October 26th 2010

Sales’ response to a price rise. Pricing part 9.

Porsche 911, Modell 997 (Carrera S).
Image via Wikipedia

Sales’ response to a price rise. Pricing part 9.   In many of the companies I have worked for, the last group to ask for a price rise would be sales.  Perhaps you have tried to institute a price rise or even harder, change the comp plan to reflect a net margin component.   (Its more work to manage revenue & net selling price than revenue.)  What are the typical sales responses?  Sound familiar?

  • The sales force will not execute on anything that reduces their commission or jeopardizes their job.
  • A variable commission on gasp “margin” can be seen as a penalty
  • Maximizing volume is hard wired in many companies , so the team will always go for the Porsche, not the steak knives.
  • Price protection requests will rise
  • Long term contract obligations are brought up
  • In the absence of tools, tactics and training on value selling, cowboy behavior will increase.

Aside from what the company culture rewards, there is a basic reason for these responses.   Customers lie, especially to sales people.  You lost the bid?  Someone else “had a better price”.  You won the bid?  You priced it “just right”.  Do not believe this.  You lose more by being outsold, not out priced.  You win, very often because you left so much money on the table (ie underpriced), but sales  will rarely  find out.

We see the lack of a truthful  win loss reviews to be holding back so many companies, companies that then take what sales tells them at face value.  By hiring a sales team, younger companies often hope they have solved their sales problem.  Again hope is not a strategy.

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