Discover your free Construction Marketing Ideas Email Newsletter

Monday, August 31, 2009

Relationship vs transactional seling

Mel Lester makes some important points in his most recent E-Quip Blog posting:

In a weak economy, the pressure to follow a transactional approach increases. The need is to increase sales, quickly. So naturally we turn our attention to looking for near-term proposal opportunities. Isn't that the quickest way to bring in new work?

Unfortunately not. Writing proposals without investing in the up-front relationship building rarely produces success. Only the illusion that we're being productive. A better expenditure of that time would be to devote it to developing relationships that position us for winning proposals.

The evidence supporting a relational approach is overwhelming. Firms that make the effort to build relationships enjoy win rates of 70 to 80% with those clients. Firms that don't win only 10 to 20%. Plus the first group will negotiate higher profits, have fewer claims, and enjoy more repeat customers.
From a short-term "selling" perspective, relationship development seems to be an exercise in frustration, as you can' immediately quantify results from your efforts. How much do you gain from digging up some useful information (unrelated to immediate future business) for a current client, or doing someone a favor at a networking event, (without expecting that person to rush back with an RFP opportunity?)

Relationship development, as well, is sometimes easier said than done for people who are not socially brilliant, but we can get around that problem by doing our real work truly well, and reflecting and sharing our passions with respect for the people around us. Lester offers some other suggestions, which he elaborates in his blog:
  • Devote prospecting activities to identifying clients with long-term relationship potential.
  • Allocate an appropriate amount of time to relationship building.
  • Serve, don't sell.
  • Don't take existing client relationships for granted.
  • Keep the relationship at the forefront even in the latter stages of the procurement process.
Even if Lester overstates the change in hit rate between 10 and 20 and 70 to 80 per cent, consider the practicalities of the time you spend, saying that your hit rate increases from 10 to 50 per cent. This means you can expect to win five times as many jobs for the same number of proposals submitted if you focus on relationships rather than transactions. So, naturally, if you spend more time building these relationships and less time chasing bids, you'll actually win more jobs -- and generally have more fun in the process.

(Sure, you say, but what about this quarter's numbers! But that is the problem. Unless you can find a way off the transaction treadmill, your next quarter's numbers won't be much better.)

No comments: