Is It Good Business to Give Away Business?

Oct 23

During a recent sales training workshop the participants and I had a spirited conversation about giving away business.

The discussion stemmed from my suggestion that it sometimes makes good business sense to walk away from a deal and to give that sale to a competitor. The moment the words escaped my lips a look of horror appeared on the group’s faces.

One individual immediately spoke up and expressed his concern noting that if he gave away a sale he would face severe consequences from his manager. Others in the room nodded in agreement. So, for the next 30 minutes or so, we discussed the merits of walking away from a sale and actually recommending that the prospect use a competitor.

This is a difficult concept for some sales people to accept because they believe that any sale is better than none especially if it means that the prospect will go to a competing company for the product or service.

A few years ago I was coaching the owner of a small independent retail store that sold nutritional products and health supplements. She had many customers who consistently asked her to price match her competition and she always agreed to their requests even when it meant she sold the product(s) at a loss. She felt that those customers would see the value of her knowledge and service and eventually be willing to pay full price. I suggested that she stop price-matching and focus her attention on driving more customers who were willing to pay full-price to her store.

Unfortunately, she was reluctant to make this change and she continued struggling to make her business profitable.

There are two key reasons companies go out of business…

1. Lack of sales

2. Lack of profit

The health retailer I mentioned had the top-line revenue but she didn’t have the necessary profit to pay her bills and she eventually closed her doors.

It is never easy to walk away from a deal but sometimes your business can actually benefit from it.

In many cases, the people who demand your absolute lowest price are the most difficult people to deal with after the sale is closed.

They appear to be needy. They constantly call with a problem of some sort. In short they are high-maintenance. As a result, you end up spending value time dealing with them when you could be out selling to high-value customers instead.

Every minute you waste with a low-value, low-profit customer the less time it gives you to focus on your high-value, high-margin/profit customers and prospects.

What do you think?

Do you think it makes sense to walk away from a sale and/or give away the business to a competitor? I’d enjoy hearing your perspective on this topic. Please feel free to add your comments.

 

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3 Comments on Is It Good Business to Give Away Business?

  1. Great article. Yes, it makes sense to walk away. Beyond a customer going for the absolute lowest price, accepting this is a sure fire way to marginalize your profit, brand and future vitality at that customer.

    If it’s the goal of a company to chase revenue until they are exchanging revenue for expenses with nothing in the middle, what good is the exchange?

    Walking away will help push your competitors out of business, make you and your brand stronger and ultimately, lead to more productive, profitable business.

  2. A good topic Kelley. Before accepting any business I find it a good practice to ask the question “What would happen if we don’t have it?”

    My suggestion to clients it this: Don’t give it away unless you can aford to give it away.

    Not withstanding decsions made for strategic reasons such as the potential for increased business or keeping production lines operating, if you are only breaking even, why do it?

    Walking away is a weighty decision and requires number crunching to be made confidently.

    Once you decide, do not waffle or you risk the chance of always having to concede to your customer.

    Think and promote value.

    Good selling,
    Richard

  3. Great article Kelley! I am all for walking away if it makes sense to. In fact, I make it clear to prospective clients very early on that I am willing to do so. I tell them “Let’s do business together if it is the right thing to do; If not, that’s ok too” and I get them to agree to that up front. In my experience, it clears the way for more open conversation because they know I will walk away if we are not a fit. I find the clients that you have to convince to do business with you are more high maintenance than the ones who make the decision on their own volition.

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