How to Differentiate and Earn Higher Margins: Debunking 4 Common Myths About B2B Customers

I recently conducted 30 in-depth interviews with user teams of major companies paying $1-6 million annually for a software service supporting a critical internal operation. While the vendor was a leader in its field, focusing intensely on customer experience, 2/3 of clients were ambivalent about the relationship. What shocked me was that their dissatisfaction did not emanate from a failure to execute the basics, it was much more from weaknesses not connected to the basic product and blocking and tackling. The phrases included:

• What are the functions and benefits I should expect the product to deliver beyond the generic functions?
• What are the atypical tough scenarios that the product should handle?
• How do I evaluate the payoff of using this product and how do I demonstrate the payoff to management?

The market differentiator was not delivering the basics at low cost, it was the value add and anticipating the atypical glitches the client will encounter.

Vendors assume customers know exactly what they want and are only interested in getting that product with maximum cost savings. Neither of these assumptions is ever correct. Additionally, Marketing only wants to sell the existing product, “We have a hammer so every problem is a nail.”

Four Common Myths about Customers

The following are four myths/mistakes made to some degree by almost every company. Each occurrence damages loyalty, margins, and word-of-mouth.

1. Assuming the customer knows critical issues and factors leading to success

In a B2B environment there are three reasons why customers are clueless about the product. First, the buyer is often not the user. Second, nobody reads or gets educated beyond the quick-start page. Third, turnover results in users who have never been trained except by Mary-Lou, the lady at the next desk who has been there for a year.

In most cases, customers want better performance at lower cost but cannot define better performance or a metric to measure it. That is where you can shine in the consultive sales area.

2. Agreeing with the customer specifications when there may be a much better way.

If a procurement team is familiar with one approach to a solution, they often try to re-procure the same product, when the state-of-the-art has improved dramatically. For instance, a major technology firm was pitching a $200MM equipment sale to a national retailer and noted that there was better technology than the requested solution. The buyer pushed back and demanded that the proposal adhere to the stated requirements, which the company declined to propose. After thinking they had lost the project, the vendor received a message from the buyer saying that, in retrospect, they liked the alternative approach and were going to contract with their company because they had been the only vendor who leveraged its knowledge and experience and argued that there was a better way. A $200MM win for transparency.

3. Not educating customers on the journey pitfalls, in detail

Any complex product will have bumps during implementation/delivery. Sales reps are often afraid to mention any of these. However, savvy customers now view the message, “Buy us and life will be perfect!” with a healthy skepticism. One leading logistics company communicates: “Lease our trucks and your up-time will be greatly improved, but, let’s also talk about what happens when one of those trucks breaks down. We’ll take two hours to try and repair it before we provide a substitute truck.” The discussion of the breakdown builds strong trust as clients know there will be breakdowns that are rarely mentioned by vendors.

A leading catastrophe modeling company, servicing the insurance industry, when selling its million-dollar tool, includes in the sales pitch that a ton of data is required to execute the model. Often, during implementation, the IT Department will complain strenuously about the effort required to provide the data. Since this fact has been woven into the sales process, client satisfaction has risen because the effort and the internal complaints are anticipated rather than an unpleasant surprise. Again, no other vendor mentions such surprises, creating trust.

4. Not continuing to listen to the peripheral complainers during implementation — identify skeptics

Proactively acting on such needs and concerns of the peripheral and secondary customers can create value add and customer delight as well as ideas for revenue generating product enhancements. For example, external users, like independent truckers, use a logistics management system but seldom are well trained, creating chaos. Clients will gladly pay for someone to efficiently train such critical partners.

Why should you care

As the above stories show, customers are harried and hassled but are usually not stupid. If shown a better idea with greater value they will strongly consider including your company in the bidding list and often will be willing to pay a premium (usually 3-4% but sometimes 20%) to gain your expertise.

We always ask customers if they view the vendor as a leader, fast follower, or “one of the pack.” A company that is “one of the pack” is never viewed as a preferred vendor or strategic partner. On the contrary, you are a necessary vendor that will be jettisoned immediately for a better price.

Also, companies that have anticipated and communicated issues in advance always have a 10-30% higher client intention to renew their contract.

The following chart may be painful to review but it is good medicine. Adopting the above four strategies will position you on the right-hand side of this chart.

Best Practices

Many of these best practices will seem like common sense sales practices. However, I’ve found sales common sense is in short supply. See my article on Applying Quality Processes to Sales and Marketing. [1]

• Ask questions that show you are aware of the challenges in the buyers’ arena.
• Ask about previous problems of implementation, mentioning two or three that you have seen. Again, this shows you are not just sales but are aware of the challenges.
• Stress how your installation, startup, and acceptance testing go beyond the basics.
• Provide information about a leading-edge best practice, even if you’ve not executed it yourself.
• Suggest performance metrics beyond cost savings, stressing business intelligence and quality improvement outputs as well as production. Demonstrate how your tool helps identify opportunities for continuous improvement, thereby gaining Quality as an internal ally and supporter.

Actions to take tomorrow

1. Assess the buyer’s level of experience with the product compared to the state-of-the-art. Do this via both direct questions as well as asking about recent innovations made by the buyer or its competitors in the space.
2. Review customer RFPs and requirements and suggest at least two enhancements that show you know their business, how your product adds incremental value, and that you are not “one of the pack.” Almost every product or tool should be producing business intelligence and or input for internal continuous improvement. Stressing these creates supporters for your product internal to the buyer.
3. Identify the three most prevalent problems customers encounter when implementing or using your type of product. Incorporate a discussion on how you prevent them into your sales pitch.
4. Assess your current customers and the industry to identify emerging best practices. Also, look at innovations in adjacent industries to see what practices could transfer and transform your industry. In Customer Service, I’ve often said that what works well for Motorola might work for McDonalds — and the carryover is surprisingly large.

Look for my new book, Customer Experience 3.0, 2^nd Edition, to be published by Harper-Collins in August 2024. Contains up-to-date analysis of AI, Offshoring, Customer Rage, and Delight Research.

Notes

[1] John Goodman & Ken Feldman, Quality’s New Frontier, Applying Continuous Improvement to Marketing and Sales, Quality Progress, June 2017