Yesterday I wrote a post about the challenges of discounting for sales people. Unfortunately, this problem is often initiated by sales leaders. Sales managers who demand, “Close the deal at any cost” are the real culprits here. Comments like this encourage people to discount quickly (and deeply). Once your reps start developing this type behaviour, it becomes a way of doing business and it is difficult to stop. A three percent discount becomes five percent, then six percent and eventually your gross margins are severely affected.
I once worked for an organization that paid commission on top-line sales. Although sales were good, we made very little money because of the steep discounting that occurred. Finally, we changed our approach to compensation and began paying commission based on sales AND gross margins. This change was extremely difficult for many sales people too adapt to; after all, they had always sold on price instead of selling the value of the product and/or service. Turnover in the company was high that year and even though our sales took a dip, our bottom-line profits increased.
As a sales leader or manager, you set the tone and establish the guidelines. You also influence the approach and behaviour of your team. Here are a couple of suggestions that will help your reps win the discounting war.
Coach your team. Yeah, yeah, you’ve heard this before and your immediate response might be, “Who the heck has time to coach?” I recognize the time crunch you face every day and know that finding the time to coach your team is a big challenge. Here’s a different perspective.
The more time you invest properly coaching your team, the fewer problems you will have to deal with which will free up time to work on other projects. It doesn’t happen overnight but the payoff is worth it.
Help your reps see the value of your company’s products and services. This requires more than providing a day of product training or arming your team with brochures and spec sheets. Invest time to help them explain the benefits to their prospects and customers.
Help your team learn how to deal with price pressure. Hopefully, you have some experience dealing with price pressure and can offer your reps some insights and strategies. If you don’t have this experience, consider providing negotiating skills training (see next point).
Provide negotiating skills training . Time invested in this type of training can pay immediate dividends as your reps begin to apply the concepts and reduce their discounting. However, like any other type of sales training program, you will seldom see results if you treat the program as an event or a line item on your budget.
The impact of discounting is much more significant than most people realize. Check out this discount calculator to see the impact of discounting on your top-line revenues and bottom-line profits. Then determine what you are prepared to do to win at the discount game.