There is a big difference between selling your cost versus selling your value.
Companies that sell on cost comparison end up losing in the end. It’s very difficult to build a profitable and sustainable company when your primary strategy is to undercut the competition–because what ends up happening is you nickel and dime yourself to such a small margin.
You want to build a brand. Not a cheap commodity.
This is a challenge for every business owner, but one I know all too well. With my most recent company, LendingOne, we offer loans to real estate investors. Now, in all honesty, there are a dozen other competitors in our space that offer the same thing. Same kind of loan, same interest rate. So, we can’t win on straight price comparison because then we’re the same as everyone else.
I’ll tell you where we do win, though: Customer service.
While other companies may offer the same exact loan, we get back to our customers in minutes–whereas our competitors take hours, or even days. We take the time to build a relationship with each and every customer. We get them on price, but we keep them on service.
Simply put, “value” means all the things that can’t be quantified in the price tag.
Which means, when a customer is comparing your own company to one of your competitors, you need to be aware that there are only four reasons people truly buy a product or service.
I asked Lewis Fogel, an authorized licensee in Delray Beach, Florida, of Sandler Training, a sales development training program, to weigh in here, since he is an expert in overcoming price objections. According to Fogel, here are the four reasons someone “buys” in the first place.
- Pain in the present: They’re experiencing a problem and need it fixed immediately.
- Pain in the future: They’re anticipating a problem and want to start planning for it now.
- Pleasure in the present: They’re looking for something to fulfill an immediate need or desire.
- Pleasure in the future: They want to invest now to reap the rewards later.
“There are only a few ways you can really differentiate yourself from your competitors,” said Fogel. “First, you want to start by not sounding like your competitors. Using the exact same terminology and examples makes you sound like everyone else. Second, you need to be inquisitive. You have to ask better questions, and make them feel like you are more knowledgeable than the rest. And third, you have to listen close and understand what it is they’re truly asking for, instead of just responding with blanket statements.”
Fogel went on to explain what to do when a potential client or customer asks the hardest question of all: “I can get your product or service from somewhere else. Why should I work with you?”
As Fogel put it, it’s best to start with “disarming honesty.”
Say something along the lines of, “That’s a great question. But depending on what you’re looking for from a new provider, and depending on your relationship with competitor X, maybe it makes sense that you do nothing and stay with that competitor. Can I make a suggestion? Let me ask you a few very straight forward tough questions about what you are looking for in a supplier, what challenges you’ve had over the years, and then we can figure out together whether I truly add value. And if we decide together there’s a good fit, then you and I could spend the last five minutes figuring out where we might get started on a business relationship. Does that sound okay?”
Finally, if you notice your competitors are slashing prices, you need to know when to say “no” just as often as you say “yes.”
It’s not about racing to the bottom along with everyone else. It’s about knowing your value, understanding what you’re really selling, and being able to effectively communicate that value in a way that puts your cost into perspective.