What Business Are You In? | Promotional Consultant

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What Business Are You In?
By: Lisa Horn, CAS
Issue: August-September 2009

There are companies that sell on a transactional basis, and there are those that sell based on relationships. But they can’t be one and the same.

During the 100 plus years of our industry’s existence, the way companies go to market has grown from salesmen peddling ad specialties from the trunks of their cars to complex, vertically integrated distributorships—and everything in between.

In essence, the shift is toward more full-service shops that handle all aspects of an integrated promotional campaign, beginning with product sourcing and ending with customized fulfillment. Salespeople do much more than sales. Thus the term promotional consultant was coined—and this magazine created.

There are still many companies in the industry that are trying to build a relationship model of selling, but they continue to struggle. Why? Oftentimes it is because they still hold many beliefs of the transactional frame of mind.

To get some clarity on the issue, Promotional Consultant sat down with Dan Collins, chief operating officer of San Diego, California-based supplier AddVenture Products (UPIC: COMPREST). Early in his career, Collins mentored under and reported directly to the renowned Lee Iacocca as his vice president of sales. His sales process advice, in the trenches experience and hands-on approach is responsible for leading teams to consistent year-over-year increases in top-line income. Here’s what he had to say about pricing pressure in the industry, the complexities of relationship selling and why the experience is what matters long after the product is gone.

PC: There has always been lots of talk about price in the industry, and I suspect this will never change. However, it seems to have escalated with the recession. Is there really more pricing pressure today than ever before?

DC: There is and there isn’t more pricing pressure today. People are focusing on dollars because there is scarcity right now. But these dollars will gravitate toward value-added services in most cases. Here’s an example.

When doing your taxes this year, you could have paid a minimal price to file online if it was purely a transaction situation. On the other hand, you could have paid significantly more for a tax accountant to professionally prepare the paperwork. The reason some choose the higher price is confidence in the accountant’s ability and the relationship with the person. These are more important than the dollars saved using an online service.

Unfortunately, most people in our industry are not making this leap. They look at everything they do on a transactional basis. This is the easiest way to look at things because neither distributors nor suppliers have taken the hard route in pushing their value adds. Consequently, they are falling to the default of a transaction.

PC: What are the long-term ramifications of being caught in the default of a commodity-based, transactional business model?

DC: The ramifications are that a transactional business model is a spiral that you can never get out of. The more you as an owner look at dollars, the more customers look at you in the same context.

Business owners must decide if they are transaction-based or relationship-based buyers and sellers. If they are relationship buyers and sellers, then they must determine what value-added services they are willing to pay a premium for and are willing to charge a premium on. These value adds must be head-and-shoulders above anything else in the marketplace in order for them to buy from higher-priced vendors and for customers to purchase from them.

This is where the trouble begins. When talking about value adds, anyone can say they have great customer service or they don’t make mistakes. For these statements to have meaning, they must be measurable and identifiable. Once this is done, these business owners must explain to customers and prospects that they are more expensive than a simply transactional company because of the value-added services. But this is a bridge they’re not ready to cross.

People are not honest with themselves. They want the transactional pricing and the value adds, but there is no such thing. You are one or the other. You can’t walk on both sides of the fence.

PC: It sounds like what many people don’t realize is that it goes back to defining exactly how the company wants to go to market and the kind of business it wants to be.

DC: You’re 100-percent right. Most businesses want both the transactional buyer and the relationship buyer, but these two buyers do not work within the same business model. If a company wants both kinds of buyers, it must create a separate business for the transactional buyer, typically an internet-based point-and-click model.

But regardless of the business model chosen, it’s all about the experience. Many people forget this. No matter what it is, after you buy something and it is gone or outlived its usefulness, there is one thing that’s left: the experience that you had in buying it, the experience with whom you bought it from or the feeling that went along with buying it. This experience far outweighs the actual item purchased. This is the definition of relationship selling.

Lisa Horn, CAS, former editor of PPB, is an independent corporate copywriter and media relations specialist who helps businesses build their brands, position themselves in the marketplace and get the publicity they desire. Based in Irving, Texas, she is a frequent contributor to Promotional Consultant and other niche publications in the entrepreneurship and sales markets. Connect with her at www.linkedin.com/in/lisakhorn or follow her on Twitter @thepublicitygal.