Stop Competing on Price

Marketing

Stop Competing on Price
by Robert Tucker



There’s nothing wrong with competing on price, but if that isn’t your strategy, flirting with price concessions to win short-term business could indicate a dangerous trend. 

How to tell? Are your sales people complaining that they are losing sales to the competition due to price?  Are they asking you to okay price concessions in order to close "just this one sale"?   

And what about your customers?  Do they think of your firm’s products or services as interchangeable commodities? 

If so, you’ve headed down price competition highway.  But you can reverse course with leadership and creativity.  What you need to do is to reestablish and reaffirm your company's market positioning: to your team, your customers and most importantly to yourself.

You don’t need an army of consultants to help. You just need to think about your company's strategy and its offerings in an objective, critical fashion.   

To insure you're competing on value, rather than price, use the following questions as a springboard to action.

1.  What is unique about your business?

If you offer the same products or services your competition does, you have nothing unique.  If you serve customers the same way your competition does, you're not exceptional.  On the other hand, you become unique when you are noticeably more convenient, more responsive, more able to customize some aspects of your product or service.  And what about the knowledge your salespeople bring to the customer? Brainstorm:  "what's unique or exceptional about what we do?"  

2.  What do customers value most about your business?

Companies that guess at what customer’s value often miss.  To determine what your customers value requires fresh unfettered thinking and listening.  Start by making a list of all the services or extras you offer. Rank this list in importance to your customer. Then survey your customers for their list.  Do the two match?  If they don't, consider further developing value added services where they find the most value, and focusing there.

3.  How do you “tangibalize” your value added?

By “tangibalize” I mean how effectively do you communicate the value adding services you provide to your customer?  Miller Office Systems in Ft. Worth, Texas slaps a sticker on every outgoing shipment that reads, “Back orders cost you time and money. Miller Office Systems saved you both with this 100 percent filled order.” Miller successfully “tangibilizes” their offerings every time a customer receives an order. You should too.

4.  Are you willing to walk away from business?

The more often you make concessions or give discounts to price shoppers, the more you signal what your values truly are.   And the more requests you’ll get for discounts in the future. If your prices aren't competitive, that's another story. But assuming they are, a willingness to explain to your customer why you are worth more, and why you are the best overall value, is the most profitable decision in the long run.  You'll be surprised at how many customers will return to do business with you later, once they've experienced the other guy's value proposition.  

5.  What are you willing to do to deliver better value?

Your customer is always asking, “Who’s has better value?” And they’re not asking that about yesterday, they want to know who’s giving them more today! What new value added services have you introduced in the last 12 to 24 months?  These don’t have to be big, it’s often the little things that customers notice.  Encouraged your staff to look for new ways to add unique value.  Continue to brainstorm solutions to the question: "what is it about the way we run this business that drives our customers nuts?" 

To avoid price competition, you need to constantly be thinking of new ways to add value.  Ask of yourself, your team, your suppliers how can we deliver greater end-customer value by what we do together by partnering between the manufacturer, distributor, and dealer/retailer.  

Ask this question and you could very well start a process that could transform your company.  At the very least it will keep you off price competition highway.


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Robert B. Tucker, President of The Innovation Resource in Santa Barbara, California, provides customized keynotes and seminars on the topic of "Managing the Future: Age Waves in the Workforce." Details: 805-682-1012 or info@innovationresource.com.