4 steps to save your margins.
In my previous post on discounting, I highlighted the issue of salespeople, in all walks of business, opening their sales conversations with a discount. As shown in my real-world example of a major retailers sales person opening a sales conversation with me by offering a further discount ON TOP of the ticketed 40% discount already in place. Madness, I say.
Research shows 67% of sales people will offer a discount BEFORE a potential customer has even asked for one?
So what do we need to do?
I believe that we need to start by challenging the sales persons’ belief that a discount is the BEST way to open any conversation. Because it’s simply not. Discounting like this is only making your customers more likely to ask for future discounts and to be become ongoing ‘discount hounds’, sniffing out any possible discounts on offer. Not very good for anyone in the selling business.
In order to stop this crazy practice, sellers need to develop a strong belief and a good understanding of what your products or services are worth and what the real value of those products is. This can be done in your sales meetings, or via specific coaching. Test your sellers limiting beliefs, test the pricing of your products against the market.
1 – CHALLENGE DISCOUNT BELIEFS.
Challenge your sales staff on their discounting behaviour and show them the quality of your total offering. You will need to give them the tools to explain to your customers why the pricing is what it is and explain what components make up the pricing strategy. It could be the product plus their expertise, that the stock is on hand for immediate delivery, it could be the returns policy, delivery service; it could be any number of items which bring value into your pricing. Just make sure you can explain it clearly. Because if you can’t, they won’t.
2 – BUILD PRICING CONFIDENCE.
Sales people need the confidence that what they are selling is worth the price they’re asking for it. To help build this confidence look for instances where the products in question HAVE sold at your desired price and hold them up as positive examples. This will help build belief in the credibility of the pricing strategy. Once their pricing confidence starts to build, holding prices becomes easier and the more they are able to hold their price with confidence, the less discounting they will feel they need to offer. It’s a circular process, as you provide pricing evidence, their belief grows, increasing confidence, impacting behaviour then producing better sales results. This is a key sales coaching task that every sales leader should be developing within their sales teams.
3 – START SMALL.
If, after all this, you still believe offering a discount as a starting point is valid in your sector or industry, then how about you try offering a smaller discount to start with, (instead of 15% try just 5%). This should make your ‘discount hound customers’ happy as they still feel like they are starting the negotiation on a win. It means that even if the sales process progresses as per every other translation in your pipeline (further discounts applied or not) you will still have more margin left at the end. This means more profit for business development… or just more money in your pocket.
4 – FOCUS ON SPEND not DISCOUNT.
If your industry, product or sales process is heavily discount driven, chances are it’s in a marketplace where pricing comparisons are easy to make (consumer electronics for example), therefore it should be relatively easy for sales people to draw customers away from the discounts given column and onto the bottom line. A $2,000 TV is only ever worth $2,000, never $3,000. Having a strong understanding of what your competitors are doing with pricing and stock holdings is essential to holding your price in these instances, as delivery and supply times can often be worth 5 -10% in the negotiation.
Is it the COST or the PRICE you’re concerned about?
So, now that I’ve pointed it out, as you travel around, during the week, pay attention to how some sales people start their sales conversations. Use them as examples of what not to do, so that you can coach your sales team to better results. You simply don’t get a second chance at making a great first impression and I believe opening with a discount creates the wrong impression.
Have a think about how you and your sales team can have better sales conversations with your customers without discounting so heavily. I’d love to hear your thoughts and comments.
Well drilled businesses and well trained sales teams know how to handle discounting behaviour and discount requests. Let me ask you, what would your business look like if your sales team gave out 5% or even 10% less discounts over a year whilst maintaining the same revenue level?