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6 Practical Tips for Protecting Profit Margin

protecting profit margin

Competing with lower-priced competition is a reality that’s only going to become more prevalent as the global marketplace continues to expand. In order to maintain a healthy profit margin, you must reinforce the importance of value within your sales culture. Ensure that your salespeople are equipped to deal with buyers’ attempts to commoditize your products in an effort to the get the lowest price possible.

Keep in mind these 6 tips for protecting profit margin:

1. Only hire salespeople who truly believe in the value of your product

When a sales rep is genuinely passionate about the product they are selling, it comes through in their presentation. Not only will the salesperson be more convincing, but they will be better motivated to only sell the product for what it is really worth, avoiding cost-cutting out of passion for and belief in their product.

2. Build a sales compensation plan that focuses on gross margin, not volume

Your compensation plan will be dependent on several factors including your sales cycle length, goals, and company maturity. But striving towards a profit-based plan that encourages reps to always keep gross margin in mind is one way to ensure salespeople aren’t price-cutting just to meet their quotas.

3. Provide training that shows reps how to build value and negotiate

Instead of trying to downplay the fact that they’re the high-priced provider, train your reps to use price as a competitive advantage. Salespeople who sell at premium prices are able to use high price to make a credibility statement. Have reps focus on building value and presenting your product as a quality solution in order to avoid price-based objections.

4. Strongly discourage price-cutting and put in place measures to prevent it

Price-cutting not only affects profit margin, but it also makes a statement about your product, and the value attributed to it. Profit-based compensation plans are a way to discourage your reps from price-cutting.

5. Share success stories among the team outlining specifics of when a rep wins a highly profitable deal

It’s not unusual for managers to conduct postmortems to uncover why a sales opportunity was lost, but make sure that you are regularly sharing the details of wins as well—especially when they are highly profitable ones. Not only will hearing about the success of their colleagues motivate typically competitive natured sales reps, the winning techniques can be replicated to secure more closes just like them.

6. Train reps to spot unprofitable opportunities early in the sales process and how to avoid them

While it may not be the most popular activity among your sales team, prospecting should be allotted a great deal of time and energy. Effective prospecting is an art, and once it is mastered, closing high profit margin deals isn’t nearly as challenging. A sales rep who has perfected the process of identifying high yield opportunities early will be able to quickly recognize when a lead is not worth their time or pursuit.

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Will Brooks

More articles written by Will Brooks

As Chief Operating Officer of The Brooks Group, Will draws on his leadership, marketing, sales, sales management and operational experience to help develop and execute the company’s overall growth strategy. Drawing from over 15 years of experience in the training and development industry, Will combines his deep institutional knowledge and client experience to optimize operations at The Brooks Group.