Who’s responsible for margin shrinking discounting to win a deal: managers or sellers?
The finger of blame for this is invariably pointed at the sales rep.
In truth, the responsibility rests with sales managers.
It certainly is easy to blame individual sellers for rampant end-of-period discounting. Reps seem like the obvious culprit.
However, my experience has shown quite the opposite to be true. Sales managers are primarily responsibility for over-zealous discounting, and the resultant price and margin erosion.
The primary problem is that managers are addicted to using discounting because it covers up so many of their own sins.
The easiest way to look at this issue is to think of discounting as a problem of oversupply.
Consider retail store managers who are confronted with a surplus of inventory sitting unsold on their shelves. They resort to discounts or promotional incentives to move the product.
Similarly, consider the sales managers who have a surplus of unfilled quota (ie: salespeople who are not hitting their numbers) and they are at risk of not hitting their own target. What do they do?
They authorize their sellers to offer discounts to buyers to help accelerate the close and win the order. And to reduce the surplus.
All parties involved in this sales transaction, managers, sellers and buyers, are familiar with this cause and effect scenario.
Salespeople wait for it. If they are in a tough competitive situation, and are not skilled on selling on value, sales reps will default to a price-based sale by telegraphing to their prospects that if they hold off until the end of the month, a better deal awaits them.
Prospects wait for it. You’ve trained them to expect a discount in return for orders placed at the end of a month or quarter.
Sellers and buyers alike are in on the game together.
The problem with handing at discounts at the end of the quarter like Halloween candy is that these “one-time” discounts morph into the new default price point for your product or service with these customers.
Try justifying to a customer that you previously gave them a discount just to get their business before the end of the month or quarter. If it hasn’t already happened, all your orders from that customer will henceforth materialize only at the end of your month or quarter.
As a manager, to effectively address this discounting problem, you have to break your addiction to taking the easy way out. You’ll need to step up your game. And stop blaming others for your unsold quota surplus.
A few simple suggestions for you to implement:
Train yourself how to sell the value of your product.
Here’s a hard truth for sales managers. You may assume you can do this. However, if your sellers are struggling to sell the value of your product, that probably means that you aren’t able to either. After all, how can you train and effectively coach your sellers to sell on value if you can’t do it yourself?
Go cold turkey on discounts
Just stop giving discounts. None. Starting right now. If your product or service is competitively priced, and if it is competitive from a feature and value standpoint, then stop giving discounts. How can you ever train and coach your sellers how to sell on value if they believe that they will always have a discount on which to fall back to win a deal?
Create value plans for every sales interaction
As a manager you also have to make certain that every sales touch your sales team executes is planned for the prospect to receive the maximum value from it. This means that every customer interaction needs a goal and a planned outcome. The goal must be defined in terms of the value that will be received by the prospect and the planned outcome is the next step(s) the prospect will take as a result of receiving the value. The value to be received will be in the form of information, insights, questions, context and data that helps the prospect move at least one step closer to making a decision.
Don’t permit your sellers to negotiate price.
This is quite simple. Give your sellers permission to negotiate any aspect of a deal except for product pricing. Of course, there are factors other than price that can negatively impact your overall profitability on a deal. So you need to However, if you take price discounting off the table, it forces your sellers to focus on value and outcomes.
Commit to Consistent Product & Customer Training
Learning to sell value is next to impossible unless a sales rep possesses a true understanding of your product and service and how your customers derive value from using them.
Bestselling author of Amp Up your Sales and Zero Time Selling, Andy Paul is #8 on LinkedIn’s list of the Top 50 Global Sales Experts to follow. With more than 170,000 followers, Andy is a highly sought-after speaker and sales sage who interviews the world’s foremost sales minds and extraordinarily interesting people to bring you strategies and insights that you can use to generate epic wins and massive value.