For our April Webinar, Joanne Smith, President at Price to Profits Consulting, explored a 5-step process for embedding pricing confidence in B2B sales teams. At the end of the session, she answered questions from the audience. In this blog, we share her live answers.
Of the 90% of sales reps that self-rate their negotiation skills as weak/mediocre, how many are actually poor? Which skill gaps do you see the most?
I typically train very experienced sales teams. As a rule of thumb, most of the time that I am working with experienced teams – like greater than 10 years – they’re usually around a three – when I say that [I mean] a three out of a five on a one to five scale. It is usually the companies that have more ones and twos tend to have a team averaging five years or less in sales.
And in terms of the skillset as I go through, I see it [skill gaps] across the board because price negotiations are so many pieces that add up and build on each other that collectively come together to make the right decisions, to know and have confidence when to discount (and when not), how to present, etc. So I really can’t say there is one area that they are weaker in.
Most of the time customer issues are immediately clear, however supporting data is not available. How do you handle this?
Typically, when I’m working with a business that is developing their own value pricing, we are hypothesizing early on all of our value. We’re making guesses at this data that we do not have. And then you have to go to that hard part of market validation. Lots of companies really stumble in that area.
The one thing I would say in just a few minutes is when we have hypothesized it, we can do a use hypothesis-driven techniques with customers who typically wouldn’t tell us anything that would allow us to learn more. There are many different techniques depending on what the issue and the data is that I use with groups, which can run from hiring somebody that is from the industry or retired from the industry to fill gaps in, using reference data that is similar, but different and using it as an example of what we might expect to find in our particular business.
So it’s a hard one to answer in a direct way, but hypothesis-driven is a really strong approach. And then there are ways to be able to use certain consulting firms rather cheaply to be able to get at experts in almost any field to get you some level of data. You do not need perfection. You need to be in the ballpark for a credible conversation, and that will lead to really good refinement with the customer as you nickel and dime them into a little bit of a tighter position.
Where in the sales process should value be introduced? How does value impact the results of the negotiation framework?
This is probably a question we’re asking not because of a broad-based annual increase, but because of a new product introduction. The framework that I brought forward was a price pressure framework. So step five is really diffusing a price pressure.
A lot of times when introducing new products, you may not be starting with the storm right in your face with price pressure, and you can skip that phase. And you can go into needs and use that as an opening in value. So understanding needs is a part of the value story before we begin to tell our value story. The key is whenever we can, we want to tell that value story before we start talking price to the extent that we can get away with. I think that the LeveragePoint tool is another way that helps us do that.
My step three was really the value story. So if I was using the LeveragePoint system, as an example, I would begin to use it in step two, as I’m figuring out their needs, so I know which tabs I’m going to open. And step three, I’m telling that whole value story and digging into those steps and customizing it.
So that quantification, it’s kind of huge in really turning around the price. And when we can quantify that value, not only are we more successful in making the sale with confidence to the customer, but salespeople are more confident in doing that as well. We’re going to get the higher price. And by the way, when we do it, we’re going to actually set a higher price because usually we surprise ourselves when we do that, and we realize our value is much higher than we were initially thinking.
I often hear from my sales team that if we increase price, then our channel partners lose margin. And the channel partner will say that they have a better margin on competitive products. This leads to an immediate belief that we will lose the business. How have you been successful in having leadership deliver a measure of pricing safety?
This channel partner thing absolutely comes out, because sometimes our value is two steps down the value chain, and we’re going through a distributor or something like that that and that may not have the same value. So maybe we’re quantifying the value down there at whoever receives it.
When training this strategy, the challenge in step four is how do we deal with those channel partners that may not see the advantage to them. In fact, that they might lose money while the next person in the value chain absolutely is loving it, seeing the dollars. So there’s different ways that we deal with that, and obviously I can just maybe touch on a few.
Do we now start to sell downstream and get the pull through, or does it somehow get speced in to get the pull through? But one of the other things we’re going to be thinking about is that we want our channel partners to be healthy. And usually if we can get a higher price, our channel partners can get a higher price and we need them to understand that and see that.
And we might give them a little share in that. If we decided that in our price premium, we created a certain amount of value and we get to keep 40%, I might take 80% of that 40% premium in my price and give a little bit to that channel partner so that they’re getting a piece of that value story, much smaller if they’re not the one adding any true value – if they’re more just a pass through. But I’m looking to do that kind of fair compensation when it’s appropriate with our partner and also perhaps looking at pool. And there obviously are many other challenges, strategies that come up that we need to think about and strategically change pricing mechanisms or models to get around some of those channel partner issues.
How do you handle communicating pricing and value when there are buyer type differences between different departments of the customer’s company (buyers, users, purchasing, engineering, operations)?
It’s interesting that more and more people weigh in [on a buying decision] because buyers don’t want to be out there on that tight rope all by themselves and something wrong happens with that product and it’s all on them. So we want to do things by committee these days.
It is also when you see that happening in an absolute sign that this is not a true price buyer, because a true price buyer can do all by themselves. They don’t need a committee weighing in on value because value doesn’t matter. It’s about price. So when we see those multiple people, it is a good sign that we do deserve a premium and have value.
Now, we got to sell that value to the key users, the ones that actually experience it, because if they understand the value story, they’re going to be our advocates. And if we look at some of the studies, the biggest thing that drives a decision, whether the key decision makers and procurement, is what the user group thinks about that supplier and what the user group is advocating. So you better be pre-selling down there to the users that receive the value and the best way to turn those guys around and to really accept you is to be able to quantify your value or demonstrate your value so that they really understand what it does for them.