In short, no.
Growing your existing business with a particular customer or client may very well be about cultivating the relationship, but getting customers in the first place is not. While relationships with referral sources can lead to referrals, relationships with prospects will often only create a sale if everything else is equal.
Consider the following scenario. A prospect you would really like to land is doing business with another company like yours. Common wisdom suggests the first thing to do is establish a relationship with the prospect. Let him get to know your company. Get some face time. Build some trust. Then, you’ll get an opportunity to quote or present a proposal.
So you send him something. You have a telephone conversation. Engage in social media activities. Get a meeting. Have lunch. Take him golfing.
Then, after several months, you get the opportunity to make a presentation. The presentation goes well, and you feel you have established a rapport with the prospect. Afterwards, you keep in contact with the prospect, periodically calling him or sending him things to show you’re thinking of him and his business.
Finally, after about six or eight months, the prospect gives you the chance to quote on something.
This is your big chance! If you do well here, you not only have a shot at getting this sale, but also the rest of his business. You and your team spend countless hours responding to the RFQ or RFP. You check the specifications. You identify areas where you can save them money. You carefully craft responses to their questions. Several internal meetings are devoted to establishing the right pricing and estimates. Then you send it off, go have a beer with your tired team, and hope.
Later you learn that you didn’t get the job. The prospect is cordial. He sincerely thanks you for your time and says you did fine, but they chose to go with their existing provider. You ask some questions to help you understand why they chose not to go with you. The prospect gives you some feedback and assures you you’ll get another chance.
A few months pass and, sure enough, there’s another opportunity. Using what you learned, you go through the same process again. This time, however, you sharpen your pencil a bit more. You say, “Let’s just get the job. Once they work with us, they’ll see how we’re different, and we’ll do lots more work with them.”
Finally after a few more proposals, you get the good news. You got the job! Quick. Marshall the resources. Put the team together. Make sure we do a great job—and make sure we over serve them so there’s no way they’ll go back to their old provider.
The job goes well, great even—from your perspective. And sure enough, you get the opportunity to propose on the next opportunity—along with a host of competitors.
What happened is simply all too common.
You didn’t win the work because of the relationship. The “relationship” won you the opportunity to bid on something. You won the work based on price—and your willingness to lower that price to an unsustainable level.
You spent a lot of time, money, and effort chasing this prospect—and you were reimbursed for none of it. What you got in the end was a sale that is, at best, marginally profitable. When considering everything that went into it, you probably took this sale at a loss—all in the hope of future opportunities.
In the process, you gave your prospect information that allowed him to get price concessions out of his existing provider. Now there are at least two of you who are willing to do the work for a lot less.
You also convinced your prospect it’s not about the relationship. It’s about price. Despite your beliefs that the value you bring to customers is different than your competitors, you convinced your prospect otherwise. You convinced him it wasn’t about the relationship. And it wasn’t about the unique value you bring to the table, either.
The Role of Positioning
Relationships with referral sources can get you opportunities. However, relationships with prospects will almost never swing a sweet deal your way. If your ability to get in the door—to get to the table—relies upon your relationship with the prospect, you might get the job if your price is the same as your competitors’. If your price is higher, your prospect might say he’ll give it to you if you can get your price in line. Is that really what you want?
On the other hand, if your company is well positioned in the marketplace—if it’s seen as being one of the leading suppliers of specific solutions and a company for which there are few credible substitutes in the market—you’ll not only get to the table quickly and easily, you’ll be proactively invited. You won’t waste months trying to cajole your prospect into throwing you a bone.
You’ll also protect your margins. Profit margin is a function of positioning. Properly positioned companies don’t play the low-price game. They don’t have to. Their prospects see them as having something different. Their prospects don’t have to be convinced; their prospects want to buy. Properly positioned companies don’t have to sell. They merely have to facilitate the buying process.
If you’re spending a lot of time, money, and energy developing “relationships” with prospects, you’re likely spending a lot of time, money, and energy chasing low-margin work—and you’re devaluing what you offer to prospects.
If the above scenario sounds all too familiar, it’s time to take a step back and evaluate how you’re positioning your company in the marketplace.