As a small business grows it must sell larger, higher value deals into larger, more complex customers. Its sales teams must be adept in dealing with more complex decision-making units. There are several elements to consider when developing your existing sales team. In this article we reveal why managing discounting is a key component for sales force transformation and maximising sales growth.
Managing discounting for sales growth
“The most dangerous negotiation is the one you don’t know you’re in”
It’s inevitable that, as you begin to experience sales growth and begin selling bigger deals to bigger clients, and especially if you are dealing with professional procurement, you will face demands for bigger and bigger discounts. Demands can be offset to some extent by selling value to each stakeholder. For example a buyer may be persuaded that your more expensive product has, in fact, a lower total cost of ownership than the current solution because of its superior reliability. However, even when it’s clear your solution offers best value a buyer will try to get you to lower your price; it’s their job.
How do you avoid discounting?
The first thing is, you don’t. Customers who spend a lot with you quite rightly expect a better price than those who spend a little, and in this world of global transparency, it may be difficult to keep your pricing confidential. The key to sales growth through effectively managing discounting, is knowing in advance what is an acceptable price for the volume being bought. Working out a pricing structure that encourages prospects to buy more but still gives you an acceptable margin, is one of the most effective ways to maximise your potential sales growth. As the old saying goes, “Turnover is vanity, margin is sanity”.
Secondly, give your sales people a clear mandate of how much discount they can offer; and don’t give them a range to work within. If you tell a seller than can offer 10-20% discount you are guaranteeing they’ll sell at 20% off.
Next consider your compensation plan. Is bonus or commission paid on sales value? If it is, consider changing it to a scheme linked to margin. Nothing detriments sales growth from discounting more than losing money from the salespersons own pocket.
Finally, train your sales team to negotiate effectively. There’s no question that a professional buyer will be a highly skilled, and trained negotiator. And, as the quote above points out, they can lure an unaware sales person into a negotiation before they know it. Train your sellers in how to negotiate effectively, never giving anything away without getting something in return. Remember different people value different things and that’s just a true in a buyer/seller relationship. You will have things that cost you little but have high value to the customer and the customer will have things that are of high value to you. By trading low cost, high value issues you can achieve a true win/win outcome - managing discounting while simultaneously maximising opportunity for sales growth. Equip all your sales people with these skills, don’t just train your senior team to come in at the end to close the deal. For a start the negotiation will have begun long before the close is near, and it sends the wrong signal. The only thing a leader can do that a seller can’t is give a bigger discount.
Have a clear pricing structure and equip your entire sales team with a mandate and the skills to deploy it. This will not only help your salesforce with managing discounting, but will also maximise opportunity for sales growth.
Being able to manage discounting for maximising sales growth is just one of the skills that sales teams must develop as they grow. To discover all four components of sales force transformation, click here to download our Whitepaper.