Today’s guest post comes from Anthony Iannarino, President and Chief Sales Officer for SOLUTIONS Staffing, a best-in-class staffing firm, and the Director of B2B Sales Coach & Consultancy. He’s also the author of The Sales Blog
Companies spend time, effort, and money working to different their offerings from their many competitors. The more special their offering, the more value it creates, the greater its chances of being chosen by their clients. This differentiation also improves the margins the company earns by selling its offering and producing results.
Enter the salesperson. The deal in front of them is hot. They are competing against other firms, and they have used their company’s differentiation strategy to pull themselves out of the pack. But when all the numbers are entered into the spreadsheets, their offering isn’t the lowest price. In fact, it’s the highest of the three finalists.
Because the buyer really wants to buy from our not-so-fictional salesperson here, he calls and says that he will sign the contract and give them the business if they can lower their price.
And this is the point at which the decision is made to commoditize the business.
It sounds like the decision is the buyer’s. He doesn’t value the differences in results that are created by paying more to obtain them. But it isn’t the buyer’s decision to commoditize the business; it’s the seller’s.
The Slippery Slope
The slippery slope for salespeople and sales managers is allowing the business to be commoditized and, over time, they allow the margins to be destroyed. In most
cases, the company’s ability to differentiate itself is predicated on having the margins necessary to produce a better result. Without the margins, the company not only loses the ability to differentiate—it often loses the ability to produce results.
Only later, after the lower price has been accepted and the work begins does the lower price start to become problematic. The results promised aren’t produced, and the client isn’t satisfied. Then, based on the evidence, he says: “See? I knew I shouldn’t have paid more. You are all the same.”
This is why we don’t commoditize.
To protect pricing, margins, and your ability to differentiate yourself and your offering, you have to resist becoming a commodity. Instead of accepting the business at the lower price, you have to make the case for the client paying a higher price (in all likelihood, the price they need to pay to get the result they really want).
It sounds something like this: “I understand that our price is higher than our competitors. That’s by design. I didn’t do a good job explaining how your greater investment is going to allow us to provide a far greater result and, ultimately, result in a lower cost. Can we get together and let me try to do better job explaining this and showing you how our price allows us to produce the results you need at a lower cost?”
The salesperson has the power to make a difference for both her client and her company here. She has the ability to resist being commoditized, and she has the ability to translate the price into value, shifting the decision from price to cost. By preventing the commoditization, she can protect the firm’s differentiation strategy and their ability to produce the results they sell.