What to do When the Competition is Giving it all Away




What to Do When the Competition Is Giving it Away
	Question: I’ve been in business for eight years and have worked very hard to establish the business relationships that I have. Within the last year, my industry has been deluged with companies offering the same products via the Internet for a reduced price. We have been forced to bid against these firms, which has hurt our profit margins. We offer services that the Internet companies don't, that save my customers money in the long-term. However, my customers are questioning why they (the competition) can compete for less. I'm fed up. What can I do? Answer: It sounds like this particular Internet business has not only hurt you, it may not be the best for some of your customers who need service options. However, perception is perception. If your customer perceives that you have not treated them fairly, they will be defensive. Wouldn't you? Don't be blinded by the fact that you are competing against an "internet" company. Competition is competition. The Internet is simply the ordering and delivery system that some customers have opted for. It sounds like these companies have simply out-marketed you, at least for the short term. Why not offer your products on line with a service option? That way, those customers that value service can opt for it. If your customers are merely looking for the lowest price, you need to do one of two things. First, decide if you want the business. With any proposition, you need to consider your HAP and your LAP. A HAP is your highest advanced position, or your ideal outcome. Your LAP is your lowest acceptable position, or your walkaway point. Your LAP is different than your breakeven point. It's the pre-determined point where the business is no longer desirable to you. Make sure you consider variables other than price when determining your LAP, such as convenience in servicing the account, ease or difficulty in providing expected service levels, attitude or ease of working with key decisionmakers, etc. Then, with the customers that you decide to keep, you will need to demonstrate the quantifiable differences between the services that you offer and the competition. The fact that your customer has questioned your pricing is a good sign. If they didn't want to conduct business with you, they simply wouldn't. They're asking you to explain the difference, to justify your price. Sometimes customers don't equate service to quantifiable measures for their business. Make sure that you demonstrate these differences in terms of the value or potential loss for the customer.	For instance, if you sell a product that is used in manufacturing, demonstrate what could happen in terms of lost production if service is ignored. How long would their production line be down if they had to wait for the competition to send in a service technician or if they had to locate one themselves? Or, depending on the type of customer that you are working with, demonstrate the added production they would realize by utilizing your service. In competitive markets more than ever it's critical to actively seek the business that's important to you. If you don't, you'll be faced with the "price" issue more often. Commit yourself to a hit list of potential new business. Then, work the list. Communicate with the accounts on the list as if they're already doing business with you. To develop your hit list, compare your potential business leads to your current client base. Choose those that represent the best win for both of you. And, don't react to every inquiry. Here are Additional Tips for Handling Price Know your customer-How have they purchased in the past? Use this to prepare your price strategy. If it's a new customer that you don't have a history with, is their someone else that can give you this information? Use an established price list-when possible. We have a tendency to accept what is in writing more than verbal. Established price guidelines let the buyer the know that they are being treated fairly. Offer pricing options-This puts the customer in control. Limit the options to three so you don't confuse the customer. Break down the price-Into smaller pricing options where appropriate. For instance if you are selling a piece of equipment that is $50k, perhaps you could break the price into delivery, installation, building a prototype, machining, etc. Quantify the results. Show the customer that using your product or service will reduce costs, avoid costs, or allow them to realize more profit. Don't just tell them this. Work out a formula to calculate the savings. Focus on value. Never talk about price without associating it to a benefit for the customer. Always give sound reasons for why your price is what it is. The customer may not have any idea how you establish pricing. They just want to know that they are being treated fairly. Compare your products/services with more expensive articles. You may ask, “Compared with what?” Never cut your price. Without making it conditional, or making the customer give something in return. If you do, it will diminish the value for the customer.

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