Price Competition Study
Escaping the Price Trap!
The Sales Board’s Price Competition Study was undertaken in an effort to provide hard data to aid in the understanding of a dilemma facing U.S. sales organizations in companies of all sizes and across all industrial categories.
The challenge is price competition. In today’s global economy, salespeople are under pressure like never before to match or beat lower prices from competitors, domestic and foreign. When they do, their sales margins shrink, resulting in lower profits for their companies and lower commission-based earnings for themselves.
To make matters worse, every time salespeople cave into pressure to discount their prices to match a competitor’s offer, they teach their customers to ask for more discounts next time.
This creates a vicious cycle in which price haggling becomes the focus of sales conversations, with value propositions having no place.
As the creator of Action Selling, a proven, research-based system for managing and conducting the sales process, The Sales Board has seen this vicious cycle at work in numerous client organizations.
The purpose of our Price Competition Study was to quantify the problem on a national level and to provide statistically valid data that would shed light on a number of questions vital to the future of companies and salespeople across the industrial spectrum.
Among those questions:
- Is price competition, indeed, a worsening problem for many or most U.S. companies?
- Is it pushing companies and salespeople into a discounting cycle that threatens margins and amounts to a self-defeating race to the bargain basement?
- What factors are contributing to the problem?
- What strategies, if any, appear to be effective at combating the dilemma and allowing salespeople to protect their margins?
That last question is crucial not only to the health of U.S. organizations but also to the very future of the sales profession. Because if the sales process degenerates into a game that involves little more than matching competitors’ lower prices, why should companies continue to employ salespeople?
Across the board, products and services are becoming increasingly commoditized, making them harder to differentiate on a classic features-and-benefits basis. Value-added strategies such as extended warranties and “partnership” programs also are being copied and commoditized. If sales professionals cannot find a way to differentiate their offerings and add value that justifies higher prices in customers’ minds, they are merely additional overhead. They have no business— and no future—on corporate payrolls.