We have seen well managed manufacturing and distributor companies spend a significant amount of time and money in building pricing strategies. We have also watched these companies invest heavily in technology to help them optimize prices to improve margin. All too often, these companies fail to realize the price improvement that was originally targeted.
Why? Because the execution of these strategies collapsed at the point of sale. That is, the customer facing teams were not able to fully execute. We typically see price improvement initiatives realize one quarter to one third of their targeted goals.
There are three common reasons why sales related teams often fall short.
1. The sales team was not trained on price execution strategies and techniques. Don’t assume that every sales person knows how to deal with price changes. Prices at many companies don’t change frequently enough for sales teams to build their skill set around this important activity. Provide your team with value based sales training that includes a heavy component of pricing execution. Once the sales rep has exposure to sound price implementation practices they will embrace the task and deliver.
2. Sales team incentive plans are not aligned with the pricing strategy objectives. Most sales teams today are still heavily rewarded for selling volume. Price rarely enters the situation. Look at your incentive plan. Where can you add a price realization component? Even consider a temporary reward for the duration of the price improvement initiative.
3. How well equipped is your team with data and information to support the pricing initiative? Supporting data from secondary information sources like trade associations is a great source of objective support.
Finally, address these issues well before the point of execution. In fact, consider bringing some of your forward thinking sales people into your price strategy sessions to get buy in. They will lead the sales team to successful implementation.