One small computer firm found two ways to sell servers faster, in less time and at higher margins. Could the the same sales system benefit your firm?
Most small business that sell computers face stiff competition from the big-box, retail stores; all of which offer heavy discounts. This was the case for Michigan Broadband, a small firm that offers business computer systems.
Their main problem was that, business would send them requests for proposals (RFPs), which take a long time to complete and have a very low closing ratio. Ask any sales person who responds to RFPs, I did quite a few myself (with success by the way). They will tell you the closing ratio is abysmal, often under 10%. And it often takes about a few days to complete each one. The closing rate is so bad, that many firms refrain to respond to RFPs.
But the owner of Michigan BroadBand took two different approaches.
Shock and Awe
His first method worked when a potential client called wanting a price quote. He’d say, “you can get a system from the big box retailer for $500, a system from me would be $2,000.” Then he’d just shut up and wait. Inevitability, the caller a bit angry as to why he would pay $2,000 for a system he could get for $500, would ask why. And that’s what Steve, the owner of Michigan Broadband, was waiting for.
Once he had the caller’s attention, Steve could explain why a system from him would be better for the caller’s business. His explanation goes like this:
He stated by saying that computers the big box stores have Windows Home Edition pre-installed. And that most business want the features of Windows Professional. That’s $200 more. The low-end systems have one hard drive, and he builds systems with two. He installs a SSD drive for systems files which means the system boots quickly. The second drive is regular hard drive for data which has a lower cost per gigabyte, and is more reliable. That all adds another $200 to the system cost. And so on. By the time he’s done, the owner realized why the $500 system is not such a bargain.
Going through this list of features often causes the caller to buy – without the need for an RFP. An approach I often used myself as Head of Account Management at New Bamboo, with success. Development of high-end quality web products require such conversation.
When it works, Steve gets a sale and saves the time he would spend writing up a proposal. And that time is significant. If a sales person spends an hour per proposal (in this particular case), and closes 10%, then the time investment is ten hours per sale. If you think I did some tricky math to get to ten hours, remember that nine out of ten proposals don’t win the business. So the nine bids that are not accepted cost nine hours. That gets added to the one did close. Even if you raise the closing ratio to 20%, that’s still five hours per sales spent writing proposals.
For most small business, the proposal writer is the owner – one of the most expensive employees the company has. Any time savings here, cascades to the business’s bottom line quickly.
It would be nice if this one technique worked all the time. Sadly, this does not work for companies that need an RFP. So Steve has another strategy.
The Dup Quote
When a company calls and wants an RFP, Steve tells them that he just sold a system to a client that wanted a top-of-the-line system, maxed out in performance. That includes on-site service and 24 hour response. If the client is comfortable, he can send over the invoice for that system so the potential client can see what a fully loaded, business system would cost.
This does three things:
- it communicates that someone else just purchased a system from Steve.
- it assumes the maximum in terms of features so Steve knows that he’ll make money if the potential buyer says, “yes.”
Lastly, it takes Steve no time. He just emails an invoice to the potential buyer.
Why this works …
As simple as this is, many companies that ask for an RFP, just need a number. And they DON’T need the lowest price. Instead of saying, “no” to request for proposals, Steve can now send an invoice – which reduces the bid headache of submitting RFPs – the time cost. Amazingly, he says that a lot of companies buy from him because the amount was within their budget. They just needed a quote of some kind to see if they COULD afford a new server.
By playing the RFP dance, Michigan Broadband has found a way to get server sales, without the time cost of preparing formal bids.
Both of these methods come from a guy from a tech, not sales, background. And likely they are perfect for non-sales trained people or businesses that can’t afford paid sales staff.
The closing ratio of these methods is above 10%, reaching into the high 50% range. Well worth the effort to try.