Recently, I’ve been coaching a number of clients who work in highly
competitive industries. It’s not uncommon for these clients to have
upwards of 30 direct competitors apiece – and that’s just in the same
town!
One subject that has been coming up a lot lately is what to do when
the competition keeps dropping their prices. If you and your competitor
sell the exact same product, this can be an extremely difficult situation.
Regardless of how many times you remind them that "you get what
you pay for," customers do tend to put the pressure on when they
think they can get the same thing for less with someone else.
To counter this objection effectively, you must first believe that
you are adding extra value for your customers, or providing a better
service or product than your price-dropping competitors. If you aren’t
truly convinced that what you have to offer is better – in other words,
if you can’t justify a higher price to yourself – then you’ll never
be able to justify it to your customers.
Get the bad news out of the way first
If your competitors always lower their prices, often the best thing
you can do is bring it up early in the buying cycle with your prospects.
Yes – I’m suggesting you tell your customers that they can find what
you’re selling cheaper somewhere else. The key is in what you say,
and how you say it.
For example, I usually say something like:
"Ms. X, I want you to know right up front that you
will always be able to find a product similar to ours for less. While
we are always competitive, we are not always the lowest price, and
we are not always the most expensive. Knowing that we are not always
the cheapest, does it make sense for us to move forward?"
The answer you get will determine whether the customer is looking
for value, or just looking for the lowest price.
The choice is yours
With the exception of Wal-Mart, no one wants to look cheap.
As a result, the vast majority of clients will tell you that they’re
not interested in buying just the cheapest product or service.
In these cases, your response is simple: "Thanks for letting
me know that. How will you be making your decision?" This
takes you past discussing price, and onto a discussion of their true
requirements.
But this approach is also highly effective even for those few people
who will look you in the eye and say that if you aren’t the cheapest,
they don’t want to do business with you.
Why?
Because it puts you in control. When someone tells you they only
want to deal with you if you’re the cheapest option, it gives you
a choice. You can stay and play the discount game if there are good
strategic reasons to do so. Or you can choose to walk away, and let
your competitors lose money serving this prospect.
The choice is yours.
Of course, this idea doesn’t work 100% of the time. Nothing does.
Some clients will tell you they don’t want the lowest price, only
to insist on a big discount at the end of the buying process.
If you find yourself in a price competition and you choose to negotiate,
always ask for something in return for your price break. For example,
ask your prospective customer:
"Mr. X, I’m not sure if I can get you that 10% discount.
If I can, is it fair to say that you’re ready to buy now?"Or: "If I can get you that discount, are you able to pay up front?"
This will help balance the relationship and let you both walk away
with something you want. It will also help ensure that your customers
won’t assume they’ll automatically get a price break when they re-order.
Four true stories
If all else fails, here are four more tips for successfully dealing
with price-droppers, all true examples taken from my own experience
or that of my clients:
-
If you know your competitor is dropping
their price and your customer is shopping around, ask them to come
back to you if they get a better price. Don’t promise to match or
better it – just ask them to give you a heads up. That way, you’ll
know what’s going on in the market, and you’ll also get a second
chance. - If your prospect tells you they can
get your product for 50% less from the guy around the corner, be
brave, and respond with: "Wow, that’s a great deal that
I don’t think I can match. What’s stopped you from buying it already?"
The answer you get may just uncover that one last thing you need
to close the sale. - When faced with the cry of "I
can get it cheaper somewhere else," one client of mine
dryly states: "I appreciate you telling me that Mr. Customer.
Life has taught me that there are three variables to consider when
buying a product: service, quality and price. Experience has taught
me that you only get two out of three. Which two are you most interested
in?" - Lastly, for the truly bold at heart – a consultant I know has a
very simple response whenever someone tells her she is too expensive.
She simply looks at them and says: "That’s exactly why you
need me!" Then, she calmly and confidently waits for the
customer to say something next. Gutsy? Yes. She also closes 90% of
the business that reaches this point in the conversation.
In short, there are many ways to deal with a competitive situation
in the marketplace.
First and foremost, make sure you passionately believe in your product,
your company and how you can improve the client’s condition. Without
this passion, all the technique in the world won’t help you close
the deal.
It’s your belief in the value of your product or service above all
else that compels the customer to act in your favor.