Selling in the Post-GFC world: Renewal Business

I have had a few conversations recently with senior sales executives in the packaging and office automation space, and, once again, we focused on the issue of Selling in the Post-GFC space. A few of these conversations were with clients, so the degree of intimacy and insight was quite deep, but even with the non-clients, another key theme emerged – Increased Difficulty in Renewal business.

In past entries I’ve not really focused on new accounts versus renewal business versus new opportunities in existing accounts. This is because the themes I’ve identified apply equally to all of these situations.

However, this time we’ll focus on renewal business, as there are a few key interesting issues – and lessons. Whether in telecommunications, office automation, equipment repair, packaging, or other industries, a salesperson is often selling in a time-based solution. In other words, the supplier is the exclusive supplier during that time period. At the end of the time period, the contract is up for renewal, and it is during these times when competition can win the business. Fairly standard stuff.

In the past, generally speaking, these renewals were fairly heavily weighted towards the incumbent. What we’re seeing now, though, is that the renewal process is much more difficult, and much more fraught with danger for incumbents. Put simply, lots of incumbent suppliers are being cast aside when renewal time comes.

The reasons are many, and include some of the themes that we’ve touched on before. Certainly one issue, raised in other entries, is that in tighter financial times decisions are being pushed higher in the organisation. Simple contract renewal decisions that used to be made at the operator level are now being made two or more levels up.

As decisions move up the organisation, they are looked at through a much more strategic and commercial lens than lower in the organisation. And here’s where incumbents can fall down: without the commercial acumen skills to demonstrate the impact on the account’s performance, and to position the repurchase in a strategic context, they are vulnerable. Competitive suppliers selling higher in the organisation, and speaking the language of the executive, can knock out an unprepared incumbent.

Incumbents generally have a huge, and fairly obvious, advantage here: they are already in the client. This should give them a privileged opportunity to retain and grow business. But unless they change their approach in ‘these difficult times’, they’ll lose out.

Here’s where we see incumbents making mistakes:

1. Focusing too much on one part of the organisation. Sales and account management teams generally have very strong relationships with the part of the client that uses the product or service. However, they need to build a network of relationships across the business, horizontally, and up the seniority chain. More relationships will mean more opportunities to create value for mare parts of the organisation, and to position yourself as a useful partner in general.
2. Focusing too much on performance against specifications. Certainly, demonstrating that you have met the terms of the contract is important, but the senior executives that are making the decision care more about the impact on the business as a whole. Focus on how you’ve helped them to take costs out of the business, to identify new customers or markets or segments, to differentiate their offering, etc. The Business Case for keeping you needs to be a strategic one. Oh, and it helps if you’ve proactively identified new opportunities along the way.
3. Waiting until contract renewal to re-engage the account. It’s not unusual for companies to pass accounts over to Customer Service (or similar) for 21 months of a 24 month contract, then pop up just before renewal. This behaviour, in the context of a marketplace that is looking for strategic partnerships, is a recipe for losing an account (or getting pummelled on price).
   
   The renewal process starts on day one of the contract, an old colleague used to say. If you want to keep a customer, keep working with them after implementation. Look for new opportunities to help them to meet their business goals, and be proactive in bringing them to the account. One customer that I work with quite frequently, a business process outsourcing company head-quartered in India, expects their teams to bring at least one “unsolicited proposal” to their accounts each quarter. Now that’s a proactive supplier!

This is basic stuff, really, but we do see companies out there, clients and non-clients, falling in the trap. In the modern economy, this kind of behaviour won’t work – your competitors are getting smarter, faster, more active, and more commercially clever, and you’ll need to raise your game to hold onto customers.

So what can you do? Think about a few of your key customers that are in the early days of their contract:

• Do you have a plan for how to continuously create value for them throughout the course of the relationship?
• Are your sales and customer-focusing teams looking for new opportunities to help the account meet their goals (as opposed to just selling in more of your stuff)?
• Does your team have meaningful *business* relationships with a wide and senior range of contacts at the account?

If the answers to the above questions are no, get ready to lose this client. Or get to work creating value for them!