Being part of Sales Leadership means you have a responsibility to get profitable sales out of new client acquisitions, upsales and so forth. Unfortunately, what happens all too often is Sales Leadership inadvertently or blatantly derails profits by “justifying” reasons to ad hoc the pricing structure.
How many times have you discounted “just to get the business” in order to hit your numbers or because you were fearful a client would leave if you didn’t discount?
When it comes to pricing and discounting, you may be surprised that some of your inadvertent actions are negatively impacting profit margins.
Below are just a few of the ways management undercuts price:
Management has developed a habit over the years of making price concessions any time business slows. Salespeople who have been with a company for any length of time will pick up on trends they see.
If the company has a habit of offering price concessions any time the business slows, then salespeople know all they have to do is wait for a slowdown and a lower price will soon follow.
Management allows certain customers to pay lower prices because they’re afraid they may not want to pay the regular price. This happens far too often in companies with long-standing customers.
Management allows for a select group of customers to pay a lower price. The problem is the sales force knows the reason the customer is getting a lower price is because management is afraid of them.
Management uses terms like “what is it going to take” and “how much lower is our competitor’s price” when strategizing with a salesperson regarding how a customer might respond.
Having these types of discussions undermines the confidence of a salesperson. This is certainly not what the manager set out to do by having a planning meeting before the sales call, but that’s what they wind up doing.
Management goes on a sales call, and in front of the salesperson, begins discussing price with the customer in the context of offering a lower price. A sales manager might have good reason to get feedback to help deal with a long-term issue, but by bringing up the topic in front of a salesperson, it does only one thing – undermines the confidence of the salesperson and the customer.
Management develops alternate pricing strategies to allow a customer to avoid having to pay a higher price. Marketing can be quick to play this game, all in the interest of being prepared for whatever might happen. Problem is when strategies like this are developed, they quickly become the norm and nobody winds up paying the list price.
Management refuses to educate the sales force as to why the full price is the right price. Old-school management theory says keep salespeople in the dark and by doing so, they’ll stay focused. Sorry, but that truly is old school.
When management keeps a sales force in the dark, the first thing that emerges is what I refer to as conspiracy theories. These ultimately are destructive.
Pricing strategies are not something to be developed quickly. And it is important that once they are developed, management shouldn’t be so quick to destroy them by doing one of the six items listed above.