Why Would You Recommend a Competitor?

Years ago I was meeting with the environmental manager at a large manufacturing plant in Colorado when he asked if our firm provided air monitoring and modeling services. "Yes, we do," I responded, "but our nearest office with that capability is Chicago. And we've never done any air work in this state." I then suggested a competitor for the work.

When my boss heard about this, he was unhappy. "Why would you recommend a competitor? We could do that work!" 

"Sure, we could do the work," I replied, "but not nearly as well as [the competitor]." Then I explained why referring a competitor was the right thing to do: We had been pursuing this client for a few years and had only a couple very small jobs to show for it. It was highly unlikely we could have won the air monitoring contract anyway. And we would have missed an opportunity to demonstrate that we had the client's best interests in mind.

Given how tough it's become to win new work, you might question the logic of ever recommending a competitor for work that your firm could perform (or any kind of work). My boss certainly did. Besides the immediate contract in question, helping a competing firm might enable them to establish themselves as a preferred provider, thus limiting your future opportunities with that client as well.

That's certainly possible, but my experience has shown otherwise. When you're in the early stages of building a relationship with a prospect or client, the most important task you have is to demonstrate your trustworthiness. Particularly in the sales phase, clients are inclined question your motives, just as you do when you're in the buyer's role: "Does the seller have my interests in mind, or primarily his own?" It's clear that most buyers suspect that sellers are driven primarily by self interest.

Recommending a competitor is an effective way to demonstrate that you can be trusted to act on the client's behalf. While it may seem you're sacrificing self interest in the short term, usually it ultimately works to your benefit. This principle was illustrated in the classic movie Miracle on 34th Street. When Kris Kringle, working as Santa at Macy's, advises a customer to go to a competing store, the customer tells the toy department manager that she has now become a loyal customer. The practice of referring customers to competitors when appropriate becomes store policy and customers flock to Macy's. Why? Because they trust the store to give them the best service, even if it involves being sent to another store. Soon other stores adopt the same practice because it has become so successful for Macy's.

In contrast to the movie, I don't advocate referring competitors as a competitive strategy, rather as a simple matter of doing the right thing. Treat customers well and they'll tend to come back to you. That's been my experience, and I'm sure it's been yours too—whether you're open to recommending your competitors or not. The point is, when clients believe you care more about them than your short-term self interests, it typically works to the benefit of both parties.

What about the client in the story I opened with? The truth is they never became a substantial client, mostly because they didn't outsource many services that fit our capabilities. But we became the first firm they typically turned to for advice on environmental issues. And the environmental manager referred us to a couple of his peers that became significant clients for us.

Now I need to clarify that I'm not advocating referring competitors just because they're more qualified than your firm. There's almost always someone with better credentials. And there have been many times that I've pursued and won work that my firm (or I as an individual consultant) had never done before. But there was a common thread in almost every such case—a client who trusted that we (I) would do the right thing for them.

So why would you recommend a competitor? Because in some cases it's the best advice you can offer. And in my experience, it usually leads to opening doors to far more opportunities with that client than what you might have passed on.