Customers have three theoretical alternatives to doing a deal with us:
- Go with a competitor
- Do nothing (status quo)
- Do it themselves
It is important we realize each option represents a potentially different selling process. The value proposition and the subsequent negotiation with be impacted, so our preparation is key.
First, we must understand the alternative we are really competing against and analyze that alternative based on what is important to this customer. Those insights are priceless. In turn, these insights must inform our value proposition as well as our selling and negotiation strategies.
Award The Business To A Competitor
This is typically the most familiar and perhaps the easiest alternative to handle. If a competitor is the most likely alternative, we can reasonably assume that a project or initiative has been approved and a budget has been assigned. Additionally, this is the alternative that is most covered by marketing teams so there is plenty of collateral material for both us and the customer.
However, we must guard against over-reliance on features, functions, and benefits to carry the day – for they may not be relevant in this situation. Think of the Porsche salesperson describing the features, top speed, and handling performance of a new 911 GT3 to a bewildered mother of three small children. Everything said was true, but of little value to her because she wants a reliable vehicle to transport her kids to sports, after-school activities, and to take the family on vacation.
Instead, looking through the eyes of the customer (and each buying influencer) we must analyze the competitor by evaluating them against the outcomes, success metrics, and priorities of this customer. Our value proposition should then focus on those relevant and high priority outcomes we can produce above and beyond (incremental to) what the competition can do.
Do Nothing (Status Quo)
Research shows that nearly 60% of a typical B2B sales pipeline is lost due to “no decision” or “do nothing.” This alone should tell us that competing against the status quo is a whole different ballgame (and it should also make us question the qualification process). What makes selling against “do nothing” so different? In short, we are battling status quo bias as well as loss aversion bias.
Keeping things the way they are is convenient as well as low risk. For example, scientists have looked at people’s attitudes toward donating their organs when they die. In countries where you have to opt-in (make a change or take action to participate), only about 15% of people choose to donate their organs. But in countries where donating organs is the default option (no change or action required), more than 90% of people choose to donate.
Researchers have also found that most people believe the potential pain of losing (if they make a change) is much greater than the potential rewards of a successful change (they win). This is loss aversion.
Should we, therefore, avoid selling and negotiating in status quo situations? Absolutely not. These are often lucrative sole source opportunities! But what both of these biases tell us is that first we must demonstrate how we can mitigate, manage, and minimize the risk of any change before we focus on potential customer outcomes and our products and services. In short, we are predominately competing against risk and customers will not be inclined to see our value until that risk is addressed.
Do It Themselves
It should come as no surprise that competing against “do it themselves” can be perhaps the trickiest of the three alternatives. The primary driver here is personal loss (or gain) and political risk. After all, when our solution replaces doing it themselves, it is almost impossible to not “gore someone’s ox.” At some point in the past, someone decided to bring this task in-house. What if that someone is in a powerful position today? What about the people currently doing it? Will our solution put their career aspirations—or even jobs—at risk?
The problem gets even trickier when our solution is being sold to and will be approved by the team currently “doing it themselves.” In this case we must first appeal to what is in it personally and professionally for them (personal value) before they are receptive to considering the potential business value of our solution. We might also have to minimize any potential political risk for those that previously approved doing it in-house before they will see the value of our solution.
In short, the different dynamics of each alternative will frequently require a different approach to the opportunity. To understand the value of our offering (the reason the customer will choose us), we must remember our value is always incremental to the customer’s perception of their alternative. Depending on which alternative we are competing against, we may have to adjust our selling motion as well as negotiation strategy to account for the customer’s perception. If a customer believes their alternative is less risky, better, faster or cheaper, then that is what we are really competing against.