CHAPTER 1

VALUE VERSUS PRICE

The Real Reason You Lose to Competition

You purchased this book because you are trying to figure out why you're losingsales to the competition. This book will provide the answers that you seek.However, to get the return on investment (ROI) that you expect from yourpurchase, you and I need to establish agreement on one key point beforeproceeding: You are not losing sales to your competitors because their price islower than yours.

That assumption, while virtually universal in the arena of business-to-business(B2B) sales, is fundamentally flawed. It is a lame excuse that you can give toyour boss if you wish, but it has no place here. In fact, if you believe thatpricing plays a role in whether or not you win competitive sales, you shouldplace this book back where you found it and get your money back immediately, foryou are misdiagnosing the source of the problem. Until you accept this simplepoint about pricing for what it is, this book will not help you.

Still reading? Then keep an open mind, and I'll prove my point in the followingscenario.

Let's Role-Play

In this exercise I will be your potential customer, and you will play the roleof the salesperson. Here is the scenario: I am currently in the market for whatyou provide, and I have called you in to discuss my wants and needs. You are nowat my office. Incidentally, I also have made an identical call to one of yourcompetitors, with whom I will be meeting at a later time. I have not shared thisinformation with you.

You and I now have our initial sit-down to discuss my needs and yourcapabilities. We have a positive initial meeting, and you handle the discussionwell. You ask a number of questions about my business, and I provide you withanswers to your questions. You then give me an overview of your company'scapabilities, and as a result of this overview, I am interested in what you canoffer. We conclude our meeting by agreeing that you will return to your officeand prepare a proposal for me and schedule a second meeting to review yourformal recommendations at a later time.

Fast-forward to the next day: I am now meeting with your competitor. My meetingwith her is very similar to the one that I had with you; she asks a lot of thesame questions that you did, and she, too, provides me with an overview of hercompany's capabilities. As was the case with you, I am interested in a proposalfrom her. We conclude by agreeing that she will prepare a proposal for me, and Ischedule her second visit to do this, just as I did with you.

Following these initial meetings, both of you submit your proposals to me. Bothproposals are well designed, but both, as expected, are similar in their contentand recommendations. After all, the question-and-answer portions of each meetingwere very similar. You both asked similar questions, and to each of you I gavesimilar answers.

There is one notable difference, however, in the two proposals. Yourrecommendations are similar, yes, but—surprise!—your competitor'sprice is lower than yours.

Finally, my decision: After weighing both proposals and your respectiverecommendations, I elect, in this case, to buy from your lower-cost competitor.

In other words, you lost on price, right?

If you are like the vast majority of the salespeople with whom I have workedover the years, you would agree. To which I would reply that you don'tunderstand the nature of the problem you face, nor do you have an accurate graspof why you lost the business. The difference in pricing had absolutely nothingwhatsoever to do with why you lost this sale, and until you understand andaccept this point, you will never win consistently against your competition.

Why Did You Really Lose the Sale?

So it wasn't the money. What, then, cost you the opportunity?

Let's first address the issue of when it really is the money.

If I do not have adequate funds to buy from you—in other words, if Isimply don't have the financial means to pay your fee, either out of pocket orthrough financing—then yes, that is a price problem. Of course, as I amsure you realize, such a situation is almost never the case.

However, if your buyer has the financial means to buy from you—and, let'sface it, they almost always have that ability—this eliminates price as areason for choosing your competitor. Put another way, if I have the money to buyfrom you but choose not to do so, then money is not the issue that is driving mybuying decision.

So why did you lose this opportunity? You lost it because, after weighing bothoptions, I did not see enough difference in value between your recommendationand your competitor's to warrant spending the additional money. This has nothingto do with your pricing. It has everything to do with your failure todifferentiate your value proposition.

This is a problem, yes—but it is a correctable skill problem, and you cando something about it!

When selling against competition, your success depends entirely on your abilityto persuasively demonstrate that what you have, in terms of value, isclearly superior to the other options being considered. Differentiating yourrecommendations from those of your competitors will result in consistent wins;failure to accomplish this results in what we just witnessed—an "apples-to-apples" competition in which all options being considered appear to offer thesame thing. Absent a difference in value, pricing becomes a default position; itis the only point of reference available for separating one option from another.This is how the lowest-priced vendor becomes the most attractive one—notmerely because the price was so attractive. Let's set aside your desire to wincompetitive sales for a moment and look at this situation from whatmatters—the buyer's perspective. We have an obligation to the potentialcustomer to help him or her make a well-informed business decision. When adecision is made based on price, the decision is not a well-informed one, and weas sales...