When your business model offers high trust, high value, and high caring, you are going to struggle to acquire clients who use a strategy of winning by having the lowest price. Both are viable approaches to competition, but the mismatch will create conflict.
When your company’s primary strategy is to create greater value for your clients, that choice precludes winning clients whose model prevents them from investing enough to produce better results. It’s not that your prospective client doesn’t appreciate your greater value, or that they would genuinely be happier with a bargain-basement competitor. It’s just that their model prevents them from being able to pay what you need to charge.
Business strategies inform all of a company’s decisions. So, if your prospective client tries to win their own customers by offering a lower price, they must also buy supplies and services at a lower price. The way such companies succeed is by requiring the companies they partner with to offer them a lower price, so they can pass the savings on to their clients.
A Theory of Constraints
You might believe that these companies are cheap, which is true, but that doesn’t mean they are trying to take advantage of you by negotiating a lower price. Companies that compete by having a low price are constrained by their strategy, so your models clash when you charge more and deliver greater value. Due to these constraints, they must sometimes forgo better results or higher investments, simply because they cannot capture enough value from their own customers or clients.
When you sell at a higher price, you are likewise constrained by your strategy, but in the exact opposite direction. Your lower-priced competitor offers a lower price by reducing their overall cost structure. Your company does the opposite, investing more in your clients and your solutions, requiring that you capture enough value to flawlessly execute and produce better overall results. As much as you might like to acquire a low-priced prospective client, your model prevents you from providing them with pricing that would work for both of you.
Staying Out of Your Competitor’s Lane
There are many good reasons to stay out of your competitor’s lane. Because your “greater value” model requires that you charge more for the better outcomes you create, you are almost certain to lose some deals to a competitor with a lower price. The more time that you spend trying to justify why your client should pay more for what you sell, the less time you have for prospective clients who not only value what you do and how you do it, but who are willing to invest in the better outcomes you deliver.
You want your prospective client’s business, and winning big deals is always exciting. Your proactive client would love to have a better partner, something that would make their lives easier by eliminating challenges and providing improvements. But chasing companies that can’t or won’t pay for your model often undermines or even compromises your own strategy, changing how you intend to win in your market.
To generalize, when a company cannot or will not pay the higher price your solution requires, there is no reason to focus your time and attention on them. However, that doesn’t necessarily end the sales conversation. You can still meet with them and remind them that, should they discover that their costs are too high to support their low prices, you can help them reevaluate their strategy. For instance, you might show them how a low price can incur greater costs through lost clients, rework, constant failures, or some other negative consequence.
Staying in Your Lane
For the most part, you will benefit from staying in your strategy lane. By calling on companies who need better results and are willing to pay for them, you spend your time and focus your energy on winning clients who are a perfect match for how you do what you do.
When your client shares your strategy, it’s generally easier to command the higher price you need to serve them. The reason is simple: your boutique strategy helps them execute their own high trust, high caring, high-value strategy. It helps that these companies know how to capture the value they create, allowing them to make the investments that help them to succeed for their customers or clients.
However, even at companies that share your strategy, you’ll run into contacts who believe that your lower-priced competitor is just as good as you are— or at least good enough to try. Over time, these decisions tend to backfire, causing problems that cause these contacts to change their minds and invest a little more with a partner that doesn’t break their strategy.
Thoughts on Dissatisfaction
You might want to believe that dissatisfaction makes for good prospects since they are motivated to change, something that often proves true. But when your prospective client is dissatisfied because they aren’t making the necessary investment in the results they need, they are not likely to be a prospect unless their strategy lets them pay more for the improvement you can make. It’s easier to go with the grain than to work against it, especially when your prospective clients are constrained from investing more in your solution.
By the same logic, with your dream clients you may have to work harder to create a compelling case for change, as they are most likely well taken care of by your competition. But there are always some contacts who are dissatisfied enough to change, or who can be taught that they should be unhappy enough to change their solution and their partner.
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Filed under: Sales