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Strategy 18: Become An Expert At Competitive Positioning

Hey, I have a proposition for you.

I had a really bad experience with Dearborn Trade Press (now Kaplan Financial Publishing) with my book, How Winners Sell, Second Edition. It’s no longer in print, although companies seem to be able to find copies somehow when I come in to present at their sales kick-offs and other events.  (I will write about the whole nasty Kaplan situation one day.  In the meantime, anyone considering publishing with Kaplan needs to give me a call.)

I was thinking about putting How Winners Sell up on Amazon’s Kindle. After a long, long effort, I finally got the rights back.  I wrote the Second Edition in 2004, but most of it is still very relevant.

The proposition.  Here is a free chapter.  All I ask is if you get some value from it and are interested in reading the whole book on either the Kindle or an e-Book format, let me know.  I may decide to republish it.


Strategy 18: Become an Expert at Competitive Positioning

I don’t know about you, but I get a big thrill when I watch a high-integrity, seasoned sales pro competitively position his company and offering. It may happen during a presentation or during a sales call as objections are raised by the buyer.

When you think about it competitive positioning begins when you formulate your strategy. From that point onward, your messaging, talking points and objection handling are driven off the same thing—the unique value you can provide to your client.

Here are some examples of how winners I’ve worked with masterfully handle competitive positioning:

Situation 1: Selling Against Goliath

If you sell for a smaller company that competes against the big guys, the age-old story of David and Goliath might come to mind. In this story, the giant, Goliath, was beaten in a fight by the small boy, David. I often see “Goliaths” beaten, but it takes flawless execution of a well-designed plan.

The most important thing of all when selling against a much bigger competitor is to be certain that if you meet or exceed all the prospect’s requirements, that size—for size’s sake—does not matter. That’s an issue of qualification. You may have the best product, innovative service capabilities, committed people, stellar customer satisfaction levels, top product quality, most respected investors or anything else that you consider of value, but if size matters, little else will measure up. And if size does matter, and you can’t convince your prospect fairly quickly that it shouldn’t, you need to get out of there—and quickly on to another opportunity. Know your prospect’s history regarding doing business with smaller companies. It may mean nothing to them, since they do it all the time. On the other hand, you may be the first and may have a long, bumpy road ahead.

What all this means is that there are certain opportunities for which you should not compete, because you can’t win them. Sorry, but that’s a fact.

Now What Do You Do?

You’re going to need to influence your prospect’s decision criteria, so that the perceived value of your competitor’s size as well as other size-related capabilities are diluted, neutralized or, in the best case, seen as a disadvantage. Many salespeople are accustomed to highlighting a competitor’s weaknesses. In the situations where you are competing against a bigger company, you will (professionally and subtly) dilute their strength.

Here is a simple, well-proven example. Let’s say I sell for a smaller professional services firm and I am up against a major player. Based upon preferences and needs of the buyers, I may decide to use the “small-fish-in-a-big-pond” approach.

It goes like this: “Ms. Prospect. There are few people who would not be impressed by my competitor’s size, global reach and financial as well has human resources. I’m sure they proudly reference some very prominent customers. However, you might consider that a project such as yours, although highly critical for you, might very well not have the same level of importance for them and therefore may not generate the ongoing attention within executive levels of their company that their premier customers’ projects would. It’s only natural…”

From that point, you would discuss how you would meet their technical requirements and establish a business relationship going forward, stressing attention that would be paid to the progress by your executives. You’d convince them that your company’s success would depend directly on their success, not the other way around. You’ll be portraying them as big fish in a small pond, with the driving message being how important their business is to you.

If you are effective with this approach, you will have moved down in importance the size and impressiveness of their customer list and up in importance the attention paid to them by your executives as well as your company’s interest in their success.

Here are challenges you might face in a David and Goliath situation and some alternatives to consider:

Challenge: The competition questions your viability to the prospect. “What would happen to you, Mr. Prospect, if they were to go out of business or be acquired?”

Your Response: Don’t wait for this to happen, as it most likely will. Immunize. Exploiting their opponent’s size is the first card most salesreps who sell for large companies—the Goliaths—play against the smaller guys. You need a solid story, prepared in advance – concise and compelling – which must be credibly and sincerely delivered first by you, then echoed by your most senior executives. Mitigating perceived risk is on the critical path to success when competing against a much larger rival. Don’t wait.

Challenge: The competition attempts to expand the scope of the evaluation into areas where you don’t have a solution.

Your Response: Again, pretty standard practice for the big guys. Alert your prospect in advance that this may happen. Praise their efforts in defining their requirements as well as they have. Ask if they are prepared to have the scope of their initiative, project or investment substantially expanded. If they say no, alert them that other vendors may employ this “sales” strategy to differentiate themselves as well as to increase the size of their contracts.

Please understand that I never advocate negative selling, mud slinging or “slamming the competition.” On the other hand, when you have built relationships in your accounts with influential people who are willing to help you, you’ll need to provide them with the messages—the sound bites and talking points—to position your company advantageously.

Challenge: The competition attempts to impress your prospect with hordes of resources to demonstrate their prowess and convey a “safety in numbers” message.

Your Response: Again, prepare your prospect in advance that this may happen. Qualify them on this issue, again. Suggest that these bigger companies have extra resources on board just to impress prospects to make a sale. If you know your competitor’s bid will come in considerably higher than yours, you may want to subtly suggest that using resources to win business may be a reason that their overhead is so high. And, remind the prospect that if they do go with your competitor, the meter will start running.

This approach is mandatory when you compete against companies who lavish prospects with toys, gifts, free trips and other goodies to try to influence their decision.

Challenge: The competition, because they are bigger, is willing to guarantee results in a way that you cannot.
Your Response: They may be able to guarantee that their product will get installed (or service delivered) within a certain time, but what if they don’t? The customer may not have to pay the vendor any more cash, but what about lost business opportunities, reduced customer satisfaction levels and employee morale if things go wrong? Will the guarantee cover that?

Tough qualification combined with strategic competitive selling does work. After confirming that size did not matter in a face-to-face meeting with a division president of a $5 billion corporation, my client, the CEO of a small enterprise software company commanded that his team pursue a $2 million contract competing against a $750 million rival. Now there is a David and Goliath scenario.

I coached that sales team during the nine month sales cycle. Among other things, we diluted the competition’s apparent strengths and portrayed their large size as a liability, which in this case it really was.

My client’s team outsold the competition and won the business. And earned a lot more business after that, because they delivered what they promised to their customer. As the CEO related to me, elated with a contract five times larger than anything his team had secured up to that time, “the most important thing for me is that this process is repeatable.”  [Note: The small company is DBM Systems, Inc., based in Cambridge, Ontario. The CEO was Duncan McLeod.  I did not provide those details in my book.]

Situation 2: Outselling a Competitor Who Slashes Their Price to Win

You’ve just read some suggestions on how to compete against a bigger company who uses their size and strength to win – the Goliath. Now, how do you compete against the smaller, more agile David out there who, for example, drastically discounts at the last minute to win business?

Red Alert. First of all, once you learn that one of your competitors in a deal has “bought” business in the past at a price you could not (or would not) meet, your alert status should immediately shift to red.

Remember, early in evaluation cycles prospects may say that price is a consideration, but not first on their list. Later on, once they have ignored or devalued any unique capabilities that your product or service can provide—to the point where they “can see no measurable difference between your offering and your competitor’s,”—price gets elevated to the number one consideration. We’ve all seen it happen. By that point it’s generally too late to remedy the situation. You’re trapped. So recognizing potential situations early on where a buyer will buy on price must become second nature.

Here are some recommendations that will point you in the right direction:

Qualify. In any competitive sales situation you have to monitor the prospect’s decision criteria like a pilot checks her instruments— ever-vigilantly. During the course of an evaluation decision criteria often change. In fact, aren’t we often the ones who attempt to effect that change to gain competitive advantage?

Among the most critical of all decision criteria these days is price. What are the key evaluators’, buyers’, recommenders’ and decision makers’ requirements and expectations with regard to price today? If you are just getting engaged with a prospect and their number one decision criteria is price, you (or your management) will have to decide whether it’s even worth competing. Clearly, knowledge of your competitor’s historic actual selling price will be critical in this decision. So will an understanding of your prospect’s recent buying patterns with regard to price.

  • Buyers focused on price de-emphasize or entirely ignore factors such as:
  • Supplier product or service quality
  • Supplier viability
  • Supplier post-sales support capabilities
  • Post sales costs (contributing to total cost of ownership)
  • The knowledge and experience a vendor can bring forth
  • Areas of additional value that you may be able to provide above and beyond what they have specified
  • Quality of vendor personnel
  • References

Address the issue head on and early. “Is your company going to make a decision based entirely or substantially on price?”

And please, make sure you are asking these questions of, and selling to, decision makers. All this matters very little to the people at lower levels in organizations.

Educate yourself. Here are just some of the questions for which you need answers to outsell a competitor that dramatically discounts to win business:

  • Is their discounting tactical or, in the case of some very successful companies, strategic – a key component of a go to market strategy supported by their business plan? (It’s hard to compete against Sam’s Price Club on price…)
  • When do they offer these drastic discounts and under what conditions? How do they dilute the value of what you are selling in the prospect’s eyes?
  • How well do they deliver post sales service?
  • How often do they produce new products or upgrade their services?
  • What is the satisfaction level of their customer base?
  • What is their financial position? If they are publicly held, look at their P&L, Balance Sheet and Cash Flow Statement for the most recent quarter and going back in time. (If they are privately held, get your CFO to create a pro forma set of financial statements that might represent what that competitor’s financial position might look like. It provide you with insights into where that competitor’s vulnerabilities lie.)
  • What do you know about their human resources? Look into staff and executive attrition rates, quantity and quality of SMEs (subject matter experts), levels of staffing, and customer care hours – anything that will point toward discount-caused reduced margins impacting operating effectiveness.
  • Look at their corporate culture. What do they value? Integrity? Quality? Are they doing the right things for building a long, profitable future or are they highly opportunistic, with little regard to what will happen tomorrow?
  • Uncover what the competition uses to deflect their prospects from exploring the areas listed above. In technology, you’ll often find that the lowball competitor has the sexiest demo, for example.

One client did a terrific job of figuring out that their competitor’s service and support resources were stretched very thin. Highlighting their own strengths in these areas pointed the prospect in the right direction. As a result of a bit of probing, the prospect found that my client’s competitor couldn’t appropriately support them post-sale. “If they can’t bring people to the party now when they are selling to us, it’ll only get worse if we become their customer,” the prospect told our rep. Bingo.

Discover And Quantify The Value. Whether or not you suspect that a low-price competitor will be included in the bidding process, you’ll need to quantify the value of your offering – in terms of financial return. When you are competing against someone who drastically discounts, it’s especially important to get close to the prospect and really understand their requirements. Not only will that enable you to better position your solution, but, more importantly, you’ll be able to uncover areas of potential additional value for the customer that can be derived from the differentiators that you are selling. If these differentiators are linked to financial impact for the prospect, they are not likely to become expendable nice-to-haves, eliminated from consideration in what might turn out to be a commodity buy. Even if the prospect doesn’t want to or can’t invest in that added value now, you’ve expanded their vision past what your competitor has done and have set yourself up for add-on business later.

Educate and Position. Winners who are really good at competitive selling subtly but definitively alter their prospect’s perception that buying at the lowest price is the prudent thing to do. You can really only do this effectively when you are selling at the appropriate executive levels.

  • Talk to the buyer about the challenging business conditions that face all of us, and the natural tendency to buy at the lowest price.
  • Talk about companies in the prospect’s as well as your own industry who have gone out of business as a result of tactical discounting, and the impact that had on those companies’ customers. (You need to do some homework here.)
  • Implore the prospect to ask questions of the other contenders that will expose weaknesses that result from tactical discounting. (See “Educate Yourself,” above.)
  • Educate the prospect on the differences between price, cost and business value and the impact on of those factors on their business. Understand the prospect’s own business model, their culture and how they sell to their customers so you can link your approach to theirs. (If they sell a commodity themselves, at the lowest price, you may have a serious challenge.)
  • Immunize the prospect in advance against what will likely be a lowball bid by your competitor. Explain how, when, and why it will happen. Prepare the prospect for what you know will come. Don’t just sit there and wait.
    Convincingly reduce what will likely be price differentials into meaningful, real terms. “Since there is typically a five-year life cycle associated with my product, and it will, admittedly require potentially a $240k additional investment, I figure that comes to 4k per month, which, you have to agree is less than a rounding error (or full-time employee) in terms of the business value we’ve been talking about.”

Get creative. If you haven’t tried risk-sharing, phased deliveries, guarantees or extended warrantees or other creative approaches that will enable you to win the business without discounting, you need to do some brainstorming with your team. Very often a cash strapped competitor who has been discounting to win business falls flat on their face when asked to match such creative selling.

Few of us can afford to sit back and wait for the competition to slash their price and walk away with the business. Understand your customer, your competitor, and your value. Then sell.

© 2004 – 2009 — Dave Stein — All Rights Reserved


That’s Strategy #18 of the 21 that constitutes How Winners Sell. Please let me know your thoughts.

Photo credit: © hutch – Fotolia.com

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4 Responses

  1. Republish! I love the idea of learning from winners.

  2. Dave,

    Thanks for the plug. Not doing software anymore but still making sure that what we do works. I will probably be in Connenticut in the next few months. We should hook up.

    Check out our newsletters on the website.

    Duncan

    • For the readers of this blog: Duncan is a perfect example of an engineer who excels at selling. He supports my assertion that successful consultative B2B selling is 90% science and 10% art.

  3. Thoughtful post Dave. There is an old concept that you get more from someone who has skin in the game. A customer can get a lot of leverage from a smaller supplier who has a high incentive to make the project work because the customer is a key account (vs. one of many in the case of a larger supplier). Customers love attention and as a seller you can use this to your advantage.
    Eliot Burdett
    http://www.peaksales.com/blog

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