How To: Sell Against Lower-Priced Competition

Providing Value Stops You From Competing on Price

Too many salespeople use their competition’s lower prices to justify offering discounts, reducing margin, and for the sake of the sale, giving away most of the company’s profit. 

The question sales leaders should be asking is: Are lower prices really that big of an issue?

You have a strong indicator that sellers aren’t properly creating and interpreting value when prospects consistently ask them to lower their prices.

In the absence of a value interpreter, every negotiation will degenerate into a conversation about price.

Developing the Proper Mindset

Selling against lower-priced competitors begins in the mind, with a salesperson’s thought process before they ever speak with the prospect.

Your sellers will not succeed in sales if…

  • They believe your price is unfair.
  • They don’t believe your product or service is the best.
  • They don’t believe the value of the product or service you sell is worth more than the price you’re charging.

Sales is a function of margin. Top salespeople sell at a higher margin, and in larger volumes.

Sales professionals need to understand the role margin plays in your organization. Do they know which products or services have the highest margin? At what point does offering a discount harm the company, or force it to operate at a loss? While a salesperson doesn’t need to be privy to detailed financial information, they do need to know when a sale only benefits the customer.

Salespeople who sell on price attract prospects who are shopping for the low-price option. Those types of customers will destroy your margin and won’t be loyal. They’ll leave as soon as they find someone who can offer a similar product or service for less.

Value Is a Formula

Sellers have to understand what value is in order to properly communicate it. Fortunately, value is a function of perception:


Value Formula
When a prospect believes the benefits of having your solution exceed the price and emotional cost to buy it, they’ll be more willing to pay a higher price to get it. If they don’t see the price or emotional cost as reasonable, they won’t see the value.

In order to deliver value, a seller must understand how each individual prospect perceives the benefits, price, and emotional cost.

At the beginning of the year, when there’s a lot of budget, the price might not be perceived as expensive compared to later in the fiscal year when the budget starts to thin. Similarly, a buyer with a ten-year relationship with their current vendor faces a greater emotional cost of ending that relationship than a buyer who just entered the role. 

Sellers must always ask themselves what this prospect considers valuable, analyzing how they perceive the benefits, price, and cost.

Out-Selling Lower-Priced Competitors

Now that we’ve discussed the importance of providing and interpreting value, let’s look at six components of a proper sales mindset that will safeguard sellers from competing on price.

1. Accept and Anticipate Price Objections.

If everyone likes your price, it’s too low. Some purchasing departments are required to ask you for a better price. Many buyers assume salespeople will cave if they apply a little bit of pressure, so they’ll always ask for a better price. Why not, you might say yes!

Don’t take it personally. Thinking objectively, buyers and sellers will always be at odds with each other when it comes to price. The buyer wants the lowest price, while the seller wants the highest one (or, more appropriately: the highest margin).

The most successful salespeople align with their buyers by presenting prices in terms of value. The goal is to provide so much value that they can’t afford not to buy!

2. Know the Selling Landscape

Understanding the landscape involves knowing every strength and weakness of your own product or service and also your competitors’ so that you can maneuver intelligently when justifying your price.

Here are some questions to get you thinking: 

  • Are there any hidden costs after a purchase is made?
  • How expensive is it to maintain the product over the long term?
  • Are there any warranty deficiencies that cause problems for customers?
  • Do you or your competitors overpromise and underdeliver?
  • What value propositions are shared with prospects?
  • Does your product or service have any deficiencies that your competition can exploit?
  • What deficiencies do the competing products or services have that you can exploit?

3. Understand Why Margin Is Important

Some companies give sellers the latitude to negotiate prices, while others don’t. If yours does, your sellers need to understand that sales is more about margin than volume.

Understanding margin requires an understanding of your cost of goods, cost to sell, and the lowest point below which it costs your organization money to make a sale.

Bundling products or services is a fantastic way to protect margin. Consider offering a platinum, gold, and silver package, each with different bundled services and options, or include a value-added package with white glove service that you can charge for. You can also offer a “gold level” warranty where you charge for a low-cost benefit or service plan.

Another benefit of bundling is you can remove aspects of the bundle to lower the price. If you always include and charge for the white glove service, for example, you can remove it to lower your price with little consequence.

If you can’t figure out how to bundle your products and services, you risk them becoming commodities.

4. Learn the Power of Differentiation

Buyers like to compare apples to apples. You need to make your product, service, delivery, customer service—or some aspect of your core offering—so vastly different from your competition that buyers can’t justify comparing your solution apples to apples.

Salespeople should be able to differentiate what they offer in such a way that completely eradicates the concept of commoditization. If they can’t, because your product or service is nearly identical to that of the competition, then the salesperson becomes your last hope. 

How do your sellers provide unique, valuable, personalized service differently from everyone else? 

If that question is difficult to answer, consider value-stacking. Teach sellers to present their price after stacking every piece of value, as opposed to saying “The price is $2,500.” Instead, have them say something like:

You’ll be receiving our full five-year warranty, the white-glove delivery and installation package, and free upgrades for the next two years. You’ll also get additional training for up to five people to assist in the implementation process and our exclusive quarterly newsletter that reports industry findings and trends. And you’ll have access to me to assist you through it all. You’ll get all of that for only twenty-five hundred dollars.

That’s how you present value.

5. Never Quote Price to an Unsold Buyer

If a prospect asks, “how much is it” and your sales process doesn’t merit revealing the price yet, here’s what your seller should say: 

We’ve got a full range of prices based on a number of factors, such as customization options, service levels, and warranties. What I’d like to do is make sure this is the right fit for you, prescribe the right components for your solution, and then I will give you the price right down to the penny.

Change the words as you see fit, but keep the strategy. Answering premature price questions is a common pitfall for salespeople.

Another option is to answer the question with a question: what kind of price range do you have in mind?

When a prospect says the price is high after it’s been shared, tell your salespeople to employ silence. They can simply acknowledge the high price and then be quiet to see what the prospect does by saying “I guess our price might be a little high”, and then being quiet.

The prospect will likely do one of three things:

  1. Ask you to lower it.
  2. Ask you to justify it.
  3. Tell you they’re going to buy elsewhere.

The best part is that sellers can respond to all three reactions the same way: by justifying the price through differentiation. Let the prospect know why the price is what it is. Maybe they found a cheaper price, but they probably can’t get everything your company offered at that price. 

This is why understanding the competitive landscape is so important. When sellers can recognize realistic offers for their product or service, they can dig to figure out what the competition isn’t offering.

Once that has been done, the salesperson can either lower their price by removing value from the offer or raise the value while keeping the price the same

Acknowledge the price is high, justify it, then add or subtract deliverables in order to strengthen the value (the customer gets less for a lower price, or gets more value for the same price.)

Similarly, make sure sellers never put a modifier on the price. They don’t have a regular price, a normal price, or a retail price. They have the price, and that’s it. If they tack on a modifier when talking about price, prospects will expect them to say “but your price is…” It’s not good if prospects think a seller is going to change the price for them. The best-case scenario is the prospect will be disappointed. The worst case is they’ll ask your seller for a discount and potentially reduce your margin.

A quick note about RFPs:

RFPs and RFQs are set up, so the lowest bidder typically wins. If your sellers are responding to those, it’s wise to be as proactive as possible and get involved in conversations that design the specs that go into them—so no one else can compete. If your sellers can’t do that, you should do your best to avoid those opportunities at all costs.

6. Be Willing To Walk Away 

A salesperson who can genuinely say, “not all business is good business, and I know I can find opportunities elsewhere” is ahead of the game.

Research indicates the fear of loss is more powerful than the joy of gain. No salesperson wants to lose a sale, but just remember, prospects face equally strong feelings about missing out on what you offer! It is possible to create so much value for a prospect that they’re afraid to lose it.

It is hard to adopt this attitude if a seller doesn’t have enough prospects in their pipeline. The pressure of a looming quota will make them desperate, driving them to try and sell to unqualified prospects—or worse—ask qualified prospects (who would make great customers) to buy before they’re ready.

Selling Against Low-Price Competition Whitepaper

Download our whitepaper to learn how to balance price, quality, service, delivery, and sales effectiveness to win against your lower-priced competitors.

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Written By

Michelle Richardson

Michelle Richardson is the Vice President of Sales Performance Research. In her role, she is responsible for spearheading industry research initiatives, overseeing consulting and diagnostic services, and facilitating ROI measurement processes with partnering organizations. Michelle brings over 25 years of experience in sales and sales effectiveness functions through previously held roles in curriculum design, training implementation, and product development to the Sales Performance Research Center.
Michelle Richardson is the Vice President of Sales Performance Research. In her role, she is responsible for spearheading industry research initiatives, overseeing consulting and diagnostic services, and facilitating ROI measurement processes with partnering organizations. Michelle brings over 25 years of experience in sales and sales effectiveness functions through previously held roles in curriculum design, training implementation, and product development to the Sales Performance Research Center.

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