Evaluating Options for Change

evaluating options for change in your businessMost of the entrepreneurs and executives I’ve worked with have struggled with change and evaluating the options that are in front of them. Frequently, only a couple of options are brought up and even considered.

Recently, I remembered a talk by a Vistage speaker, Amy K Hutchens, where she said the best solution is not usually among the first few options. The first ones are just the obvious ones. The real gems lie in the next set of options. Fortunately, I remembered this strategy and used it with a client and a great solution was found.

A company I worked with was struggling with how to deal with a particular client that represented 25% of their business. The issue was that the client wanted a significant discount because they had been approached by another vendor and offered some very good rates. This client had been doing business with the company for 5 years and their pricing had remained the same with small increases over time.

The Account Executive was pushing to match the price, the Service Department was pushing to offer additional services at discounted prices and the Controller was advocating for doing nothing. The executive team got together and debated these three options without a very clear consensus or compelling reasons as to why one was better than another. I encouraged them to bring the client in, (or go to them), and have a discussion about what they were really looking for, how had the company served them well over the years, how they hadn’t, and encouraged them to ask what would be an ideal solution from the client’s perspective.

It was decided to invite the client to a nice dinner and just listen to them. The clients were provided the above questions in advance so they had time to prepare and consider them. What the company learned at dinner was that the client wasn’t as concerned about price as the company thought, it was just the catalyst that caused them to think that they were being taken advantage of. They rarely saw the Account Executive, they didn’t much hear from the company, and service levels had slacked off in their eyes over the last few years. In other words, they didn’t feel loved.

In my recent Emerging Leaders class for the SBA, we discussed the amount of money spent on acquiring new clients as compared with existing. Most companies spend 95% of their marketing budget on acquisition and 5% on existing clients. Good companies spend about 35% on existing clients. As you may have guessed, the company in question spent almost zero on existing clients, even this one who equaled 25% of their business.

At their next executive meeting, the company scrapped all 3 of the initial options and came up with about 5 more that they felt might work. What they ultimately decided was to take 3 of them back to the client and make a completely new proposal, giving them these three options. One involved a slight price discount but with higher minimums, one involved quarterly service reviews and additional reporting that would address compliance concerns, and the third involved an on-site stocking program. The client asked for a combination of the last two items and the company kept the business.

Lessons learned? Never ignore your existing clients, look for the real solutions after you’ve thrown out the first 3-5 options, and be sure you know what the real issues are as you evaluate your options and solutions.