Competing on Price

There are companies that must compete on price in many, most, or even all deals.  That’s a function of what they are selling, into what markets, and against which competitors.  With that being said, too many companies often wind up competing on price because they simply aren’t very good at selling.

The “sales ineffectiveness” affliction that so many companies suffer from is apparent during my initial conversation with sales leaders and their marketing counterparts.  It takes about 30 seconds before the word “price” is uttered—and not by me.  As I dig deeper they tell me that their biggest challenge is “being forced to compete on price.”

“Forced by whom?” I ask.  Most often the answer is “our competition.”  Sometimes it’s “the customer.”  When you think about it, both answers are pretty much the same.

The discussion goes on… “We do a great job building relationships, understanding the customer and selling our unique value,” they continue.  “Then, at the last minute the competition slashes their price and we’re forced to beat it or lose the deal.” They may have done a “great job” with a number of things, but competitive selling isn’t one of them.

Here are some sales leader-level questions for you to answer:

1. Are you certain your prices are competitive? What evidence is there?  If your prices aren’t competitive, why aren’t they?  There may be perfectly valid reasons, or not.  I’ve worked with companies that just couldn’t manufacture their products any less expensively.  With others, pricing was arbitrary, based upon irrelevant data or assumptions.  Where does your company stand on this issue?
   

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2. Do you have enough of an understanding of your competitors that you can easily predict when in the customer’s buying cycle they will drop their price, by how much, and in what situations?  If not, why not?  What would you have to do to get the answers to those questions?  Once you got the answers, would you be able to devise effective competitive strategies and tactics?  If the answer is no, don’t point your finger at price, your customer or your competitor.  You’re the one who must take action.

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3. If your salereps know early on that certain deals will ultimately come down to price, will you continue to pursue these deals?  If so, what buying criteria might you introduce (or highlight) that would take precedence over price and how are you going to convince the customer to buy from you based upon those criteria?

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4. Have you armed (with tools and messages), trained and certified your sales people in strategies and tactics for winning in situations like this?  If not, why not?

Don’t leave it up to your salespeople to figure out, individually, how to outsell a competitor who regularly wins as a result of last minute price slashing.  Few salespeople have the skills and experience to accomplish that.