During a recent training session a client asked the following question:
Question: We are a mid-market firm and we compete against smaller and larger firms and the price is set by the other firms do we give them (the prospect/clients) the price they want?
Answer: Rarely does competing on price make sense.
It may be a frustrating answer however when you compete on price there is a higher likelihood that a client will leave based on price. Maybe there are exceptions to rules such as when you have a highly strategic situation where you move your price for competitive reasons (e.g. it’s a company with potential to be an anchor client in a strategic startup niche for the firm).
Being reactive and basing decisions on what your competition is doing, is also a destructive way to determine your price. The price YOU set (not the one determined by another firm) should be the one that makes the most sense for your firm from a profitability standpoint. The bottom line matters so ask yourself the question, can I make the money I need to cover staff, overhead, and create a good net margin at this price? If the answer is no then doing the work makes little sense.
You should also consider how those other firms are able to do it. Are they buying the work or do they have a much more efficient operation than you and are able to profitably deliver to the client? If they are buying work then it could be that it is a commodity service with little room to add value to the client thus likely it is not what you want to be doing. If you sense they may have a more efficient operation and this is the type of work your firm needs, you must find a better way to deliver.
Whenever you are in a proposal situation, whether you win or lose, find out why they made the decision they did. In a winning situation it is a great time to get feedback about your proposal, your differentiation factors, and how the competition is approaching the market. Make sure your services are being compared against the same services of the other firm. This is where you want to separate yourself from the competition as well, by doing things that set you apart. Specialized knowledge, delivery systems, and unique services specific to an industry are all value added things that many times other firms (even the large regional firms in your market) don’t have. As an example, we work with many well niched firms that devote more resources to their niche industry than the a Big 4 or larger regional firms in their local market.
There are three ways for you to compete: price, speed, and quality. Your firm needs to how you can win the market (or a good share of it) in two of the three. Your strategy can be based on a combination of price-speed, price-quality, or speed-quality. Trying to compete at all three levels (price, speed, quality) at the same time is not normally a winning strategy. Spend time considering your strategy and focus on where you can be different (better) than the rest and you will find your firm winning more proposal than losing them.
At the end of the day you will not win them all. If you are winning 60% or more of proposals sent out you are probably doing better than most. If you are not…research why!
The Rainmaker Companies