen this coming?"

What was the decision maker thinking, right? During meetings, he complained incessantly about the existing solution! He met with vendors, sat in on product demos, read your proposals and negotiated on price. Why would he expend all that time and effort just to stay with the same provider?

Faulty Assumptions

Even top-notch salespeople sometimes confuse a decision makers venting about the shortcomings of a current provider with a firm decision to stop doing business with them. These reps know their product / service might not get selected, but they feel certain a new vendor will get the nod.

In the process, reps forget the biggest potential obstacle to successfully closing a sale - a customer choosing to stay with the product or service they already have -- the status quo. Despite all the complaining, it is almost always easier for a company to stay with the current vendor.

Understand the Status Quo

To avoid this disaster, when interviewing potential clients reps need to include questions that uncover what they like about their current solution such as:

  • Tell me about your existing system.
  • How did you go about choosing it?
  • What set it apart from all the others?
  • What is your business relationship with that company like today?
  • What do you like about the system?
  • What about it still meets your needs?
  • If you had it to do over again, would you still select this product / company?  

These inquiries lead to an understanding of the prospects overall feelings about the product or service and the provider. Reps come away with solid information on how their company stacks up against and compares to what the customer uses today.

Leave the Key Question until Last

Those reps serious about closing sales will not be shy asking the most critical question of all:

What are the chances that you will stay with the product / service / solution that you already have?

They listen carefully to the decision maker's response. Any hint that the present provider will be considered along with all other vendors poses a giant red flag. Taking the business away may prove difficult.

Only the bravest, most money-motivated reps will make this inquiry. Why? Time is money and they're wasting it with a prospect that isn't ready to move on from their current vendor. The best reps want to extricate themselves from an unproductive situation and meet other, potentially stronger prospects.

The Incumbent has a Built-in Advantage

The current provider enjoys a built-in advantage over any competitor. They have a relationship with their client (your prospect) and will fight hard to maintain it. Having the client take their business elsewhere could mean losing revenue from service contracts or supplies.

Complaints that you've listened to from the decision maker have undoubtedly been heard many times over by the current provider too. No doubt they're busy trying to address those concerns. Subtly or not, they're reminding the customer at every turn about the expense and pain of switching companies altogether.

Sales reps that focus exclusively on the competition do only part of their job. Equal time should be devoted to learning about what the decision maker already uses. By including the status quo in customer discussions, they get a far more realistic picture of their ability to close the deal.

Selling Against an Incumbent Vendor

A client asks "My company sells a product that competes with a well- known brand name product from Company X, a much larger organization. The statistics on the cost savings realized by using our product as opposed to Company X's are inarguable, our product performance is strong, and our post-sale customer service is excellent. Despite the facts, we have a frustratingly low close rate with prospects whose contract with Company X is expiring. What is going on?"

A lot of different things could be going on here such as upfront versus long-range cost savings or the prestige and track record of Company X versus a lesser-known organization. I am going to focus on one in particular: the hidden costs and difficulties of switching vendors.

Many sales representatives spend a great deal of time discussing features and benefits as well as the cost savings of their particular product or service with prospects - and they should. What they sometimes do not do, however, is put the facts and percentages aside at some point and ask the decision maker what the true feelings are within the organization about switching vendors - irrespective of anything else. Sometimes having the less expensive product gives salespeople a false sense of security.

During the interview process with the decision maker they should be asking such questions as:

  • How long have you used Company X?
  • How do the users generally feel about Company X?
  • What product were you using prior to them?
  • Was it a difficult transition?
  • What would be involved in switching from their product to ours?
  • Would there be any costs associated with changing?
  • Who would oversee the change?
  • Who in your organization will not be in favor of changing vendors?
  • Do you know what their reasons are?
  • Would anyone feel they are putting their job at risk by switching from Company X?
  • Who will be in favor of switching?
  • Why do they feel this way?
  • What are the odds that you will stay with your current vendor?

Convincing sales representatives to insert these kinds of questions into their interview process with the prospective client can be one tough sell. Most salespeople are terrified to ask questions like these. The answers they get take them out of their comfort zone: discussing features, benefits, and cost savings.

Those salespeople who do ask these types of questions will tell you that they are crucial to helping establish themselves as a partner with the decision maker. If they don't get a prospect to speak candidly about their current provider, they may lose the sale and never know why.

When a salesperson proves that they are not afraid to ask awkward or straightforward questions, they typically earn the respect of a prospect. The prospect, if they are the true decision maker, typically shows their respect by answering the questions in a straightforward manner. The salesperson's ability to bring all the facts to the forefront increases, not decreases, their chances of success.

Sales Superstar Going to the Competition?

A client asks, "One of the sales representatives on my staff is a superstar whose revenue generation far exceeds any of the other salespeople. While I appreciate their stellar performance, there is a downside: they periodically threaten to go to the competition. Do you have any suggestions on how to handle this situation?"

Having a sales superstar on staff has many advantages. They are able to open new accounts, substantially increase sales revenue within current accounts, and serve as motivation to others on the sales team. As many business executives have found out, however, their super-sized sales production often requires super-sized management. Here are some tips on managing the superstar more effectively.

Look for patterns

Think back to when most of the conversations about going to the competition have occurred. Do they take place at the end or beginning of the year, during slow periods, or right after they close a big sale? Could it be right after you hire a new sales representative or give them their annual review? Do they bring up any other subjects? Going through this exercise might help you to see some patterns.

Talk with them

Set up a time to speak with them during a relatively calm period in your company's business cycle and not when they have just threatened to go to the competition. Ask them what they need to be happier and more productive at your company. Make a list of their suggestions and requests. Take all of the requests seriously but do not make any promises or immediately say "no" to anything they ask for – no matter how outrageous something may seem. Read the requests back to them and ask them to rank those requests in the order of importance. Thank them for their candor and then schedule a follow-up meeting right then and there.

Categorize the requests

Divide their requests into two categories: monetary and non-monetary. To be sure, most of their requests will be monetary, but others may surprise you and not involve compensation. Are they upset about their title or the fact that you have vetoed their request, which they feel would bring in a lot of business, to golf on Wednesday afternoons? Would a special parking place make them happy? Do they want more or less involvement with the new sales representatives? Have you begun to take their stellar performance for granted and not given them the recognition they deserve?

Match revenue to requests

Rather than say "no" to the upgraded company car or the President's Club trip to Portugal outright, get out your calculator, determine the real costs, and see what you can do. If you consider their monetary requests outrageous, set some high-level goals for them. If they can increase sales to Company X by 25%, you might be only too happy to buy them a couple of plane tickets to Portugal. If they can convince Company Y to buy from you instead of the competition, the idea of leasing a Lexus for them might be a lot more attractive.

Treat the other reps fairly

Use the possibility of the other sales representatives coming to you and complaining about the superstar’s preferential treatment as an opportunity to set some high goals for them too. Have some fun with it. Tell them that if they were to achieve a 30% increase in their territory, you will be happy to send them on a trip to the Bahamas and will personally drive them to the airport to catch their flight!

Call their bluff

If you feel you have done everything to accommodate your superstar and they are still threatening to go to the competition, it’s time to get a little tougher. Ask them questions such as: "Have you formally met with the competition?" "How do they compare with us culturally?" "Have they in fact offered you a position?" "What appeals to you about their company?" "Will you be their top producer?" "What if things don’t work out?" A conversation like this should tell you how serious they are about leaving.

Speak with your attorney

Regardless of whether you have this conversation with your superstar, if the departure of key employees to the competition puts your business at risk, you should have your attorney draft a non-competition agreement to protect your business from such an eventuality. Then have all your key employees sign it.

Be ready

Superstars sometimes leave no matter what you do. Make sure that you are accompanying them on visits to their largest accounts on a regular basis (see "Meeting Customers is Critical for Executives," May 2005) and have a contingency plan in the event that they do resign. Think about who on your staff would be able and willing to handle their accounts.

Discussions with the staff superstar can be a nerve-wracking event for many people. Instead of avoiding them altogether, which may lead to an unnecessary resignation, prepare for them as you would a major presentation and they will be much more productive and much less stressful.