Back in March 2003, in my e-Zine, I featured an article
entitled, Selling Against Goliath. In the article I offered some
coaching to smaller companies who regularly compete against the
big guys. The article was very well received, in fact it was
reprinted in many sales publications. However a number of my
subscribers and clients have come back to me with a question:
I'm the Goliath. How do I compete against the smaller, more
agile David out there who drastically discounts 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 orange (if not 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 its
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 issue 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. ·What
do you know about their human assets? Look into staff and
executive attrition rates, quantity and quality of SMEs (subject
matter experts), levels of staffing, support hours,
etc.--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? Can they sustain? ·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. A few
subtle and well-planned comments to the prospect suggesting they
look more deeply into certain "areas" pointed them 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 a competitor 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 associated with my solution, 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
implementations/installations 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. ©2003 The Stein Advantage, Inc. All Rights
Reserved. For permission to republish this article call or email
us. (845) 621-4100
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