Sales Lesson: Winning/Losing as the Incumbent

Imagine you are the owner of a printing company, and you were just informed by an important customer that they did not renew their contract with your firm, signing instead a contract with your local competitor and archrival. This customer, who has been your client for 5 years, represented $200,000 in annual sales, a total of 1/3rd of your annual revenue. The dedicated salesperson you assigned to that customer was caught off guard by this announcement. 

In this case, where does your scrutiny of what caused this get directed? 

Who failed here? 

Who gets fired? 

Or do you rationalize things saying, “it is not our fault.”

Or throw up your hands and say, “there is nothing we could have done?” 

Or worse, do you blame the customer for THEIR poor decision making? 

Related article: Nine Phrases Typically Said by Losers of Large Complex Sales

We have all likely heard the business rule of thumb that the cost of acquiring a new customer is five times higher than it cost to maintain an existing one. So the financial incentive is there to support investing to remain the incumbent. And it really shouldn’t be that hard since being an incumbent gives you a decided advantage over competitors trying to unseat you in a number of ways. 

• The customer CAN help point out shortcomings in performance or quality of your product and, should you choose to, allow you to proactively improve/correct those deficiencies while they are still your customer.
• You CAN gain insight into other aspects of the customer that further broadens your ability to understand how to best serve them with your current product or future ones.
• You CAN have routine access to both the users of your product/service as well as those who are involved in the purchasing decision to hear and learn from their perspective.
• You CAN help shape the future battlefield for competing products/services like yours by defining for this customer the standard for which all competitors must be measured against.
• You CAN hear about personnel changes earlier and assess and proactively address any impact on client relationships.
• Their input into your future products CAN further align your company with theirs - forming a strategic bond.

You might have noticed how many times I used the word CAN above. These are things you can do as an incumbent -- if you choose to. And these are ways to keep winning as an incumbent if you choose to. But, if you choose not to, it offers an explanation and leaves little ambiguity as to who is to blame if you lose that incumbency. 

One of the most devastating forces that can negatively impact your chances of retaining the role of incumbent is arrogance. The belief that simply because of your incumbency you don't have to invest time or resources to preserve that title. Ironically there is some scientific evidence to support this. In a Salesforce blog titled, “The Science Behind Unseating an Incumbent” the author cites a research study that says, “Buyers often have the tendency to become attached through experience; experience good or bad, with a product, service or company. The thought of relinquishing the assumed benefits of that experience can sometimes make buyers feel anxious.”

In other words, “the fear of losing something is much stronger than the practical benefits of gaining something new.” And thus,

“It means that our (the competitor) value proposition needs to be significantly stronger than that of the incumbent if we hope to win the business.”

So you can see here. It is not easy to unseat an incumbent. 

It was unequivocally arrogance on the part of the incumbent that allowed a sales campaign I led for Boeing (formerly McDonnell Douglas) to unseat the incumbent (Lockheed) and win a $2.5 billion dollar fighter jet competition in Israel. Lockheed had owned this client for many years. In that timeframe they had sold and delivered over 200 F-16s. I had uncovered the Israel Air Force identified several shortcomings of the F-16 that could prove critical in future battles. It was because of these shortcomings, and Lockheed’s hesitation to address them, that prompted genuine interest in evaluating our F/A-18 as an alternative solution. Further, after DESERT STORM (occurred in the middle of this sales campaign), and the impact that SCUD missiles had on both the people and leadership, we detected a priority change for the use of defense funds. The aircraft’s strategic range moved to the forefront. Arrogance on the part of Lockheed prevented them from either seeing this change in priority or believing it (“they won’t really buy something else - it is just a negotiating tactic”). And while we changed our solution offering from the F/A-18 to the F-15E, Lockheed kept to their F-16 solution. We won with the F-15.

I share this to remind you that you always have to earn customer loyalty. And as the incumbent you have many ways to do just that - that aren’t available to your competitors. Never assume that you are not vulnerable to a customer moving their business elsewhere. And though incumbency gives you a decided advantage it can also cloud your judgment, and give you a false sense of confidence over your standing in the eyes of your customer.  

Oh, and if you lose your incumbency, look no further than the mirror if you need someone to blame.  

About the author: Mike is the founder of Allegro Consulting, an Atlanta Georgia based growth specialty firm helping business owners and start-up founders define growth strategies and improve how they interact and engage with customers to improve sales win-rates. He is a former international sales executive with Boeing and Lockheed where he led sales campaigns against rival U.S. based, French, UK, EU and Russian competitors to sell jet fighters to foreign allies. He is a passionate advocate (speaker bio) for strategic planning and sales process training. His sales record exceeds $10B.