A couple of months ago, a leading sales technology company asked us to share some of our observations and research with their audience. The event was a lot of fun and we were pleased to see so many of our subscribers also in attendance!
In the hour-long session, we discussed a number of strategies and tactics that leading sales operations are employing to reduce over-discounting and margin erosion in the field, including:
- Modifying incentive plans to reward salespeople for profitable pricing decisions as well as revenue generation.
- Providing training regimes squarely focused on imparting the strategies and tactics of effective negotiation.
- Implementing price optimization technologies to show salespeople what customers are really willing to pay.
- Developing more compelling and robust value cases to proactively influence prospects’ pricing perceptions.
- Refining targeting definitions to focus on prospects who are inherently less price sensitive and more profitable.
So, why is this topic so important? Why are leading sales operations focusing more attention on shoring-up their pricing and discounting? What do they see that other teams might be missing?
Simply put, price concessions have a disproportionate negative impact on profits. Clearly, a 10% discount on a transaction affects revenues to the tune of 10%. But depending on the starting margin levels, that 10% discount could be slashing transaction profits by 20, 30, or even 50%!
Turning it around, reducing price concessions has a disproportionate positive impact on profits. Again, depending on the starting margins, a sales operation that reduces overall discount levels even just a little—say, from 10% to 8%—could boost profit contribution by as much as 20%.
Leading sales operations recognize that pricing is an extremely powerful profit lever, where relatively small moves can have magnified impacts. And as a result, they’re taking proactive steps to ensure that those magnified impacts aren’t to the downside.
5 Ways Sales Can Stop Losing the Pricing Game
Discounts can seem like a small price to pay to capture revenue. But for many, giving in to pricing pressure is having disastrous impacts on profitability. In this on-demand webinar, learn five strategies leading teams are using to win more revenue...without crushing their margins.