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Discover and quantify the value. Whether or not you suspect that a low-price competitor will be included in the bidding process, you'll need to quantify the value of your offering--in terms of financial return. When you are competing against a competitor who drastically discounts, it's especially important to get close to the prospect and really understand their requirements. Not only will that enable you to better position your solution, but, more importantly, you'll be able to uncover areas of potential additional value for the customer that can be derived from the differentiators that you are selling. If these differentiators are linked to financial impact for the prospect, they are not likely to become expendable nice-to-haves, eliminated from consideration in what might turn out to be a commodity buy. Even if the prospect doesn't want to or can't invest in that added value now, you've expanded their vision past what your competitor has done and have set yourself up for add-on business later.
Educate and Position. Winners who are really good at competitive selling subtly but definitively alter their prospect's perception that buying at the lowest price is the prudent thing to do. You can really only do this effectively when you are selling at the appropriate executive levels.
Talk to the buyer about the challenging business conditions that face all of us, and the natural tendency to buy at the lowest price.
Talk about companies in the prospect's as well as your own industry who have gone out of business as a result of tactical discounting, and the impact that had on those companies' customers. (You need to do some homework here.)
Implore the prospect to ask questions of the other contenders that will expose weaknesses that result from tactical discounting. (See "Educate Yourself," above.)
Educate the prospect on the differences between price, cost and business value and the impact on of those factors on their business. Understand the prospect's own business model, their culture and how they sell to their customers so you can link your approach to theirs. (If they sell a commodity themselves, at the lowest price, you may have a serious challenge.)
Immunize the prospect in advance against what will likely be a lowball bid by your competitor. Explain how, when, and why it will happen. Prepare the prospect for what you know will come... Don't just sit there and wait.
Convincingly reduce what will likely be price differentials into meaningful, real terms. "Since there is typically a five-year life associated with my solution, and it will, admittedly require potentially a $240k additional investment, I figure that comes to 4k per month, which, you have to agree is less than a rounding error (or full-time employee) in terms of the business value we've been talking about."
Get creative. If you haven't tried risk-sharing, phased implementations/installations or other creative approaches that will enable you to win the business without discounting, you need to do some brainstorming with your team. Very often a cash strapped competitor who has been discounting to win business falls flat on their face when asked to match such creative selling.
Few of us can afford to sit back and wait for the competition to slash their price and walk away with the business. Understand your customer, your competitor, and your value. Then sell.
-- By Dave Stein
Before he founded his consultancy, The Stein Advantage, Inc., in 1997, Dave Stein was employed by several leading-edge high-tech companies in a diversity of roles.
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