There is nothing more guaranteed to reduce your price than a demoralised sales team with discretion to discount… except perhaps a demoralised sales team behind budget who need their bonus to pay the mortgage.
Modern CRM systems are very good at measuring conversion rate and delivering it as a metric with which the management can beat the sales team. Consider a 20% win rate. It sounds bad doesn’t it. It feels bad for the salespeople…. four out of five people have told them to get lost. But what if there were eight similar competitors approaching all the available customers in the market. In this case 20% is above what we would call ‘natural share’ and actually demonstrates that your sales team (or the company’s product) must be doing something right.
It is difficult for both companies and sales people to take this positive view. A sales person’s perspective is governed, not by statistics, but by the last two or three people they spoke to. If one those is negative about quality, service or product features, the average person will struggle to re-set the dials before their next call. Even the best salespeople cannot avoid storing these negative comments somewhere deep in their subconscious.
It is not too bad if you are the market leader with a fabulous product that everybody wants, but if you are trying to sell for an also-ran player in a busy market, these objections corner you into turning to discounting to try to win business.
Given enough rope to discount, a sales person will keep on trying to win on price when perhaps price is not the issue. Compound this with an incentive scheme that rewards winning deals never mind the price, then the only way is down.
Eventually your business winds up at a price level that feels too cheap for customers and you still don’t win any business.
How do you get out of this downward spiral?…. four steps:
- Find something that truly differentiates your product and make sure your salespeople understand it.
- Identify those customers who will value whatever it is.
- Fix the price based on value and allow no discounting.
- Make sure the sales team only go after these customers. This means improving their discovery skills to enable them to identify suitable customers.
Magically the conversion rate will go up… once it hits 40-50% your salespeople will think they are the bees’-knees.