Competing with Wal-Mart, Part II: Selling Value Instead of Price

By Allan Pulga

The biggest challenge for wireless retailers facing mass-merchandisers like Wal-Mart is competing on the basis of price. Cellphones are commoditized like never before and besides sitting on department store shelves, they are even sold in – you guessed it – vending machines.

Two weeks ago, Motorola unveiled the first cellphone vending machines in the U.S. Installed in nearly two dozen malls and airports nationwide, these contraptions ushered in a new era of low-price convenience for the weary cellphone shopper: self-service.

The emergence of little boxes (vending machines) and big boxes (Wal-Marts) in their territory should provoke the independent wireless retailers to do some serious soul searching. As the middle-man continues to be eliminated from the cellular retail equation, cellular dealers need to ask themselves: How can I compete with cheaper, no-frills distributors?

*Mark Landiak, president of Corporate Dynamics, Inc. – an Illinois-based sales and customer service consulting firm – says the battle can be won by selling value over price. “While you can’t sell every customer and prospect at list price, still, a large percentage of your clientele is open to a well-defined value proposition,” he says.

Landiak suggests the following steps for developing an effective value proposition for your staff and customers:

Your sales team must believe that they (as a team) and what they offer (service and product) are worth more than the “other guys.” Together, you need to ask yourselves:

• Why should a customer pay us more than the other guy who offers a similar (or the same) product?
• How do we convey this to the customer?

You should be able to list several reasons why customers should pay you more for your services than for those of your competitors. Next, you need to make this “added value” tangible to your customers.

However, if the entire company – from the owner down – isn’t on-board, your value proposition is doomed, Landiak warns. “If your sales team doesn’t believe that you’re worth more than the competition, then you’re not. Game over. Play the discount game and good luck.”

To build a quantifiable value proposition for your customers, you must understand that “value” comes from what surrounds the product and not the product itself. The cellphone vending machine offers no such value, only the inanimate product.

Shift the focus onto the “customer-salesperson relationship,” with value elements such as:

• Personnel expertise at uncovering and solving problems
• The resources and special services on both the sales and service sides of your company
• The ability to demonstrate how products, expertise and company resources can help customers save money

“As an industry, the cellular business has transformed itself from being problem solvers to being ‘promo-pushers,’” says Landiak. “Hiring people from this business almost guarantees lower margins.”

Instead, he suggests hiring reps that are problem solvers – people who understand Step #2: how to define and sell value beyond the product.

Existing reps must become better at revealing what customers are paying extra for. “This takes training and regular role-play exercises,” he adds. “Look at the deals you sell for the largest margins and dissect the reasons why customers purchased from you versus going to a cheaper alternative.”

Landiak urges salespeople to avoid assuming all customers are price-focused. Doing so could lead to proposing a different product that is “just as good for a lot less money.” Many customers stick to brands they know and trust, so don’t lose a deal by downselling an established value brand.

“Coke, Nike, Lexus, Nordstrom, Mercedes, Rolex, Mont Blanc are just a few established brands that people pay extra for everyday,” he says. “All too often, we assume the customer won’t pay extra for what we have to offer. If it is important to the customer, he or she will pay for it.”

• Not everyone is value-focused. “Qualifying the type of buyer is very important,” says Landiak. Asking whether a customer is focused on low price or “looking for the best overall value over the life of the relationship” is critical, he adds.

“If they say, ‘low price,’ then you know where you stand and can act accordingly. If ‘best overall value’ is what they want, then spend some time defining this, making suggestions about how other customers have used your expertise and resources, and redefine the customer’s buying criteria.”

It’s not easy and it takes skill, so you better be ready to practice, he says.

• Creating a value proposition = Your most profitable sales decision

“Our research shows that two thirds of companies are open to a value proposition if presented in the context of sharing ideas and resources that can increase revenues or reduce costs,” says Landiak.

“Not every customer is price-focused all the time, but in the absence of a way to differentiate between company X and company Z, prospects will most often go with the low price.”

Create a value proposition for your customers and train your team to package and present it along with the product. Before long, the results will become visible: in the form of a fattened bottom line.