Even if you could supply that part for $1,180, the business isn’t secured by any means. What if your competition comes in at $1,150? You’re out of the running. Additionally, even if you do win the bid, what’s going to stop another competitor from coming in lower than you next year, causing you to lose the contract?
In other words, when you compete in a competitive bake-off and enter the customer’s decision cycle at Step 4, you have no choice but to compete on price. It’s not a sustainable position for any company. It squeezes your margins, and it builds absolutely zero long-term loyalty between you and your customers.
In order to stop competing on price and build relationships that last renewal after renewal, you need to create a competitive advantage for yourself, one that doesn’t hinge on price. The best way to do this is to enter the process earlier, ideally at Step 1 and definitely before Step 4.
When you can enter the buying cycle during Steps 1-3, you have the opportunity to offer your customers a unique point of view on their business and show them a different path toward better results. Often, this happens by helping them:
1. Recognize an unrecognized problem. (Step 1)
2. Recognize a new solution to an existing problem. (Step 2)
3. See an unrecognized opportunity. (Step 1)
Ultimately, in each of these scenarios, you’re bringing tremendous value to your customers by helping them better understand their business. In fact, if you can understand your customers’ business better than they can, they will come back to you again and again for solutions, and they’ll pay a price premium for them.
To understand how this works within the RFP/RFQ environment above, take the real-world example of a composites manufacturer who noticed that its clients were experiencing increased costs, schedule delays and missed delivery dates, which resulted in huge penalties. This particular manufacturer had a unique capacity for design for manufacturability, allowing them to look at a design before it goes into production and determine how to most efficiently manufacture it.