Most professional firms walk into pricing discussions armed with an understanding and defense of their costs (spreadsheets populated with people and estimated hours) but have spent virtually no time or energy comprehending the value they’re about to create for their client. It’s little wonder that the senior executives at most professional firms are easy prey for the tactics of professional buyers in compensation and contract negotiations.
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When procurement professionals source chemicals or other commodities, its a matter of defining specifications and then finding the best price from the available suppliers that can meet the list of requirements. The plastic required to build a smart phone can be fabricated by a wide variety of suppliers, all manufacturing to the same exact specifications. In this case, the job of procurement professionals is to find and hire the most cost-efficient supplier; the one who can meet the required specs at the lowest cost.
Why is acquiring new business so expensive? For some firms like advertising agencies, the cost of new business can be staggeringly high. In addition to all the normal expenses associated with the sales process, agencies are usually expected to invest their own time and money producing speculative work and recommendations. Just watch an episode of AMC’s “The Pitch” to get an idea of how intense – and expensive – this process can be.
If you’re the leader of a professional services firm and you’re cracking the whip to get your business development person to make more cold calls, 2014 is the year you should stop cracking. Outbound sales activities like cold calling have always produced only modest results, and today’s avoidance-enabling technology only makes it easier for prospects to hide from your phone calls and ignore your e-mails. Traditional new business prospecting methods are becoming less and less effective.