Price War

How To Avoid a Price War

 

During tough economic times, customers go bargain shopping. You have two choices: either get involved in a price war or defend your price using the “PDQ” method.  Here’s how:

• STEP #1: Position. Before even discussing solutions or approaches, get the customer to agree on ALL the specific negative financial impacts of the problem. Work with the customer to define the ways that the problem that your solution addresses impacts their revenue and profit.  Include direct costs, lost opportunity costs, personnel costs, etc., etc.   Do this early in the sales cycle and make sure that the decision maker buys into the cost analysis.
• STEP #2: Differentiate.  After you’ve positioned the financial impact, get the customer to agree that your solution has attributes that no other solution provides. It’s not enough to be vaguely “higher quality.”  You’ll need to express specific quantitative elements of your entire solution that are unique from the competition.  Anything that is unique about your solution is a potential differentiators. BTW, if you don’t have a differentiators, a price war is inevitable.
• STEP #3: Quantify. Once you’re certain that you’ve differentiated your offering, get the customer to quantify the specific financial impact of your differentiators on the finances of the problem. For example, if your products can be at the customer site within one hour, and the low-cost competitors can only get the product there within 24 hours, how much is it costing the customer to do without the product for 23 hours?

This approach avoids getting you involved in a price war because it puts the conversation into the context of financial impact, rather than the cost of your offering.  If your offering has value, it will become immediately clear that your product, and only your product, is going to mitigate the problem.

This PDQ technique is based upon the thinking of sales genius Robert Nadeau.  According to him, if this method is done correctly, much of the time the prospect will preemptively close the deal without the sales pro having to ask.