Train 'n Gain | Online verkooptraining since 2012

What to do if there is a huge price gap?

The sales challenge of March 2020 was a situation, where a price gap of 40% existed between your offer and the competitor’s offer. The question was: What would you do?
Markymark, a participant from the UK, submitted the winning solution.
This was the case that we needed a solution for:

After the presentation to the decision making unit of your prospect, they had asked you to write a proposal. Based on the information that you got, you know that they wanted a high-quality product/service, so you offered your top line.

Thereafter, it remained silent for some time. You decided to call their technical person, who is your promotor in the organisation, to ask him whether he knows what’s going on. He told you that they are talking to your competitor because there is a huge price gap of 40%. You know that there is no way to bridge that price gap for the offered product.

What would be your strategy and what would you do?

How to approach this situation?

First of all, we need to verify whether we have offered the right solution to this customer and whether the competitor did this as well.

If they are talking to your competitor and there is a huge price gap of 40%, then only one of the following scenarios (or a combination) could be true:

  1. It is not true that there is a price gap of 40%: they are bluffing,
  2. We have offered a product service that is too good (and therefore too expensive) for their application, Competition offered a lower quality solution with a price/performance ratio that better fits their needs,
  3. The competition offers a product/solution of equal quality but with a 40% lower price,
  4. The competition has been able to convince the customer that their cheaper solution is as good as ours, but it isn’t.

To be able to determine the right strategy, we have to find out which of these options is true.

Option 1.

As we have a good relationship with the technical guy, we could assume that it is not likely that they are bluffing. Plus, if they were bluffing and wanted to do business with us, they would have approached us, but they didn’t. So we can reject this hypothesis.

Option 2.

Could be that this is true. In that case, we made a mistake during the initial process of finding their needs and requirements. Or we were pre-occupied by getting a big deal that had no chance of actually become true.
In this scenario, we have to find out what we can leave out of the solution to make it cheaper and still meet the requirements. If we don’t have a solution that has an acceptable price/performance ratio, we should also be able to say “no”. It might be that you are not playing in your own league.

Option 3.

You have yo use your market knowledge to judge this hypothesis. If it is not very likely that your competitor can offer equal quality with 40% lower price, you have to reject this option as well.

Option 4.

Oops… we have not been able to sell the added value of our product or solution. We need to act asap and speak to the right people to straighten up things. The technique of ‘selling the added value’ would be very helpful in a case like this.

We should try to get as much information from our internal ambassador to find out whether option 2 or 4 is the correct hypothesis and then try to get in contact again with the people that make the decision.
But it seems that they have moved on from the stage of consideration into decision making (see also ‘personas’ in the module ‘Acquisition‘ in our training programme) and that means that we have to be realistic about our chances of making them change their mind.

Want to become better at negotiating? Check out our events calendar.

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Train 'n Gain | Online verkooptraining since 2012

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Train 'n Gain | Online verkooptraining since 2012

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