Unless you are divinely blessed, you've probably been involved in competitive bids. Some you've won-and some you've lost. And when you've lost, you've probably heard, "Sorry, nice work, but your price was just too high."
If you believe that, you're a sucker. Because it's almost always a lie. Here's why.
Proof You've Been Lied To.
Here is an exercise I've done in a hundred seminars. It almost never fails. I ask people, "Think of your most recent competitive loss; raise your hand if your customer told you that you lost on price." Somewhere between 20% and 50% of the hands typically go up.
Then I say, "Now think of your most recent competitive win; raise your hand if the customer said you won because you were the low bidder." Half the time, no one raises their hand. The other half, one or two hands go up.
So--20-50% of the time you lose on price; and yet you almost never win on price. What's wrong with this picture?
In one of those two situations, the client is lying to you. Which one do you think it is?
Why Would a Customer Lie?
Sometimes people lie to cheat, trick or hustle you. But more commonly, in my experience, people lie to get out of uncomfortable situations. That's what's going on here.
Imagine that the customer has entertained several bids. The easiest way to narrow down the bids internally is to look at overall quality, qualifications. If one offer is clearly inferior, or lacking in qualifications, then it's usually out the door-even if it is priced very low.
The bids that make the 'final' round are all seen as strong. Some may be strong in quality, some in capabilities, some in track records. How's a customer to make the decision?
Interestingly, those final decisions are rarely made on price. They are made on things like reputation, character, chemistry, trust and confidence.
Now, assume you're a customer, and you have to tell a competent bidder who came in second or third that they've lost. Do you tell them they lost because they have an inferior reputation or character? Do you tell them they didn't get selected because you didn't have chemistry? Or you didn't have confidence in them? Do you say they lost because you didn't trust them?
Very few customers will have that honest a discussion with a bidder they have turned down, and may not speak to again soon, if ever. It is a that makes them uncomfortable to begin with.
In addition, buyers have to justify their decisions up the line. How many of them, if asked by higher-ups to explain, will say, "We went with Seller X because, well, we had good chemistry with them and I trust them." That's not an easy internal sell in the quantitative land of business these days.
Fortunately for buyers, there is a far easier solution close at hand.
Why Price is the Perfect Lie.
Price is the perfect solution to the buyer's problem.
First, it's quantitative. It's a metric, it's the denominator in return-on-investment calculations. Who can argue with measurements?
Second, the buyer holds all the cards. None of the sellers (presumably) know what the others' bids were. And-they don't want to know. Because the only thing worse than knowing your price was too high is knowing the real reason you lost: reputation, character, chemistry, trust and confidence.
If a man asks a woman out on a date for Friday night, and she doesn't want to go, the most gracious way for her to decline is to say, "So sorry, I'm busy Friday." Often the man will read between the lines, particularly if this happens twice. After all, it allows him to save face too. But if he persists-eventually the truth will come out.
And that's how it is with price. It's the socially acceptable lie, the thing that lets everyone go home feeling not too bad about themselves, having avoided an uncomfortable social situation. Whew.
What To Do Next Time It Happens.
Here's the final proof price is a lie: if a customer really did like you, and really did want to work with you, yet felt your price was too high-what would they do? They would most likely go to you and say, "Listen, we really like you guys and want to work with you-but your price is just too far out for us. Can't we figure something out together? We want this to work."
When price is given as a reason for rejection, what's really going on is a failure of relationship. You can't fix a relationship issue by cutting your price. Nor can you fix the relationship retroactively after you've been told you lost the bid.
However: you can learn from it, and you can set the stage for the next bid. I'll talk about how to do both those things in "Recovering from Lost Bids." Stay tuned.