The Center for Sales Strategy Blog

Dealing with Price Competition


Price competition is a reality, and it can become pretty intense at times! You can’t avoid it altogether, but you can greatly minimize the haggling over price. The key to dealing with price competition is creating specific value for each of your customers.

If a client you are working with is satisfied with the value you deliver, driven by the solution you create, they are likely to keep buying from you—and they are much less likely to put intense price pressure on you—because they appreciate the value you’ve delivered and they want the relationship to continue.

The key to avoiding price competition is to develop a tailored solution that delivers specific value to your client. This is your best long-term strategy to avoid price competition with established customers. The tough part is trying to avoid price competition when you are dealing with a prospect. You haven’t had a chance to deliver value yet. That’s what we are going to focus on in this post.

Think Like a Consumer

To get started, think about how you behave—not as a salesperson, but as a consumer. Ask yourself: Are there products and services for which I regularly choose to pay a premium, even though lesser-priced alternatives exist?

Maybe you choose Starbucks over Dunkin’ Donuts. Both serve hot, freshly-brewed coffee, but you might be one of those people willing to pay a premium for Starbucks. If you are a Starbucks junkie, you must value something about the experience more than the money you could save by selecting a less expensive alternative.

If you drive anything other than Kia’s lowest-priced model, you probably paid more than necessary for transportation. If you have a slightly nicer—or much nicer—ride, you probably value something about the car you drive more than the money you would have saved by buying that base-model Kia.

Where do you buy your clothes? It’s hard to find a place that sells clothing for less than Wal-Mart. If you don’t buy all your clothes at Wal-Mart, there must be something you value in the clothes you buy, more than the money you would save.

Most people don’t make purchase decisions based on price alone. As a consumer, you recognize that value is measured in various ways beyond just low price… and your buying habits prove it. It works the same way in business. Those who win in sales create a solution that has strong value. They don’t have to resort to deep price cuts to win the business.

There are a lot of ways to create or add value. The strategy is so fundamental to earning a higher price that some companies have built their entire business around it.

How You Can Pursue This Strategy of Creating Value

When you create specific value, you are likely to encounter much less price competition. Specific customer value is based on specific customer needs—indeed, a product attribute or a solution benefit is of no value to a customer unless it helps accelerate a desired business result. You should look for ways to exploit all the natural advantages your company has given you… but you should also look for additional ways to add value with your creative solutions. 

As a customer, you’ve suffered through enough bad service to know that salespeople don’t always add value! Sometimes they subtract value—it’s one of the reasons we use ATMs and go online to make purchases. Sometimes salespeople get in the way and make life more difficult.

But good salespeople make life easier and better for their prospects and clients.

Let's illustrate with a true story about how Milliken successfully competed against cheap goods produced in China with their own US-produced products. Watch the video of the story here.

Creating value does require creativity. It demands asking intelligent questions, truly listening, and crafting solutions that deliver what your competitors don't. But when you go that extra mile, you'll find that you don't have to cut your price.

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Topics: Proposal sales strategy Sales