How Winners Trap Their Competition
Written By: Dave Stein
Published On: February 5 2005
How Winners Trap Their Competition
Featured Author - Dave Stein - February 5, 2005
Originally published - October 8, 2004
You can sell all the business value you want to all the real buyers, but if you aren't protecting your value proposition from competitive attack, your deal, your commission, and maybe even your job will be at risk.
A mousetrap makes a great analogy when it comes to understanding how to protect your deal by setting traps for your competition. (Trap-setting is an advanced selling skill that must be employed with the highest degree of professionalism and integrity.)
I recently ran a workshop for a software client entitled, "How Winners Compete." In the session we covered a number of strategies, counterstrategies, tactics, and countertactics, all of which, when used appropriately, would provide my client's sales teams with new levels of competitiveness.
The first countertactic we discussed was trapping a competitor's behavior or action. I asked the team to describe what must be considered for a mousetrap to get the job done. I got some insightful responses:
- You must have identified certain behavior as unacceptable or damaging.
- You need to know something about your mouse.
- The right bait must be used.
- It must be positioned in a place where you know the mouse is going to go.
- It must be the appropriate size. Too big and the mouse sneaks through. Too small and it has no effect.
- You can get your own fingers mangled in a mousetrap, if you aren't very careful.
- You can't be present for it to work.
- You must use the trap in the way it was designed to be used. For example, it isn't worth the effort to throw the trap at the mouse.
- You need to do a bit of planning: recognize you have a problem, buy the trap, buy the bait, figure out the best place to set the trap, etc.
- You need some patience.
Once we had gone through this list, the team was ready to begin considering how they might trap their competition.
Setting a Trap
In any situation where you need to trap a competitor's actions, behavior, or practices, you'll first have to determine if what you expect them to do is trappable. Using the mousetrap model, consider what they will do, when they will do it, what might be done to catch them, the potential risks for you, the rewards for stopping them in their tracks, the timing, and whom you can count on in the account to help you (if help is required), among other things. This process can be used no matter what you are selling in any industry. As you read through this example, envision how you would set a trap for a competitor in your own situation.
One of my client's sales-reps found out that the competition was severely undercutting my client's price. The competition was deliberately under-analyzing customer requirements, ignoring areas where their software didn't quite fit. Apparently when questioned about their deficiencies by the prospect, the competitor lied. The competitor asserted that my client was too expensive and that there was little measurable difference between the products. I'm certain that you will find at least one competitor employing practices like this in your industry.
On more than one occasion, the competitor would manage to get the deal closed. Later, when the customer realized the gaps, the competitor would come back with a proposal for customization of the software and additional professional consulting services. By then the customer was locked in. The end result was, of course, that the customer wound up paying as much or more than they would have had they chosen my client's offering, with considerably more disruption, aggravation and a contentious relationship with the vendor. The customer's evaluation team members, decision makers, and real buyers were left angry and embarrassed.
In working with my client, we determined that investigative work had to be done. Here is just a sample of what we found:
- By scrutinizing the competitor's financial statements, we found that professional consulting and implementation services as a percentage of total revenue had been increasing during the most recent four quarters. Software license fees (the initial "price" that a buyer would pay for the software) were going down. Although there could be other explanations, it did support the assertion that they were undercharging on product and making up the difference with services.
- We also looked at the competitor's days sales outstanding (DSO), one indication of customer satisfaction. That number was increasing as well, showing that the competitor's customers weren't paying their invoices on time. There could be other explanations, of course, but the pieces were beginning to fit together.
- We identified two companies who, during win/loss reviews, admitted that what they bought from the competitor was not what they had received. They were angry, and although they did not let us use their names, they were willing to provide specific areas where the competitor's products fell short of expectations and expensive customization had to be contracted for.
We decided on the following course of action:
- My client's sales-rep, Marcia, would openly discuss the total cost of ownership (TOC) of her product and the related services and support with the prospect. Because of their experience delivering on time and on budget, Marcia's company was willing to guarantee a fixed price, including any customization of the programs.
- Marcia would prepare a list of references that would acknowledge that their projects came in on time and on budget. She would share this with her ally in the prospect account.
- Marcia would create a very detailed list of gaps between the prospect's requirements and her product's capabilities, along with a fixed price for the work that would have to be done to close those gaps. Any perceived customer risk was mitigated by her proactive approach.
- Marcia would have a frank discussion with the evaluation committee chairperson and the real buyer about how critical it was for integrity to be considered as a buying criterion in a situation such as this. She would talk about the balance between software license fees and services and how a company could potentially win business by selling at the lowest price, only to come back later for more money when the customer no longer had any options. She would dig deeply in total cost of ownership, and what that really meant. And finally, she would state that it was her company's responsibility to analyze gaps between her offering and the prospect's requirements and to provide a fixed-price proposal to close the gaps.
- Marcia would speak with her ally, an influential evaluation team member, about the expense, disruption, and embarrassment to all, including to herself, if they together didn't get this right.
- Marcia would strongly recommend that the prospect require product demonstrations of key components of both systems. She would offer a suggested script derived from the prospect's list of requirements (which of course included some of the competitor's deficiencies highlighted during the win/loss reviews). Marcia also suggested that the vendors use some of the prospect's data for the demonstration. Marcia requested that her team present last.
- Just in case it might not be apparent to the prospect's evaluation team during the competition's presentation that details were being glossed over, and that gaps were not being acknowledged, Marcia's ally would ask several pointed questions (which had been provided by Marcia), which would slam the trap shut, exposing their unethical sales tactics, discrediting them, and potentially eliminating them from further consideration.
The questions we devised for Marcia's ally to pose to the competitor during the demonstration were
- What do you believe the gaps are between our requirements and your solution?
- How do you propose to bridge those gaps?
- What will be our total cost over five years including software, services, support, and customization?
- Are you willing to offer us a fixed-price guarantee?
- Can you explain why your services revenues are increasing while your software license revenues are decreasing?
- Can you explain the increase in your DSO?
- Can you provide us with names of recent customers who are satisfied with your products and services?
I'm sure you're wondering what happened when the plan was executed.
Actually, the competition never made it to the demonstration and those questions never got asked. When the prospect required a scripted demonstration from both vendors, the competitor responded that they didn't have the resources to prepare for one. They refused to budge, perhaps sensing our trap. In effect, they removed themselves from further consideration.
Marcia and her team had done a terrific job. I'm convinced they would have successfully trapped their competition if given the opportunity. No trap is guaranteed to work, but this one was very well constructed.
About the Author
Dave Stein, an internationally recognized expert in selling and marketing enterprise software and services, has twenty-three years of executive management and consulting experience in technology. He provides vendors with insights and strategies around ethically positioning the business value that their offerings provide, especially in fiercely competitive situations.
On the user side, Stein guides buyers through the specific vendor-caused risks associated with the acquisition of enterprise software and services in today's environment of hyper-marketing and hyper-selling. He assists user companies in effectively mitigating those risks.
Dave Stein has sold to and consulted with companies from $10 million (USD) in sales to the Fortune 100 in forty-eight of the fifty states as well as more than twenty countries. He is the author of the Amazon best-selling book, How Winners Sell.
He can be reached at dave@HowWinnersSell.com.
2004 The Stein Advantage, Inc. All Rights Reserved.
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