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To grow market share you often face a reality to grow your share at a competitor’s expense. In a break-in situation a big part of the challenge is to define who to target and how to do it. Taking the decision to switch or swap vendors is a large and risky decision for buyers. To be successful with a break-in strategy you need to be clear on what the 4 main consequences are for your customer. The main factors where you can help your customer to select you ahead of an incumbent vendor.
Major negative consequences of staying with current vendor/s
Starting point is to understand the consequences for your customer maintaining status quo. Start by articulating the negative consequences of staying with the current vendor. Then rate the expected impact and focus on the factors with the largest negative consequences. Negative consequences from staying with current vendor is the foundation for a successful break-in. The larger the better.
Break-in deals are tougher to win than other deals. Especially if your customer opens up all purchases for competitive bids even if there is no intent to change vendors. It can be hard to sort real break-in opportunities from the ones where you are a rabbit in a price concession game.
The deal qualification for a break-in deal is all about the negative consequences of maintaining the current vendor. Look for large negative implications with the incumbent vendor/s.
- Uncompetitive cost base – resulting from insufficient business model and price level for current offerings.
- Inferior offerings to customers – caused by inferior products and services quality from vendors.
- Difficulties in keeping up with market pace – caused be vendors struggling to invest to keep products competitive.
- Uncertain outlook for current platforms – caused by vendor consolidations or major technology shifts.
- Increasing TCO/LCM cost – driven by high degrees of customizations and little leverage from global solutions
- Not able to adapt fast enough to changing markets – your vendors need to be at least as fast as your market changes.
- Creating a bigger pain later – by postponing an un-evitable vendor replacement.
Aim to find 2-3 larger pain points to build your strategy around. Be careful with relationship and price level issues as they can change with the stroke of a pen.
Major positive consequences of selecting your company as a new vendor
Positive consequences of selecting a new vendor are only relevant if there are major negative consequences of staying with current vendor. The positives benefits of a new vendor are a pre-requisite but not a reason to change. The importance of the negative consequences must be >> than the value of the positive consequences of changing.
When identifying the positive consequences, the size of consequences is of great importance. You can assume it is just a few of your major benefits that will be in play. An inside-out approach can start with the generic benefits of your offering. Before presenting you need to articulate the points with an outside-in perspective. Aim to articulate your main points as major positive consequences your client can expect as outcomes. The more specific your consequences are the higher the probability they will become as a base for their decisions.
Besides being positive you want the consequences to be tangible near term. The better rationales you can give for acting now the better. Uncertain or long term consequences are harder for your clients to take immediate actions.
Major negative consequences of selecting your company as a new vendor
Your proposition as a different vendor will generate both positives and negatives. Be proactive and identify the negative consequences of your offering. To secure they are not exaggerated by your client and by competition.
Aspire to establish a realistic view
- Cost to client of introducing a new vendor in their supply chain – if you are not present in other areas they need to manage one more vendor than in the past.
- Cost of introducing a new vendor into their business processes – most vendor introductions in B2B operations requires system integration efforts.
- Cost for backward compliance with existing customizations – the more customizations in play the more cost and risk.
- Risk exposure when shifting vendors – hard to predict for your client both with regards to time and cost for vendor change out.
Positive consequences of staying with the current vendor
Changing vendors is about breaking up a relationship. The current vendor might not be best but you know how bad it is. The current vendor represents something well known. Your customer knows their product quality. Their development processes are well understood. Personal relationships are in place.
The negatives need to be greater than the positives to motivate the break-up.
Questions for you and your team
- What are the market inflection points you can leverage – changes of vendors are more common during large market shifts.
- What are the business consequences you can envision for your client for the opportunity at hand – mapped out on the four buckets above.
- What evidence do you have the current relationship is broken or bad enough to motivate a vendor shift – look for material factors.
- Who in the client organization experience the largest pains with current vendor/s – the source for identifying the driving pain points.
- Who are the driving person/s behind a switch to a new vendor – these are your sponsor and crucial for your success.
- What does the negative consequences with the current vendor tell you about how to play your game – critical to play strengths against their weakness and neutralize the two other factors.
- How do you expect incumbent vendors to act – expect fierce defense if the account is of great financial or reference value to your competitor.
Additional reading suggestions
- Lies my vendor told me: Tech relationships gone wrong [ARTICLE] – by Computer World
- What it costs to obtain a new supplier [BLOGPOST] – by Harry Hough
- Should I break up with my current IT vendor [BLOGPOST] – by Jeff Perkins
- The hidden costs of switching software vendors [BLOGPOST] – by G2 Crowd
- Changing suppliers is more than the cost of their parts [BLOGPOST – by Spend Matters
- Managing when vendor and supplier risks become your own [ARTICLE] – by McKinsey