Pricing is important. No-one works for the least possible return, margin is important for company growth and commission payments are important for the sales person’s sense of achievement, self-worth and self-respect. Plus, nothing breed success like success and there can be no better mark of success for a sales person than a bumper commission payment.
Despite its importance few sales training courses address pricing as thoroughly as they should. Much time and energy is given to the sales structure, the questions to ask, the order to ask them, constructing the premise and demonstrating value, but when it gets to the point that it’s all geared for…we can rely on intuitive pricing….and in doing so compromise the margin, leave budget on the table and ultimately, in some instances, devalue our offering.
This piece is not going to give you everything you need to know about pricing smartly (you see, I don’t work for free either) but what it will give you is an insight into two techniques that you may want to think about.
Get the last 6 months revenues out and look at the difference in bottom line by increasing the prices charged by a mere 1%, then do the same at 2%, 3% and do on, maybe up to 10%…then work with the sales person to understand what that means in terms of selling. Start off by asking them to go through the sales they made and why the priced those sales as they did, ask them to reflect on (with the value of hindsight) how much more they think they could have secured. To do this you may want to ask them about how quickly the order was signed off, the objections they had to handle, how many times they handle price objections, how many times they have resolved those price objections by solving something other than price. And finally, you need to ask: do they think that the product will bring value to the client and do they think that the value delivered could sustain another 3% (say) increase?. Do they think the product is too expensive?
The purpose of this is to make the ‘Price Conversation’ less scary. A price objection is simply a clue that the prospect is failing to see the value in the proposition – you need to explain it/demonstrate it again and not in the way you explained or demonstrated it before – that didn’t work remember. So rather than talking, go back to asking questions of the prospect.
As the Sales Manager you can explain all of this to the sales person.
Take the sales person through a very robust ROI sales presentation. Look at the likely returns a typical prospect will get from having your product or service.
This allows the sales person the opportunity to fully understand orders of magnitude and payback periods.
These are both fundamental leverage points for gaining the price you want.. Many sales people, especially new sales people, fail to make the connection between price, value and worth. Some also confuse consumer spending with business spending. Yes, these are basic business principles, but if no-one has pointed them out, they can make a huge difference.
Plus it never hurts for you to do an ROI based sales pitch to your more experienced members of the sales team who may need reminding about what a great product and service you actually have!!
Tip 1 – look at breaking down the mental blocks around small percentage price increased in relation to what it can do to their overall sales figures
Tip 2 – make them comfortable with talking about value and worth in relation to cost. No point talking about cost alone – it’s a concept that only has meaning when it is related to something else.
Finally – ensure their skill set is sufficiently high to allow them to incorporate the new thinking. If not, well that’s just a subject for another post at another time.
Carol Griffiths – Lead Consultant and Director
Morton Kyle Limited
0779 002 1885