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.
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:
1. 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.
2. 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.
3. 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?”
4. 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.