When Competitive Price Discounting Becomes Your Company’s Biggest Weakness!
A few months ago a long-time client decided to “take a chance” on discovery meetings with their sales team and strategic leaders in other departments. At the time, the marketing and product development departments were using an internal competitive analysis to help shape their road maps. The sales departments also had many competitive intelligence forums and groups that completed debriefs and various methods of data gathering. This intelligence was then turned into competitive battle cards.
That said, I convinced them to let me take a deeper dive with the sales teams on the feedback we were receiving from their buyers. After their first set of interviews were completed, they learned the buyer feedback was completely contradictory to what their internal data was telling them.
Price Discounting Weakened Competitive Advantage
We decided to share our discussions beyond those sales reps and teams responsible for each opportunity. The key decision makers in each department were invited to listen to what we were able to dissect. Our analysis drilled down to what was the real reason for their losses.
At first, they believed the reason was price. Everyone always wants to assume price is why you lose. There are ways to speak to price though and the bottom line, or the total package, is not always the reason for losing an opportunity.
Because my client was losing constantly to a competitor on price, their strategy was to discount the price in order to close the deal. When that didn’t seem to work, they decided to cut deliverables in order to match the competition’s assumed price.
These strategies were not working. In fact, the majority of the loss deals we evaluated, the buyer had a budget that was over the total cost proposed by my client, and the buyers spent more money with the competitor.
So why were they losing on price?
Selling the Value
After only five discovery meetings, two data points became apparent.
1. Internally, their intelligence team was pre-targeting opportunities that would need to be heavily discounted or services cut to win. Sales reps were focusing predominately on bringing the cost down that they did not sell the value of the product. One sales rep even said, “I don’t think I ever demoed [this feature of the software] because I knew the competitor had a better option for them.”
2. The sales teams needed targeted marketing collateral to support the separation in cost and the added value to portions of the application that competitors did not offer. However, we learned in one meeting that the marketing team did have this documentation, but had not rolled it out to the sales teams.
Tip: Have the marketing team send out periodic emails informing the sales teams when new documentation has become available and where to find it.
Revamping Sales and Marketing Objectives
After discovering these two root causes, we have revamped their Win Loss analysis program and objectives. Uncovering the price/value issue is just one of the root causes we were able to identify.
Diagnosing the problem by only listening to one side of the story—even if it is the buyer’s side—you will miss the ability to capture actionable intelligence. It takes a clear picture of the sales team’s knowledge, the key players’ insights as well as the buyer’s perception, to gather root causes and find best practices that will produce action steps and a viable road map.
What was the outcome?
We defined in-depth their actual rate of discounts by completing a formal review of discounts offered in one month’s time. Once we started tracking their discount percentages, our analysis showed the sales teams overall have cut their total discounts offered by over 60 percent.
Since revamping their sales and marketing objectives, this company has seen a 15 percent increase in competitive wins by price position alone without discounting more than 20 percent!
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