As competition heats up, companies and sales reps end up in a place that nobody wants to be, fighting a battle nobody can win:
The price war.
With increasing competition and marketplace efficiency in sales today, more products are becoming commodities – difficult to distinguish from competitors, leading to pricing competition. When that happens, and sales reps become more desperate to close deals, companies sacrifice their differentiation and unnecessarily slice margins. This not only marginalizes themselves in the marketplace, but also doesn’t do the customer justice. There’s no reason both sides can’t get full value out of this transaction.
You can’t win a price war, so the best thing to do is to avoid one altogether. Here are 4 tips on how to avoid this price war of mutual destruction.
Understand the differences between Differentiating Value (DV) and Unique Selling Propositions or ROI
When your differentiating value is well communicated to the prospect, there will be a sharp distinction between you and your competitor, or the status quo. They no longer have to justify this purchase based on price; they can gain value that is markedly different from anything else on the marketplace. The key step here is to really understand what differentiating value (DV) means, and how it is different from its closely related cousins, Unique Selling Propositions (USP) or Returns on Investment (ROI):
The DV is typically developed at the highest level of the company, from founders or executive leaders who understand how to incorporate their vision for the product or company and translate that value into real dollars. One good way of thinking about or communicating DV to your prospects is to talk about the economic consequence of maintaining the status quo, i.e. not using our product and continuing on their merry way.
The USP is typically messaging developed by marketing or the sales team as something for reps to parrot back to their prospects. Unfortunately, these are usually fluffy and intangible, with very little substance to the claim. Calling your product “best-in-class” or “the #1 for…” is often not backed up, and doesn’t mean a thing.
The ROI is, in theory, a convincing argument for why the prospect should buy your product, backed up by real numbers and sales metrics. Unfortunately, these numbers are typically calculated from the perspective of the seller, with their interpretation of costs and savings. Prospects will only believe an ROI function that they have calculated themselves, with their own knowledge of the nuances of their company and sales processes.
Avoid talking about the USP or ROI, especially early in a conversation with prospects. Instead, communicate your DV by asking your prospect, “What is the cost of not doing business with my company, and can you afford that cost?”
Figure out your Differentiating Value
There’s a simple process for identifying your differentiating value:
List all the things that you do better than your competitors. This doesn’t necessarily have to be product features, but make sure they are objective advantages that can be definitively proven, via facts or popular opinion from a varied group with the right sample size.
Translate the quantifiable consequences of what happens when prospects don’t use your product. This can also be construed as figuring our pain points, with your product positioned as the salve to those pains.
Write down a list of questions that your sales reps can ask prospects to probe for those consequences and pains. Once those have been identified, it’s a short leap to talking about differentiating value, all those things you do better that can solve those pains immediately.
Find the Right Buyer
There are typically two types of buyers in any company or transaction:
The logical buyer is the purchasing agent, one who is in charge of the company’s finances and whose primary job responsibility is usually to cut costs and save the company money. This type of buyer loves fighting price wars, and has a pretty sterling record in winning them too.
The emotional buyer is the person who will benefit the most on a day-to-day basis from buying your product. This prospect is measured on performance metrics that include the cost of not having your DV. They make purchasing decisions based on a variety of factors, not just price or unit economics.
You want to identify the emotional buyer, and then communicate your DV to them. For example, one of our core DV’s here at InsightSquared is our immense time-to-value; you’ll derive tremendous value from day 1 of purchasing and using our product, in contrast to some of our slower competitors. The logical buyer of our product might be a CEO or a Sales VP who understands that our product can make their company more successful. The emotional buyer of our product is more like a Sales Operations Manager or a Salesforce admin, one who suffers the daily pain of not using our product and who will desperately crave the time-to-value offered by our product to make their lives easier immediately. Our reps will have much more success selling to that prospect.
In order to find the right buyer, you have to ask the right questions. Instead of saying, “Who makes the buying decisions?” and getting transferred to that very logical purchasing agent, you should ask, “How are buying decisions made in your organization?” Try and probe to see which departments are affected by using – or not using – your product.
With the continued shortening of the sales process and the smarter buyer today – 57% of the buying decision is completed before there is any interaction with a sales rep – it is critical to avoid wasting time and to get to the right, logical buyer immediately.
Give your Buyers a Satisfactory Buying Process
As the buying process has changed, as we mentioned above, sales reps are becoming somewhat of a DV themselves. Since buyers can do so much of their own research and answer their own questions before they even start running the race, it’s on sales reps to do the extra things and cultivate a strong connection that can carry the prospect across the finish line.
According to the RAIN Group, what kind of experience the buyer has during the buying process can carry just as much weight in terms of ongoing loyalty as satisfaction with the product or service. With that in mind, coach your reps on how to deliver a better buying experience at every stage of the process.
When there is sufficient and different value communicated and received, price will hardly ever be an issue. This is not to say that you should never negotiate discounts, in the name of goodwill, but in general, price wars leave many victims and should best be avoided. Find your Differentiating Value to ensure you never get stuck in a proxy price war again.