Question: “What if . . .your product is the same as your competitor, service is virtually the same but the competitors price is lower than yours? I was recently caught by this one and even though proper prior preparation prevents poor performance, I am stumped by this one. I was a sissy cut the price and ended up splitting the order with the competitor. I felt so commoditized and stuck with the choice of either take the deal which was decent in size and okay in margin or walking away from the order completely. Any thoughts you would care to share. . .?”
Response of The Sales Hunter: Your issue is timely; it happens to a lot of people and most do not even realize it until it’s too late. Here’s how I respond as the same thing happened yesterday to me with a client I was working with:
First: Never accept the fact that service between you and a competitor is the same. If you believe your service is the same. you have lost your position of strength. In the end, for every product sold, the only sustainable competitive advantage anyone has is in the people they have servicing the customer. Passion to serve the customer is real and it’s important each person in your company exhibits it on a daily basis.
Now to the sales process:
1. Try and use time as a point of leverage. Ask the customer what their timeframe is for needing the product and if your product is used in conjunction with something else. Ask them how soon they will be installing or using it. Time = money. Although the commodity you sell might be the same, the timeframe in which it is delivered or used can make a huge difference.
2. Ask the customer how the item is going to be used and what the total value / cost of what the item you’re selling is part of. Example: You might be selling screws used to help build equipment. If the equipment being built is worth $10,000 and the total cost of the screws is a dime per machine, is it worth risking having the machine malfunction due to bad screws that cost a penny or two less? One piece of equipment failure will wipe out years worth of savings at a penny or two per unit.
3. Ask the customer what the cost of their time is. The time the customer has to spend setting up a new vendor, processing an invoice, and dealing with incorrect invoices is a cost few companies take into consideration. In a vast number of situations, a company selling a low-priced commodity is able to do so because of cuts they make on the back-end that will return to haunt the customer.
4. Play the “dual-sourcing” card. This strategy is where you allow the customer to buy from your competitor, but you ask them if they believe it is prudent to allow all of their purchases to come from a single-source. In this case, you are willing to concede on the size of the order but not the price. If the customer is smart, they will quickly see how they can become subject to “price creep” if their vendor knows they are the sole supplier.
5. Sell yourself in as a head-to-head competition with the competitor. You allow the customer to source from both companies and it’s done as a test of the entire supply chain. (I do not advocate this and only suggest it be used as a last-ditch approach.)
As tough as it sounds, you really need to walk away unless you are willing to accept the lower margin forever because you will never get it back once you cut your price. If you walk away, be prepared for the phone call from the customer asking for an emergency order. It will come – maybe not for a long-time, but it will come. It always does. And when it comes, deliver the most incredible service you can and you’ll have the customer for life and, more importantly, at the margin you want.