March 23, 2016
Are your sales representatives skilled Jedi Pricing Knights; guardians of profit maximization that balance the forces between price and volume? Or is your sales force full of droids unable to tap into the force? Perhaps they have gone fully to the dark side, worshipping volume at all costs?
Price negotiation or execution can be one of the toughest challenges in pricing. There are valid reasons for discounts but far too often discouts are negotiated too frequently , too deeply, or reps are backing down from an announced price increase. In addition, once a decision to drop prices or back off a price increase occurs, it is often done in a way that sets you up for more aggressive price pressure in the future.
Here’s where the dark side makes in-roads in creating traitors to profit maximization.
You start to believe that your price targets are set too high when, in fact, it is the lack of strong execution skills, courage, and conviction that is leading to your excessive discounting or failure to increase prices.
You can turn the sales team to the light side with the right price execution training (jedi training), mindset (tap into the force), and tools (lightsaber). It’s up to the pricing organization to play Yoda to the sales force’s Luke Skywalker. The pricing team must partner with sales, understand their challenges, and provide the guidance, data, and tools to enable them to successfully negotiate fair value prices and/or successfully implement price increases. That means the pricing team, as well as sales, needs jedi training.
They can’t focus solely on price strategy and setting while simultaneously bemoaning the fact that sales is not effectively implementing these prices. The pricing team must be a valued source of motivation and guidance.
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There are many best practices that must come together to improve your pricing execution, but let’s start with one powerful fundamental element: trust.
You must be viewed as being consistently fair and trustworthy in the eyes of the market place. Think about it this way: as a customer, would you rather buy from Luke Skywalker or Darth Vader? Probably Luke. Why? You trust Luke to be fair (value price), treat you as he treats others (similar prices for similar customers), and stand by his word (implement price increases to all of his customers when they are announced). As a result, you as the customer, become less price aggressive.
As a supplier, would you rather compete against Luke or Darth Vader? Most lean towards Luke. Why? You trust him to be consistently fair, price per his value, and stand by his word (actually increase his price when he announces an increase). This gives you the confidence to consistently hold to your fair value or your announced price increase.
On the other hand, if you were competing against Darth Vader, you would not trust him to fairly price. You might suspect he would drop price to win the account at any cost or announce an increase but never follow through. As a result, you would begin to get more price aggressive, encouraging Darth Vader to become even more price aggressive. Customers would pick up on your lack of conviction to your fair price and they would become more aggressive in pushing for price relief.
In the end, the force that drives a balance in price and volume—that ultimately wins the profit battle—is being consistently trustworthy and fair.
Join Joanne as she demonstrates how to set your sales force up for success in a pre-conference workshop at Profit Summit 2016 in San Francisco from April 18-20. Click here for more information on how to register.