Despite how common it is, of the toughest challenges a sales person (or sales organization) can face is having a product or service with the same cost basis as their competitor’s. You each pay the same price for the component parts that make up what you sell, whatever that may be. The difficulty is caused by the fact that your prospective clients know that your cost basis is the same, resulting in a lot of pressure on your pricing.
Costs + The Value You Add
But the difference between your price and your competitor’s price is only one thing: the difference in the value that you add. Your price is X plus the value that you add. Your competitor’s prices is X plus the value that they add.
Your job as a sales person (or as a sales organization) is to focus on creating the value that makes you worth paying more to obtain.
This doesn’t mean that it’s ever easy to compete in this situation. But it does mean that some of your competitors will choose to subtract value in order to capture market share. Instead of trying to be best-in-class, world-class, or exceptional in any way, these sales organizations will subtract value in an attempt to be just good enough. They treat their offering as if it’s a commodity, and so some segment of your market (probably too larges a segment) will choose to believe that you sell as a commodity.
There is an upside to this problem. The subtraction of value creates dissatisfaction.
If your prospective clients suggests that price is most important, you can test that theory by asking them if they’re willing to give up service, support, the business results they really need, or any of the things that make you a strategic partner. Invariably, mature business people will answer that all those other factors are important to them, and probably more important than price.
But you will run into the rare few who will say the price is the most important factor of all. They suffer under the persistent delusion that they can have all of the things that come along with the higher price by still choosing the lowest priced provider. These dream never come true, and the people and companies by this way suffer from an equally persistent dissatisfaction. And when the pain is great enough, they mature and make the necessary investments.
Your price is X plus the value you create. It has nothing to do with your competitor’s price. The case that you need to make is that you can and will create the additional value you are trying to capture.
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Filed under: Sales