Strategic Pricing: Get the Sales Team On Board
Moving a manufacturing or distributor organization toward a strategic pricing capability requires the development of skills and resources to set pricing strategy and perform analyses among a variety of other crucial elements.
A key function that is often overlooked is the sales team. This is the point where pricing strategies are executed and we rely upon the sales team to carry value messaging and price negotiations to the point of sale.
Getting Sales in Step
Teaching sales teams how to deal with price issues is an important first step. Get team members involved in the pricing strategy phase early in the program to get buy-in and create a clear understanding of the program objectives.
The first step the pricing training
experts at PricePoint Partners teaches the sales team is about selling the economic value and its impact on profit margins. While pricing training
will go a long way to helping sales professionals effectively manage price issues, there is on aspect that needs to be addressed: the issue of sales incentive plans.
Align Sales Rewards
If sales teams are incented on sales volume you stand practically no chance of getting them to support price improvement initiatives. Their focus will continue to be selling more volume with no attention to price or profit margin. Do you blame them?
If your sales team is incented for profit margin you are only part of the way to gaining their attention on price. Every sales professional knows that they have no control over costs and see margins as something they can only impact with volume. Little attention is paid to price.
The solution to getting the sales team to focus on price improvement is to reward them for better price performance. This is most impactful when sales professionals have the ability to impact prices through discounting.
Set price targets for each product at the beginning of a time period (i.e. at the beginning of a fiscal year). Then, track each sales rep’s actual realized price throughout the time period for each product. Reward them for achieving prices over the target level and detract from their incentive for performance under the target price level.
In the end, you will be impacting profit margins because price changes fall straight to the bottom line. And, you will be driving sales team pricing behavior in a positive direction.