Maintaining a healthy profit margin is (of course) important to the overall success of your sales team and organization. It can be tricky to find the sweet spot for an offering’s pricing, however.
Those in the organization in charge with business strategy should set a price based on market research. But should that price be set in stone?
Once your salespeople are out in the field trying to sell your offering, should they have pricing authority (aka the ability to freely give discounts)?
Let’s walk through a few of the pros and cons of allowing salespeople to have pricing authority:
Pros of Giving Sales Reps Pricing Authority
- Your salespeople are closest to your customers and the market. This gives them unique knowledge about the prices your customers might be willing to pay.
- The ability to negotiate can position your salesperson in a more strategic way. Buyers working with a salesperson who has some control over price are less likely to consider the sale as transactional.
Cons of Giving Sales Reps Pricing Authority
- Salespeople may be tempted to offer a price that is too low in hopes of making a sale. This can cut into margin and be unsustainable in the end.
- Heavy discounting degrades the value of your offering, your salesperson, and your organization.
- Discounts set up a precedence. Once a salesperson offers discounts to a client, that client will expect discounts in the future.
The Solution: Empower Your Salespeople to Confidently Sell at Premium Prices
The bottom line is, it’s probably a good idea to give your salespeople some degree of pricing authority.
If your salespeople have no control over pricing, they could be severely hampered in the field. But you can’t allow an ineffective salesperson who relies on discounting to be the face of your organization.
Unfortunately, many salespeople sell on price—and that’s because they’ve never been trained in the skills necessary to build value and negotiate effectively. They don’t feel confident and end up falling back on price in order to close the deal.
Buyers are conditioned to question the asking price in today’s competitive selling environment, so it’s vital your salespeople are able to stand up to the price pressure and command premium price.
Here are several examples of how you can protect your margin while giving your salespeople some degree of pricing authority:
1. Incentivize on Margins
If your salespeople earn more money when the price is higher, they will be less eager to reduce price just to make a quick sale. This will encourage your salespeople to focus on building value, and to use discounts with discretion.
2. Train Your Sales Team in Negotiation Techniques
Many times, salespeople say and do things that encourage buyers to request a discount. You need to make sure your salespeople have strong presentation skills, and feel confident holding their ground during price discussions. This empowerment can come in the form of sales training, consistent sales coaching, and mentoring programs (pairing less experienced or less proficient salespeople with a high-performing team mate).
3. Combine Price Reductions with Other Offers
With some customers, offering a discount is the only way to close a sale. When this is the case, a good tactic for your salespeople is to combine the discount with another offer. Perhaps the price per unit can be reduced if the customer commits to buying a certain number of units. With a little creativity, your sales force can come up with many potential combinations of offers.
In the end, every business’s purpose is to serve the needs of its customers. By using a consultative selling process, your salespeople can partner with a prospect or client, discover what they need to overcome their challenges, and provide the best solution possible—at a price that matches the value. By giving your salespeople the training and tools they need, you are putting power in their hands to serve customers more effectively. And that results in a winning situation for all parties involved.
If you’re looking to empower your sales team with the selling skills they need to be confident and successful, your annual sales meeting is a great place to do it.
The Brooks Group offers a selection of high-impact training programs that are a great option for annual sales meetings, and can be customized to meet the needs of your organization and sales team. Learn more about planning a sales meeting that gets results here.