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Want to Eliminate a Price War? Eliminate Your Competition.

Posted on  16 March 10  by 

Comment (1)

354401232_507d5d38ffLast week, Boeing scored a major coup when Northrop Grumman withdrew from a contest to provide the U.S. Air Force with a new fleet of tankers after the Pentagon refused to revise elaborate rules that appeared to favor Boeing’s smaller, 767-based tanker over the larger Airbus A330 that Northrop planned to bid.

Turns out that Boeing managed to get the US Air Force to rewrite the bid to take into account the life-time expenses of operating the aircraft, as well as the cost to retrofit Air Force runways and hangars to accommodate the new tankers, potentially penalizing Northrop since the larger A330 would burn more fuel and wouldn’t fit into current parking spaces.

Although most of us aren’t bidding on decade-long, $35 Billion tanker orders, we’re likely facing many of the same challenges as Boeing and Northrop: customers with a limited view of their needs, multiple decision makers and influencers, buyers who try to commoditize our offer, and internal politics. 

All of those challenges emerged when we recently surveyed over 5,000 of our members’ customers to try and understand what actually leads them to reward suppliers with business.  These customers, with roles ranging from influencers to decision makers to end users, all told us they reward suppliers with business when you can accomplish what Boeing did:

  • Provide insights into needs they may not know they have
  • Help them navigate alternatives
  • Help them avoid potential landmines and problems
  • Build broad consensus for your solution across the customer’s organization 

Boeing was able to introduce previously unforeseen needs and unanticipated problems into the bid.  And wouldn’t you know – Boeing’s solution is the only solution that can meet those needs and reduce those expenses. 

And therein lies the secret to Boeing’s success – they enabled their reps to reframe the customer’s perception of their value, effectively removing the competition from the customer’s buying decision.

SEC members, we’ve found members who have mastered this type of commercial teaching and reframing approach. 

It starts by getting a crystal clear understanding of the UNIQUE differentiators that your offering brings to your customers’ business relative to those of your competitors.

Comments from the Network (1)

  1. Mike
    on March 26, 2010
    Respond

    It’s a bit of a mischaracterization to say that the Air Force rewrote the RFP to favor the smaller 767. It’s actually poetic justice if you look at the larger story.
    The prior RFP asked for a given fuel carrying capacity and gave no points for extra capacity. Boeing bid the appropriately sized 767, yet Airbus bid the larger A330, which at the time didnt seem to make sense (aside from the fact that they sell the A330 based tanker in international markets). Then, just before awarding the contract, the Air Force changed the rules so that you DO get extra points for extra capacity. This is, of course, the reason for the successful protest by Boeing.
    The newest RFP simply reverts to effectively the original requirements of X amount of fuel, with no bonus points for extra. The fact that Northrop/Airbus are now complaining about it is quite ironic given how they played the prior round (intentionally bidding the larger plane).

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