We keep meeting many companies and also salespeople. When we ask, what are their biggest challenges, 2 common challenges expressed are pricing and competition.
Most buyers are challenging the salespeople on the pricing part and there is always a competitor who is out there who is willing to undercut the price to win the orders.
How do sales team can handle this?
Firstly the sales team must first understand how do buyers in most B2B industries evaluate products or services
Most businesses where pricing competition exists, the following 3 common ways a buyer arrives at the best possible price to start bargaining,
- By engaging in discussion with multiple parties and collecting price estimates from competitor products.
- The buyer is already using a similar product and has the benchmark pricing details.
- The company allocate a budget and will explore the market to get the product/service that meets their budget.
Knowing how the buyer is arriving at his pricing helps the salesperson to negotiate better and plan your pricing strategy.
When it comes to pricing there are 4 more issues exists with the sales team, which needs to be addressed
- Believing in own price of the product
- Ability to help buyers clearly differentiate from low-cost vendors
- Always communicating the value of your solution before sharing price
- Learning the art of negotiating for the Win-Win
We have put blog regard to this. You can read here
3 rules for managing the competition threat
One of the major challenges comes is buyer says there is a competitor product who are offering a similar solution at less than 50% of the price. Now the buyer challenges the salesperson to match the price and take the order.
Whenever this happens, what we have seen among most salespeople are, they start responding in either of 2 ways which are counterproductive,
- Defending their own price and downplaying competitor threat
- Doubting their own price and giving too much important to competition price
Instead what is required is to start doing thorough research on what the competitor offering is, what are their solution features, benefits and value they offer. Based on the research one might get more understanding that the competitor,
- Really has developed an innovative solution which costs less your solution
- The quality offered by the competitor (aka Chinese products!!) is much lower than what you offer and the buyer is not aware or willing to take risk
- Offering a solution which has a limited feature set whereas your solution has a broader feature set.
Now based on the response one finds, the salesperson must take the right action. It can be
- Giving input to the internal team about developing a better solution,
- Educating the buyer about the quality issues of a competitor product and how your solution is superior, or
- Including only those features which buyer wants and reducing the price
The only thing to be remembered is the B2B market will remain dynamic and competition and pricing challenges will never go away.
The only way to handle these is to continue to learn more about buyers, market, and competition and develop ways to overcome.