- There are three primary competitive strategies a business can pursue: lowest price, best product, or customer intimacy.
- Both the lowest price and best product strategies are designed to eliminate barriers.
- The customer intimacy model requires that you create value in the sales conversation to differentiate yourself and win big deals.
There are only a few different strategies a company can use to compete and win in their market. A strategy mainly recognizes what you cannot and should not do, making certain things verboten. Once you choose a strategy, then, it establishes how you compete, primarily by preventing specific actions.
In the book The Discipline of Market Leaders, the authors outlined three different strategic choices. The first choice is to compete by having the lowest price, an option you find in every vertical. The second strategy is to compete by creating the best product. The third potential choice is one the authors termed “customer intimacy,” a model that means solving the client’s problems better than anyone else.
The advantage of choosing the “lowest price” model is that it removes price from the buying decision, making it easy to choose one solution over higher-priced options. The advantage of the “best product” approach is that you can differentiate your offering from competing products, especially when you are the clear leader and you have some way of protecting that lead.
What creates the advantage in the customer intimacy model, by contrast, is the ability to solve the client’s broader problems by customizing a solution specifically for your client. This choice often requires that you be close to the client and not have the lowest price, and you may not have the best product either. What you do need is a way to create the most significant value by helping with something the client considers strategic and most important.
Success in any of these models means staying in your lane. When you choose to offer the lowest price, you can’t decide to provide the best product because you lack the profit margin to improve what you sell. The value created is designed for those who don’t want or need to spend more. Choosing to have the best product, conversely, means charging enough to profitably provide the best solution, with a large percentage of that profit invested in innovation.
Most B2B sales organizations find themselves with a customer intimacy model, even when they face low-price competitors. The fact that they are creating greater value by solving what we might call strategic challenges, the kind that threaten negative consequences for potential clients, means they are unlikely to have both the best product and the lowest price.
Making Sales Easier
Those who sell under a customer intimacy model often try to make selling easier by swerving into one of the other two lanes. It often begins and ends with a salesperson trying to remove barriers, instead of creating enough value to remove the obstacles they perceive as preventing the client from buying their solution. The logic here is that when you cannot help the client recognize the greater value (and justify the greater investment) of your solution, you lower your price. For some, it seems easier to lower your price than to create the value that would convince the client to pay the premium you charge.
You may also face a strong temptation to focus on the value of your product, differentiating it from your competition’s products to win a deal. The better the product, many people think, the more work it should do for you, making it easy to sell. I once interviewed a salesperson for a job who told me he would only work for a company whose marketing created such a demand for their product that every contact would take his call. He also wanted prospects prepared to buy from him immediately. The interview ended inside of three minutes.
Your Strategy Problem is a Development Problem
Most B2B sales organizations have adopted a customer intimacy strategy, even if they are wholly unaware that they made that choice. When they struggle to create and win new opportunities, it is mainly due to the inability to execute their strategy—not the strategy itself.
The development problem plaguing sales organizations is that their sales force hasn’t been taught, trained, coached, and developed to create enough value within the sales conversation to win deals, without trying to find value elsewhere. Recently, someone tweeted me some research showing that clients believe the salesperson counts for twenty-five percent of the total solution. I replied that the salesperson is responsible for one hundred percent of the value created in the sales conversation—the most prominent factor when it comes to the decision to buy.
The most important initiative for a sales organization today is to develop their salespeople so that they can create enough value inside the sales conversation to win new opportunities. If you are an individual salesperson, growth in this area should dominate your personal and professional development.
To execute a customer intimacy strategy, you must provide your clients with insights and higher resolution about their business, their challenges, and the decisions they must make about their future. You have to maintain information disparity, possessing more information and greater experience solving the problems you help your clients with, as well as the situational knowledge necessary to provide them with the required context to make the right decision. More still, you need to be able to differentiate yourself and your offering by creating greater value for the contacts who will decide what to buy—and who would make the best partner.
A development problem may look like a strategy problem. When this is true, you only solve a development problem with development, not by swerving in and out of different competitive strategies. Your focus should be on creating value by providing your clients with the best advice on how to improve their results, something you have to prove within the confines of the sales conversation.
Do Good Work
- What is your company’s strategy choice?
- What skills and competencies do you need to be able to create and win clients?
- Is your strategy problem really a development problem, one that could be solved by improving your competencies?
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Filed under: Sales