Posted On: March 16, 2022
What is a price war? It’s when two or more distributors lower their prices on HVAC equipment to gain contractors. Price wars are a common strategy in the business world and the means to strike back are clear—lower the price. This strategy may work once or twice, but what about when you start losing money?
A price war is just one battle, and each time a competitor lowers their price, you’re battling again, and again, and again. Only the distributors with the widest profit margins and best cost structure win in a price war. Competing on price alone might win the battle, but it could cost you the war.
How do you win the war? It starts with your promise to your customers.
Define Your Why
Why would contractors want to do business with you, your company, your brands, your products, and your people? For example, why Allied Air? Because we offer targeted brands and products so that our distributors can offer a complete portfolio of products that earn conviction from contractors.
We do our best to deliver industry-leading quality and inventory replenishment that enhances the ease of doing business with us. This is what we call operational excellence. The last pillar of our ‘why’ is collaborative business building—this means that we partner with our distributors to develop and implement unique growth solutions.
Why is the “why” the first step in winning the war? Without a clearly defined why you can’t begin to deliver on the promise. Once you define this why you must convey your promise to your customers.
A promise can be seen, heard, and felt by your customers. That’s what is called your value proposition. Defining the ways you can deliver value to your customers, who can deliver on this value, and what your customers prefer in the delivery of that value all add up to delivering on your value proposition.
Having a competitive price is part of the equation. Having a consistently competitive price is of greater value to your customers. Consistent pricing means reliability in your price. When distributors constantly change pricing, it implies to customers that you’ve got a lot of room to negotiate. That negates cost-effective operations.
Define Your Value Proposition
In a recent study, only 2.2% of companies have a useful and understood value proposition. You need to distill it into one sentence and use it in different parts of your overall marketing, sales, and customer service strategies.
Your value proposition should focus on the reasons why a contractor should become or stay a customer. This means highlighting benefits, features, and value adds that set you apart from other distributors. An ineffective value proposition can allow your ideal customers to be easily distracted by other distributors and OEMs.
If you want to avoid endless battles for a customer based on price, define the why and execute on a value proposition for your company. Live it, breathe it, and write it into your corporate goals down to your individual contributor goals. To remain out of the price war, do your homework and ask your customers what they truly need and want. Now there’s a war strategy for you.
When you’re deciding how to grow your business, strategizing how to win the war is crucial. Clearly defining your value proposition helps attract loyal customers, build solid relationships, and grow your brand. Contact us to learn more about how to differentiate yourself in the HVAC industry.