Outmanoeuvre the Competition
A salesperson had a long-term relationship with the head of an in-house printing group and he expected to get the business when the company decided to outsource its printing services. The salesperson was shocked to find out the deal went to a competitor. His contact told him the other company offered a "better value." The sales rep thought he knew the customer, but now he wondered, "What did the other guy know that I didn't?"
The salesperson in this example was sure he knew what the printing manager was looking for—she frequently told him how much she prized his company's quality, reliability and service. What he didn't know, but a competitor did, was that the buying committee included several finance people and a key stakeholder who were very concerned about capital expenditures, rather than all the extra service the rep emphasised in his proposal. In short, he was outmanoeuvred because he didn't understand what the customer truly valued.
Salespeople often believe they know what the customer wants and needs, based on their own company's value proposition and one or two discovery conversations with trusted contacts. Salespeople may be responding to an RFP that spells out the official requirements—information that is shared with all bidders. In fact, this information only tells part of the story and will not really help the salesperson clearly understand how the customer sees value. In the case above, the competitor learned about the capital expenditure issue either from a broader mix of stakeholders or from one contact who was well-informed about the decision makers' real view of value. As a result, the competitor was able to create a solution that responded to the customer's priorities better than the salesperson's solution did. The salesperson was not only outmanoeuvred, he was blindsided by having gathered too little or even misleading information.
The Value Map is one tool salespeople can use to determine the customer's true view of value. Using the Value Map, it is possible to carry out a detailed analysis of the customer's value position and where the customer stands relative to your company and the competition.
There are two components to value: price and performance. Some customers want the highest performance and are willing to pay for it. Others will accept lower levels of performance in order to get a lower price. Between these two extremes is the fair value line, and every customer is somewhere on this line. With the buying process changing—most notably, the increased involvement of multiple stakeholders in a company—you need to be keenly aware there might be multiple perspectives on price and performance inside the client organisation. This means you cannot rely on data collected from only one person; the "customer" here actually means all key stakeholders across the organisation, and the important thing is how the customer defines price and performance. For some, performance means the latest technology, while for others it is a high level of service. Similarly, customers define price differently. Some will be more sensitive to initial price and cash flow issues. Others will focus on the long-term costs of ownership and the total price over time.
With these different views of value, salespeople can be at a competitive disadvantage for two reasons: they don't understand how the customer defines price and performance, and, they don't know where the customer is on the fair value line.
To create a competitive value strategy, ask yourself these questions:
1. How does the customer define performance?
As information is gathered about the customer, it is essential to know the definition of performance from the customer's perspective, not your own. Don't think because your company is known for the latest technology that the customer values that highly. What does the customer think is most important to solving their problem? Is it after-purchase service? Ease of use? Reliability? Don't guess; collect information—evidence—to find out for sure.
2. How does the customer define price?
Like performance, customers will define price differently. Some customers need to keep the outlay of capital to a minimum, so initial lower cost and long-term payments represent a better price. For others, the total cost of ownership is more important and they can accept a large initial payment if that will lower the total cost of the product over its lifetime.
3. Where are the customer, you, and the competitor on the Value Map?
Once you understand the customer's idea of value (price and performance), you can place the customer on the Value Map, and then you and your competitors. Where are you relative to the customer and competitors? Clearly, if you are closer to the customer on the Value Map than any of your competitors, then you have an advantage and should pursue. If you are aligned with the customer on price but to the right on performance, then you are offering superior performance at the price the customer wants.
If, however, you are not aligned with the customer or are not the closest to the customer on the Value Map, you will need to consider a strategy to manoeuvre and compete on the customer's view of value. You will need to have a better-aligned offering than the competition.
4. What is your strategy to compete?
If your position is not where the customer is, you have to evaluate whether the pursuit is in your or the customer's best interest. As you understand the customer's definition of value, you may realise that this is not good business for you, even if you could win. If you choose to pursue, your overall strategy should be designed to bring your offering closer to the customer's position than any of your competitors' offerings. For example, suppose you are at the higher end of the fair value line and your customer is on the lower end. You might consider unbundling your solution, offering an attractive financing deal or providing an option for less-expensive parts or equipment. The re-framed offering would put you in a position of providing value that is in line with the customer's position on the Value Map, allowing you to respond to the customer better than the competition.
Don't be misled into thinking that you are taking these strategies in a vacuum. Every move you make affects the customer and the competition. You constantly need to look for information that either clarifies your understanding of customer-defined value or illuminates how your competitors might be trying to position themselves.
The key is to focus on aligning with both the customer's definition of value and their position on the Value Map. If the Value Map is used to identify the customer's value position and competitors' positions relative to the customer and the salesperson, an effective competitive strategy can be crafted that will offer customers exactly what they want—and outmanoeuvre the competition.