Saying “no”

Sometimes the sales process delves into the ridiculous. This is when the value proposition has failed, and the customer starts asking for bill of materials.

Imagine if you will, apart from the ingredients listed on a package of food, you asked the vendor of said food to describe the exact amounts, the source of each (brand, sku or part number, …), the make and model of your oven, the make and model of everything you will use in the preparation of said food. Then they say “the bill of materials comes out to X, why aren’t you charging me X?”

Which means that they don’t apply any value to what you do. Which means, unless you are planning on funding their purchases, you need to walk away. Put down your laptop, hang up the phone. The customer does not see value in your proposition. So stop trying to convince them that there is value. If they can (bake it or) build it themselves, by all means, have them go ahead.

Just had something like this happen today. Had it happen last week as well (much smaller customer). You have to learn when to say “no”, where it makes sense to do so as it makes no sense for you to continue.

When the profit margins are razor thin to begin with, pushing on them simply means less choice, until you wind up excluding every vendor … no one will want to provide 3 years next business day onsite support to something they can’t make money on … that is a money losing proposition.

It all gets back to what a business model you are in. If you want to live on terrible margins, you need huge volumes. And very little added value. If you want to be able to justify better margins, you need to be able to show something of real value that the customer agrees is of value. We do this on the storage arena. You can’t build big storage units with a fixed/limited/slow connection. Performance is a real differentiator.

When the only value seen is the inverse of price, gradually, over time you will have less and less choice as the businesses pushing this model go under. Then, at some point in time, there won’t be much competition in the market, and suddenly, you won’t have so much leverage. Bummer how that economics thing works.

There is a cost to operating in this manner. A cost to the market, a cost to competition, a cost to the consumer as choice is driven from the market.

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