How to Compete Without Discounting Prices
It was a morning of deal reviews. The salesperson was reviewing the deals expected to close by the end of the quarter.
Deal after deal, there were differing issues that had to be addressed for each deal. We developed action plans to address them. But I started noticing a problem: 100% of the deals required a “discount.”
“What’s the problem? Why do we need to discount each of these deals?” I asked. “Do we have a pricing problem? Or is it something else?”
The sales person immediately responded, “Yes, we have a pricing problem; we need to substantially reduce our prices on everything, I can’t compete without lower prices….”
But then we started to look at some of the data and analyzed all the deals that had been won and lost in the past two years. Fewer than 10% of the deals won required a discount (outside of normal volume discounts or quarter end incentive programs).
Lost Deals: Price Often Isn’t the Top Factor
We looked at the lost deals. Those are always a bit of a challenge, it’s so easy to code those deals as “lost” because of pricing. But we did a quick review of a number of the deals, discussing why they had really been lost. While price may have been an issue, it was not the issue in the majority of the deals. There was always something else that impacted the ability to win the deal.
I went back to the salesperson, and said, “I’m confused, why do all your deals need discounts? As I look at the data from your peers, and historic data, you seem to be the only one that has this challenge with every one of your deals. What am I missing?”
I’ll stop here; I’m sure you know how this came out. While the salesperson had all sorts of arguments suggesting discounts were required for all their deals, it was really a selling skills issue. The salesperson could not articulate or differentiate the value. Their sole strategy for winning against competition was to discount–even when the competitor solutions might have been more expensive.
Sadly, there are too many salespeople, and leaders, who sell based solely on price. Their winning strategy is not to articulate the differentiation between alternative solutions. It never includes articulation or defense of a value proposition. It never includes a business justification, showing the business improvement the customer should expect. The financial concept of “Payback,” which is an indicator of time to results, is interpreted by these salespeople as “What do we have to ‘pay back’ to the customer to get the order?”
What Salespeople Owe Customers
Selling on price is not selling. It does not require an understanding of what the customer is trying to achieve. It does not require an understanding of the differentiation between alternatives. It does not require helping the customer navigate their buying process.
Selling on price is not selling. It’s not about shifting opinions, changing minds, influencing the customer. It is not about creating differentiation and demonstrating superiority of a certain approach, product, or solution.
When we sell by price, we are ceding the leadership to our customers or our competition. We are saying, “What they do, only cheaper……”
Of course, there are times when we choose to discount. It should always be considered thoughtfully. It must always be an exception to address a very special, unique issue. It is never a “What we do for every deal.”
Sales people owe their customers better performance. They owe their customers an articulation of the value, differentiating their offering, and defending their value. They owe their customers value co-creation.
Sales people owe their companies better performance. They need to create and defend their value. They need to differentiate based on a superior ability to solve the customer problem, not just a lower price. They need to maintain and defend the pricing in terms meaningful and relevant to the customer.