Q: When does 1% equal 9%?
A: According to McKinsey and Co., a 1% change in discounting has a 9% impact on your operating margins, indicating that a seemingly small capitulation on pricing can have a much larger, negative impact on your company’s bottom line. But that’s a sales problem, right? Well, not entirely.
In a recent survey conducted by Corporate Visions, 89% of nearly 400 companies “agreed” or “strongly agreed” that pricing pressure has increased in the last three years. The environment for selling your solutions is hostile and getting worse, despite the easing of the recession.
Additionally, the tension your salespeople feel from savvy buyers, aggressive competitors, and deadline-driven sales managers makes it hard to hold the line and avoid unwanted discounting. So, what does that have to do with marketing, you ask?
Lack of Differentiation Leads to Discounting
The No. 1 reason why companies find themselves in such tough price negotiations is that your customers aren’t convinced your solutions are sufficiently different from the competition. In the same Corporate Visions survey, 68% of respondents “agreed” or “strongly agreed” their inability to create clear competitive differentiation was the main reason for unwanted discounting.
The brain science behind decision-making tells us that “contrast” is necessary for making a decision. In the absence of clear contrast between the vendors and their solutions, the brain defaults to price to create the contrast. That’s why price pressures aren’t a budget problem; they are a contrast problem.
It also explains why, in a separate survey, several hundred salespeople said they believe the most important job of marketing when driving revenue is product positioning. It’s not branding, not demand generation, not sales tools. It’s better product positioning, which is what your salespeople believe will help them the most in creating more business.
Your Story Must Live in the Unconsidered Needs
Here’s one quick idea to consider when developing your positioning and seeking differentiation: Stop relying on known customer needs, problems, or concerns.
If your messaging is like that of most companies, you’re typically addressing buyers’ identified needs and matching them with your capabilities. The problem is, when you position and sell solutions to these known needs, you are responding to the same situation as your competitors.
Think about it. If your prospects know precisely what their problems are, they can often find the information they need to make a decision—with limited assistance or input from your salespeople. And they can typically find multiple vendors with the specified products to meet their identified needs, putting you at parity with all the others.
As a result, your ability to get your prospects to do something different, choose you, and pay a premium hinges less on solving known problems and more on helping your prospect see unknown problems, or “unconsidered needs” where you can provide a unique answer and deliver unique value.
In his book, To Sell is Human, author Dan Pink states, “Your products and services are far more valuable when your prospect is mistaken, confused, or completely clueless about their true problem.”
To get out of the commodity trap, you need to create messaging that helps others see their situations in fresh, more revealing ways. You need to identify problems they don’t even realize they have, according to Pink. “Problem finding,” as Pink calls it, becomes the necessary quality in your marketing and sales messaging if you stand any chance of differentiating yourself.
“What unconsidered needs exist beyond the obvious identified needs everyone is talking about? Dig hard to find the unknown, under-valued, unmet challenges that your prospects and customers are not thinking about. Then determine where your solution’s strengths align with specific unconsidered needs to create what I call, “unconsidered value opportunities.”
It’s at this intersection between unconsidered needs and strengths that you can create distinct value for the prospect in a way that you are uniquely qualified to deliver.
As a marketer, selling to unconsidered needs will improve your ability to create contrast, prove differentiation, and relieve the pricing pressure your salespeople are facing.