Price Doesn't Matter
By Andrew Shedden
In today’s fast paced sales environment price is becoming increasingly irrelevant. Companies basing their marketing solely on deeply discounted prices are beginning to suffer declining market share. This is good news for you if inefficiencies in your process or cost base differentials have a tendency to put upward pressure on your prices. If, however, your business model is based on heavily discounted price you may want to reconsider your strategy.
Business today
Downsizing, consolidation, and global competition have greatly reduced staffing levels in many businesses. Lean and mean is the operational mantra and most companies are cut to the bone. There is a real need to run these businesses with optimum efficiency often to extensive erosion of profit margins.
Why price matters less
You might think that any company operating on a skeleton staff and tight profit margins would be concerned with beating up their suppliers for better prices. While this may be true in some cases it’s not true in most. Most of our clients in the business to business marketplace tell us that price, while obviously an important factor to clients, isn’t the important factor.
We find the single biggest concern of the average buyer or buying team is the overriding fear of making a bad purchasing decision. When you spend some time to think it through it makes a great deal of sense. Companies that have cut to the bone have no margin for purchasing error. A few reasons are:
They can’t afford to continually retrain suppliers
Companies operating with minimal staff don’t have the time or inclination to train new suppliers. Training suppliers in the correct ways and means of dealing with their specific companies is both a time consuming and very expensive process. It’s far easier to stick with a current supplier.
They can’t afford to bring in an untested new supplier
If the current supplier is doing a good job it’s highly risky for any company to entertain the thought of bringing in a new untested supplier. With no margin for purchasing error in today’s lean companies a new supplier not working out would be catastrophic. It’s far safer to stick with a current supplier.
Many new buying teams have no prior product knowledge
Downsizing has created buying teams within companies. Many of these teams don’t have a great depth of prior product knowledge. In order to do well they need suppliers who offer them the breadth of experience and knowledge they need to perform their jobs. Quite often these teams require good advice even more than a great price. Jobs are far safer when buying teams stick with a current supplier.
If you’re currently a supplier
The most obvious way to maintain your business is to continue to be a good supplier. Offer your clients what they need and what they want. You’ll keep your competitors at bay by working closely at strengthening your current client relationships. Your company must be committed to providing the product or service specific advice clients need to avoid the inevitable challenges along the way. By placing your clients under your protection you’ll keep them happy-and keep them.
If you’d like to become a new supplier
Recognize the fact that companies want to have deeper relationships with their suppliers. They require the reassurance and expertise that results from more meaningful collaboration. You need to first demonstrate that you understand the current realities in your target markets by proving your company is empathetic. You need to clearly establish that your company is seeking a long-term relationship and not a one off sale. Ensure your company is a practitioner of consultative selling and you’ll never have to sell on price again.
