Are You Circling In A Race To The Bottom Of The Drain?
Apple’s latest iphone launch garnered the now customary online explosion of comment. Analyses appear polarised.
In one corner, the Job juggernaut remains stubbornly behind the Android crowd, most notably Samsung, because they did not offer a cheap entry-level model. In the other, the Cupertino crusaders are lauded for not producing a cheaper version, so they don’t cannabilise existing sales nor diminish the value of their main marque.
One opinion I particularly enjoyed reading was from a Californian-based “general partner for Allegis Capital”. Of the two camps mentioned above, he seems from the second.
I was first struck by the wonder of his boiling down of a ‘Henry Blodget equation’;
network effect + commoditisation = failure.
The author does not necessarily subscribe to this. And I can see why. If this had a Sales bent, then wouldn’t it mean that the more commonly the ‘problem’ gets experienced (or by more people), then solutions sought would gravitate towards the cheapest as they all become eerily similar. And we know this not to be true. Not least because the biggest differentiator any vendor has at such a level is pretty much always their ‘people’.
As an aside, I do like these kind of ‘x+y=z’ formulae. An especially fine example being “comedy = tragedy + time”, as many a bar-room discussion of deals gone wrong will exhibit. They also make for great presentation slides, even better when you leave one of the functions blank and engage the audience in trying to guess it. From the Apple case here, an accurate, yet aligned, equation for Sales to consider may perhaps be something more like;
airtime + business dependency = focus.
Where airtime is the amount of energy a particular happening is taking up inside the prospect, and business dependency relates to how much the critical, stated aims of the business are being hampered. So if these two are higher somewhere else in your client over the proposition you’re promoting, then your advances may well be doomed…
Yet it is the veiled appearance of differentiation that interests me here.
I once read an important corporate memo that began with the single sentence, “We do not like to discount”. When the reality was at the end of each sales period, procrastinating prospect would be bombarded with special discounts, somehow only available to them from a supposedly never-before released head office discount pot.
The first reaction of anyone feeling under pressure is so often to drop the price. I use the established phrase ‘race to the bottom’. Whether your peddling breakfasts in a row of cafes or the most crucial of software, undercutting competition alone rarely reaps rewards. The policy just never works. This article introduces me to the concept of,
circling the drain.
I looked this up. It apparently has a synonym in FTD, ‘fixing to die’. The term also seems to herald from medical circles to ‘describe a patient for whom death is impending and yet continues to cling to life’. So, if a patient whose future prospects of life are dim can be described as circling the drain, then this applies equally to products undergoing the big slash of discount.
In solution selling your price is so set for a reason. You win deals because there is something you offer/give that is preferred by prospects over alternatives.
Know what this is. Bring it out. And never be afraid to charge for it.
Don’t let your product get squeezed in any race to the bottom. The last thing you want is your commission and career circling the drain.