Help Your Friends, Not Your Competitors’

I hear it all too often. “A customer just called us for a quote. They have always done business with our competitor. We’re going to give them our best deal, and see if we can take their business.”

Before you do anything, the first thing to ask is why they are calling you. Many reasons won’t indicate that your best price (and lowest margin) are called for.

Perhaps your competitor is out of stock or at capacity, in which case all you’ve done is pass up an opportunity to maximize the value of a one-time sale. If their vendor relationship is strong, they are unlikely to leave merely for price, at least not without asking their currently supplier to match it.

Are they having a disagreement with your competitor? The appropriate response may lie with delivery times, shipping costs or service levels, not price.

Has the customer been cut off for slow or non-payment? In that case, you are merely relieving your competitor of a problem account.

Did the competitor just initiate a price increase because costs are going up? If so, would special pricing lock you into less-than acceptable margins, or can you sustain it over the life of the relationship?

Is the competitor having other problems? Did a top salesperson quit? Has the company changed hands? The call may have nothing to do with you.

Finally, what would your customers, the loyal ones who do business primarily with you, think of this special pricing? Nothing stays secret forever. Are you risking currently profitable business in the chase for more? What will your salespeople think about giving out a better deal than their most dependable accounts get? Are you risking general price erosion?

It’s in the nature of every entrepreneur to chase the new and challenging. The psychological thrill of winning, taking away someone else’s business, is very tempting.

Your business has been built on your friends (loyal customers), not the friends of your competitors. We all know that retaining a good customer is more profitable than hunting for new business.

Ask the prospect why he or she is calling you. The answer may surprise you. If they won’t answer, dig a little deeper before you pull the trigger on discounts.

(Thanks for this one, Harry.)

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