Outselling Your Cut-Rate Competitors
Any given product niche tends to have competitors with a wide range of strategies. At one end are the "premium" offerings, which are more expensive than the others but come with additional features and warranties. At the other end are the "cut rate" offerings, which sell at a lower (sometimes much lower) price but are lacking important features, are of a lower quality and durability, and are generally disappointing in the long run. To make things more complicated, periodically one of your mid-range competitors is likely to run a promotion in which they drastically cut prices in order to lure some of your customers away.
The steep discount will often be tied to an extended contract, making it much harder for your customers to switch back if they decide they've made a mistake.
When a salesperson from one of these (temporary or permanent) cut-rate competitors launches a campaign to woo away your customers, you'll start getting phone calls from said customers telling you about the much lower price your competitors are offering and asking if you can match it. In most cases, matching that steeply discounted price is simply impossible. And even if you can, it's a big mistake because that customer will expect a similar price in the future – meaning that you'll lose your profit on the customer and may even be selling to him at a loss.
Rather than try to compete on price, your best bet is to out-do cut-rate competitors on value. Explain to the customer all the perks and features he'll be giving up in exchange for that lower price. Hopefully, you've taken the time to familiarize yourself with your competitors' products, because this is the perfect situation to make that research pay off. The more you know about your competitors, the easier it will be for you to lay out exactly why staying with your company is the best choice for your customer.
If the customer isn't convinced by your value comparison, the next step is to haul out your testimonials. Testimonials from customers who either switched to a competitor and then regretted it or considered switching but then realized it was a terrible idea are very valuable testimonials indeed. Try to collect a few of each kind and keep them on hand for these moments. It's sad but true that customers will put more faith in what other customers say then they will in what a salesperson tells them.
Some customers simply won't listen to value arguments. Their prime motivator is getting the lowest possible price, and no matter what you say, they'll just keep coming back to that. For such customers, you're better off just letting them go. Price motivated customers tend to be your least profitable customers anyway because they're focused on getting the best possible deal. It's possible that after switching to a cheaper competitor, some of these customers will finally realize the difference between value and price, in which case when they come back to you they'll be much better customers from your perspective (and don't forget to collect a testimonial from them!).
Since you can pretty much count on cut-rate competitors trying to steal away your customers at some point, it's a good idea to be proactive and take steps to make it harder for them. Loyalty programs are a great way to do this – they literally reward customers for sticking around, usually by offering discounts to longtime customers or giving them a slightly better price on future purchases after they've bought a certain amount of stuff from you. Since customers who've been with your while are usually much more profitable than new customers, giving a slight discount to these customers won't hurt your profit margin.
And these loyalty programs make your customers "stickier" because if they leave, they lose the benefits of that program.