Situation

Contracts with suboptimal margins

ChemCo had a number of major customers who generated significantly below average margins. ChemCo recognized the need for a systematic approach to significantly improve margins across its major customers.

ChemCo, a global chemical producer, has a business that manufactures and delivers specialty chemicals to consumer product companies. In the past, ChemCo would create what they thought was their best offer for a customer and then rely on the skills of the individual salesperson negotiating the deal to get the best price and thus determine margin. Unfortunately, the success of these negotiations was highly uncertain and drove the parties away from collaboration and instead focused on who was in a better bargaining position at the time. ChemCo needed to sell to customers in a way that increased the probability of maximizing a customer’s contract margin.

Synaptic Decisions was asked to conduct “action learning” as the beginning of a train-the-trainer program by utilizing our Value Based Selling approach with a large ChemCo customer whose contract was up for renewal

Approach

Create a multi-dimensional trade space for negotiations

Our approach was to:

  • Facilitate ChemCo’s understanding of their customer’s wants and needs
  • Identify opportunities to maximize revenue, reduce cost to serve or reduce the cost of risk for either ChemCo or its customer
  • Develop offerings to target identified high value opportunities with a focus on customer preferences
  • Design a menu with multiple offerings to discover what the customer values and to create a multi-dimensional space to trade around that value
  • Create a negotiation and trading ‘playbook’ for the commercial team on trades that maintain or improve margins after each round of negotiations

Image

Results

'Trading up' margins during negotiations

Through each round of negotiations, ChemCo has retained or traded up margins. The contract’s expected margin has increased using menu based versus traditional negotiation. ChemCo is in the process of implementing Value Based Selling throughout its entire sales organization.