There is no way your irrational competitor can quote those prices and be profitable enough to deliver the outcomes they’ve sold. You can’t do it, and the companies that have tried have struggled, or they have disappeared.
The concessions your irrational competitor makes are unintelligible. They make no sense at all, and they are something your company would never agree to. The profit margins don’t exist to allow these concessions. Yet they regularly agree to them.
The explanations your irrational competitor provides to explain how they can be better and cheaper usually amount to nothing more than “We’re just like them, only cheaper.”
There is nothing you can do about your irrational competitor’s strategy, their tactics, or their promises. If the strategy is unsustainable, it will eventually prove itself to be just that. If the tactics reduce their margins and make it difficult for them to execute and produce the promised outcomes their clients expect, at some point, that is what will happen. If their promises turn out to be lies, they will be exposed. Eventually.
You can do nothing about their strategy or tactics. There is even less that you can do about the promises they make to your prospective clients—and your actual clients, as they try to displace you. Even collecting the stories of the clients that have come back to you aren’t always enough to keep you from losing a prospect or having a client defect.
Your irrational competitor is irrational. These behaviors are what make them irrational. It’s how they believe they will win. They will operate this way until the market punishes them. And, over time, the market punishes those who don’t run a profitable business.
Until such a time, your job is to identify the prospective clients who are willing to pay more for the greater value you create. Your strategy is to identify those clients who are let down by the concessions your irrational competitor makes, when their execution fails because they made the concession necessary to buy business. Your strategy must be to create greater value for your prospective and existing clients, focusing on winning those who are unwilling to make concessions, and those who understand the difference between price and cost.
You will lose to irrational clients because there is nothing they won’t do to win. The hedge you make is to build your pipeline, and learn to create greater value, value worth paying more for.
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Source: The Sales Blog