Defeat Overseas Competitors With Three Simple Steps

Are you at a loss to explain how your company can compete with overseas competitors, ones who are encroaching on your customers and ones that have an inherent cost advantage? More importantly, have you simply given up trying to defend your position as the incumbent supplier? If you’ve answered “yes” to these aforementioned questions, then this is a definite must read. You don’t have to lose business to low-cost competition. Instead, you can help your customer identify their true costs when purchasing from an overseas vendor, one that insists on a large minimum order quantity (MOQ) and one that will increase your customer's inventory holding costs. 

1. Focus on Costs – Not Price

You must give up trying to compete on price. You’ve likely no way to overcome this obstacle, so don’t even bother. You can’t pretend the problem doesn’t exist, and you certainly can’t expect your customer to ignore the lower price coming from your competitor. So, what should you do? First, when a customer focuses on a lower price, what they are really looking for are ways to reduce costs. 

You may not be able to match the competitive bid, but you can definitely save your customer money in ways your competitor can’t. When a customer talks about a lower competitive bid, what they really want is to reduce their expenses – and you can reduce these expenses without reducing your pricing. Therefore, if you can get your customer to switch from a price comparison to a cost comparison, then you have a much better position to win business. When your customer mentions pricing as a concern, your immediate response should be…

“I understand your concern, but when you talk about pricing what you are really concerned about is reducing costs – correct? Good, then let me show you how we can help you reduce your costs in ways our competitor can’t.” 

2. Expose the Competitive Bid

You must define your customer’s costs of buying from that overseas competitor. As is often the case, companies immediately focus on price, while ignoring their inventory costs of ownership. For instance, it’s common for overseas competitors to insist on a minimum order quantity (MOQ), one that forces companies to hold inventory for longer than needed. Holding inventory longer means your customer has to finance inventory longer, which increases the likelihood of inventory damage, obsolescence and theft. It also means your has a large account payable to cover, one that easily impacts their cash flow and leads to an uneven cash position.

Ultimately, your job is to expose the true costs of your competitor’s bid. You must systematically identify your customer’s biggest inventory cost drivers when buying from an overseas competitor. For instance, when they buy from you company, they don’t have to concern themselves with a long lead time. They don’t have to concern themselves with high inventory financing. They don’t have to concern themselves with inventory obsolescence, damage and theft. They buy what they need, when they need - no more, no less than what they have demand for. 

 

The above video is from the post: Sales Negotiation: Defend Price, Customer Scare Tactics & Managing Concessions

3. Explain How Your Offer Reduces Costs

The first step is to get your customer to move away from price and on to how you can reduce their costs. Your second step involves uncovering your competitor’s offer. This third step involves showing how your offer reduces costs in ways your competitor’s offer can’t possibly match. For this to work means you must do a direct comparison of your offer versus your competitor’s offer.

If you’ve successfully exposed your competitor’s offer from the second step, then you should have no problem explaining why your offer helps reduce your customer’s costs. Remember, a customer’s concern about a product’s price is essentially a concern about managing costs. Once your customer moves away from price, you must focus on exposing the true costs of purchasing from an overseas company. Once you’ve done that, you can then systematically show how your offer saves your customer money.

 

The above video and table is taken from the post: Stop Losing Business to Overseas Competitors: Define Your Customer’s True Purchasing Costs 

Don’t make the mistake of trying to compete on pricing when confronted with an overseas bid. Instead, take the time to show how your company can reduce costs by helping your customer reduce their inventory costs of ownership. There is far more to managing inventory than just the price paid for a product or raw material.

Ultimately, financing, obsolescence, damage, pilferage and warehouse space all play a role in a company’s inventory holding costs. Unfortunately, most companies are unaware of these costs or don't take the time to understand their impact. You must show why they are important. If you do, then you’ll level the playing field with those low-cost overseas competitors.