Why The Customer Happily Paid 30% More
TALE OF THE SALE:
A medical device manufacturer in the Atlanta area was 6 months from submitting a new product for FDA approval. Engineers were making final changes and closing in on final designs when they ran into a major issue. One of the components within the device was sourced from overseas and had since been listed as a potential high-risk supply chain issue. The engineers took to google and started contacting possible suppliers. They found two different companies and engaged with their sales and technical teams. Both companies were familiar with the medical device markets. Their products were of equal quality and performed almost identical in initial testing.
The engineers turned the sourcing over to the procurement group lead by an experienced buyer named Jim. He started to send the official RFQ also known as a Request For Quote. The first salesperson to respond was Sally Sales from XYZ Medical. Sally asked some surface qualifying questions including one about target pricing. She did not ask who the key decision makers would be for the prospective client as she assumed the procurement team would be making the decision. Sally figured the engineers already received samples and provided the information to procurement so their job was done and she just had to win on price and delivery. She was confident in her price as her company was usually a low cost provider in the market.
Sally quoted the procurement team right under the target price she was given. She told the buyers she would follow up in a few days as this was a big opportunity for her company. There were many eyes on this opportunity as it was not only going to be very profitable but help fill some revenue gaps caused by losing a major account due to the end of a contract. All eyes were on Sally to bring this home!
Shortly after Sally sent her quote, Jim the buyer received an email from Sammy Sales from ABC Medical who was the 2nd of two companies approved by engineering.
“Hi Jim, thanks for the RFQ! It looks like a good one for all involved but I can’t quote this without having a call with your team and the engineering team. It would also be a good idea to invite anyone from compliance, legal, or regulatory if you can?”
Jim fired back:
“Nice to meet you Sammy, I’m not sure I will be able to get all those teams together as we are in a rush to get this moving and they have already approved your product along with one competitive product. By the way, I already have the price from your competitor, and they have met our price target.”
Back to Sammy:
“Jim, the reason I am pushing for the call is to make sure your group understands some changes coming up in regards to the FDA legislation involving the conflict minerals act. We could all end up in a real fire drill with the FDA if we don’t cover those bases before going into manufacturing. Let me know when we can chat about it.”
Jim forwarded Sammy’s email to his colleagues and received almost immediate responses letting him know that they either did not know about the new legislation or didn’t know enough about it. They requested that Jim set up the call.
Once on the Zoom call Sammy explained the new law and what it meant for regulations and how it impacts cost. He was professional and most of the engineers and compliance personal viewed Sammy as a consultant more than a “salesguy”. They were overly thankful for his insight at the end of the call and let him know how much they appreciated this level of information. It even forced them to review a different product that was in development unrelated to this project.
Sammy sent Jim his quote and it was 30% higher than that of Sally’s quote. The price was no surprise to Jim and he thanked Sammy for the information and the quote. He went back to Sally one time asking about the new regulatory laws pending but she was not as up to speed, and it was clear XYZ company was not going to be in compliance anytime soon.
Jim sent Sammy and ABC Medical a $200,000 purchase order pending FDA approval on their new device and it would end up being the first of many. Sally on the other hand was crushed and learned a very expensive lesson once Jim explained why she was not awarded the business.
The major lesson here is that the price is almost never the deciding factor when selling. Overall cost is very different than price and the sooner you learn to dive into overall cost the better you will be at closing sales. The “price” was a whopping 30% difference in the Tale of The Sale above and at the end of the day it wasn’t enough. The “cost” of potential product recalls, FDA fines, lawsuits, and reputation damage for this manufacturer would far outweigh the 30% savings on one component within their device. Sammy knew this and he sold on value not price.
You see Sammy did not only know a great deal about his product and his industry, he knew what would be most important to his prospects overall business much more than price. Finally and just as important, he was able to convey this information with incredible acumen and the final decision to pay 30% more wasn’t even close. Sammy closed this deal at excellent profit margin and locked his company in for years to come.
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