Our price consultants find that most wholesale distributors and many manufacturers rely upon their customer facing teams to control or at least influence prices. In the most extreme cases, sales reps have complete decision making power to set prices as they see fit. In more moderate situations sales teams influence price setting by discounting. The rationale behind these scenarios is that the sales rep has street-level knowledge of the market and is in the best position to judge customer price sensitivity.
While front line teams have an important view of customers they often lack the information and data to make optimized price decisions. Here are three reasons why.
While the vast majority of sales teams are in a great position to generate margin improvement, they often are not provided the necessary information, tools and techniques.
Pricing complexity is addressed with technology. Using historical pricing data and analysis, strategic pricing software pinpoints the optimized price for every sales situation. It takes into account the myriad of attributes inherent in every sale situation and delivers pricing guidance to the sales rep that optimizes revenue and margin. Equipping the rep with science based pricing guidance means less time spent on pricing calculations and more time spent selling.
Sales incentive plans should be equally focused on rewarding price performance and volume achievement. For example, set a discount budget and reward reps when the budget is not fully utilized.
Finally, most customer facing teams have not been trained in the successful execution of pricing initiatives. From periodic price increases to discount programs sales reps are largely unaware of the impact these initiatives will have on the company’s financial performance and their own incentives. Our price consultants see sales teams achieve profit improvement of 1-2 margin points after participating in pricing training programs. That’s $100,000 to $200,000 on $10 million in revenue.
Powering your sales team with the knowledge, incentive and pricing guidance to execute at the point of sale is a sure fire way to increase revenues and lift margins. Sales teams are in a tremendous position to make an impact. Help them achieve success by providing them with the tools and knowledge that will give them pricing power.