It never fails: Whenever we find ourselves in a competitive sales situation, we end up competing on price. Our dream clients ask us to “sharpen our pencils,” but what we should be doing is sharpening our value creation.
Let me offer you some additional evidence of my assertion, a new book by authors Michael Raynor and Mumtaz Ahmed, The Three Rules: How Exceptional Companies Think. Here, in abbreviated form, are the three rules, which were drawn from their research of more than 25,000 companies over a 44-year period:
- Better before cheaper. In other words, compete on differentiators other than price.
- Revenue before cost. That is, prioritize increasing revenue over reducing costs.
- There are no other rules. Change what you must in order to follow Rules 1 and 2.
What’s interesting to me about Rule 1 (“better before cheaper”) is that companies that sustain exceptional performance always compete on non-price differentiators. Even during recessionary periods, when they were forced to lower their prices, they still came in higher than their competitors. It was their consistent value that made the difference in their success.
The second rule (“revenue before cost”) is interesting to me for two reasons. First, I continually see companies that try to shrink their way to greatness. They focus on cost cutting to the detriment of revenue growth. I’ve even seen some cut salespeople before non-revenue generating employees. When it comes to generating exceptional performance, evidence points to the fact that greater revenues are more valuable than lower costs — and differentiation is the key to capturing those higher revenues.