Saturday, September 22, 2012

Quality & Technology

Companies often try to justify higher pricing by saying that their product or service provides higher Quality.  Unless there is a quantitative way of proving this claim, it will immediately be discounted in the market place.   Higher Quality Services or Goods are an expectation in the market place today.   It is the ticket for entry, not really much of a differentiator.   I was actually told that by a Procurement Manager years ago when she said to me that we would not be at the table at all if the end users in her company did not feel that we could deliver a Quality Service.  

Once all understand that providing high Quality Services or Goods are a requirement for Sales and Business Development and not a differentiator, then other factors must be used to sign new business.   In addition, Technology too is an expectation in the market place that once again cannot be used as a critical differentiator.   All major suppliers in an industry probably have comparable technology to support clients and customers.   So if Quality and Technology are not really key selling points, then what is?

Let's start with People.  In a service business especially, we are selling people.  That is why I insist that we hire the best, most educated and experienced people we can recruit for new jobs.   Resumes matter.   And, employees who go from job to job every few years, never make the interview cut in our company.  I am interested in people that have demonstrated stability and a track record of success.  We also implement drug and credit checks to make sure we are not dealing with anyone with a substance abuse problem, or credit issues that could ultimately impact job performance. 

Next, Flexibility is a key buying factor.   While we may have what we believe is a best in class business model, it may not be exactly what a client wants or needs.   As such, we need to implement our services from the client back, not from our operations out.   This sometimes creates problems internally because there will always be employees and managers in particular, who will say, we just don't do it that way; but the way we do it does not matter if the client sees it another way.   However, hopefully, if we have been responsive to the market place in general, our business model will work for 90% of clients; but it is that 10% that is looking for Flexibility, as their key buying factor, that adds volume to any business.  

Supply Chain Management capabilities is a key buy factor today especially among Procurement Managers.  In our case, we have hundreds of affiliates around the world that we manage on behalf of our clients and customers.   Clients must clearly see that we have the Metrics, staff and mechanisms in place to do this efficiently. 

Clients expect both Quality and Technology; but at a competitive price.   A competitive price is not necessarily the lowest price; but it would be hard to be higher than 5 or 10% above the lowest price without some real differentiators in place.   This is particularly true when a service or good has been commoditized.  In other words, if the client thinks they can buy about the same service from 5 or 6 high quality companies, which is often the case, price becomes a critical buying factor. 

Quality and Technology are often used for internal purposes to make emotional arguments for new expenditures.  As the President and CEO of our company, that never works with me unless I see quantitative support for any new expenditures, particularly related to new headcount, our most expensive investment.  I am always looking for return on investment in terms of client retention, higher service results, wider and deeper selling, higher productivity etc.   Unless I can see numbers that prove the case, the new expenditures will not be approved.  Quality and Technology or critical to any business; but they are an expectation in the market place today; not a differentiator. 

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