“I Can Get the Same Thing Cheaper…”

My clients often fear charging more than their competition.  I ask them, “Are you better than your competition?  Can your competition do what you can do?”  Almost always, my clients are aware of many ways they have advantages over competition, but they tell me their customers don’t recognize this competitive advantage or at least aren’t willing to pay a premium for it.  Their customers say, “I can get the same thing cheaper from someone else.”  THIS IS A MYTH.  This is your customer doing the best they can to get what they want (your product or service) for the lowest price they can.  It doesn’t make your customer a jerk.  But you don’t have to do what they ask.

Here is a great example from a recent client, which is a distributor of commercial kitchen equipment and parts with extensive in-stock inventory and a very knowledgeable sales staff.  Customers often cited cheaper online competitors, and counter sales people felt compelled to match internet pricing because it is the “same part” for less.  However, I helped them see that a part in Idaho that will arrive in four days is not the “same part” as one the customer can walk out of the store with today to get their oven up and running immediately.  What is the cost to the restaurant of having that oven down for four days while they wait for that part to ship?  Far greater than the $9.00 difference in the part price.  Counter sales people described customers showing the internet part on their iPhone at a lower price, saying, “Here’s this part for $53.13.  If you match the price, I’ll buy from you.”  We joked that a good strategy is to say, “No, that’s an iPhone with a photograph of a part.  If you put that iPhone in your oven, your oven will still be broken.  And maybe your iPhone will be broken too.”  The reason the customer got in their car and drove to the distributor in town is because they don’t have the ability to wait four days for the part to ship.  If they did, they wouldn’t be standing in front of you in the first place.

Here’s what it means when your customers ask you to lower your price to meet competition:  there is some reason the customer wants to do business with you.  If they wanted to do business with your competitor, you would not even be having the conversation in the first place.  (If the competition were cheaper and better, customers would not be talking to you.)  The customer putting price pressure on you is rational, but it does not mean you have to match pricing.  Recognize that you have some leverage in this situation, and communicate your unique value to ensure you are paid fairly for the excellence you deliver.