Get Out from Under Price Wars
To gain an edge in this slow economy, prospects negotiate for better pricing and terms before making their final selection; they do so even with preferred partners or vendors. Even though many industries moved to strategic sourcing, partnering, and cross-functional purchasing teams, buyers still haggle with suppliers on price. That’s why more advisory firms have fallen into price-driven RFPs (request for proposals). Free yourself from this low price syndrome in several ways:
- Show evidence that the total cost of the plan or life-cycle cost beats your competitor;
- Point out the value of the services the client now receives, especially if superior to competitors;
- Rely on personal interaction, service support, know-how and ability to improve client status, the important differentiators, and you can reach key-advisor status.
Another way to relieve price pressure—improve productivity. For example, one retirement planning company ties one-third of employee bonuses to the timely delivery of employer statements. Some firms use technology to devise novel client solutions such as interactive webinars for client education. With today’s digital tools, you can offer value-driven services that were once unaffordable.
Next, solution selling also alleviates price pressure. Here are three examples.
- Solutions to Enhance Client Revenues, a regional bank designs a product finance program for the client sales force, and increases the company’s revenues by 30 percent.
- Solutions to Decrease Client Risk, a 401(k) advisory firm resolves to take on client fiduciary responsibility, which reduces the client’s risk
- Solutions to Reduce Client Cost, a healthcare provider designs a wellness strategy to reduce client’s healthcare cost by 22 percent.
Because companies seek solutions to increase benefits and reduce costs more aggressively today, when you satisfy the need, it may be enough to overcome the pressure to cut even further. Another example:
A regional accounting firm offers its “Guaranteed Cost Reduction Program” born out of a decades-long tradition of working with clients to reduce costs. When clients insist on lower fees to match competitors, the accounting firm guarantees it will find cost reductions in the client’s operations that meet or exceed the price difference between itself and the competition. In one case, the firm used a strategic partner to analyze its client’s insurance cost, and found 33 percent savings, more than the cost difference between their competitor.
To get out from under RFPs and price wars, sell your value proposition early and focus on solving key prospect issues.