Are You a Discount Leader or Loser?

August 18, 2012- 

Today’s blog post is by Chris Jones, chief sales officer for PROS, a big-data application software provider that gives salespeople the confidence to compete and win by taking control of their deals and directing them to opportunities that will close, product that will sell, and pricing that will win. Jones will present How Big Data Gives Your Team a Competitive Advantage at the Sales & Marketing 2.0 Conference on October 22-23.

• A global chemical company increased its revenue by 3 percent last quarter, despite seeing no volume growth.
• A global heavy-equipment manufacturer increased price realization by more than $300 million in one quarter.
• A software company reduced discounting by 6 percent, on its way to drive 22 percent bookings growth.

What do the winning sales vice presidents at these companies realize about selling that others don’t? They know that mining and leveraging their data –- data about their markets, customers, and products – is the ultimate opportunity for improving sales effectiveness.

Consider this: a company with 500,000 products and 1,000 customers sells through direct, indirect, and e-commerce sales channels, with potentially 1.5 BILLION selling and pricing decision points. How are you managing that complexity in your own sales team?

World-class sales leaders realize that the complexity of managing every sale globally – or even regionally – is too great to rely solely on a sales rep’s individual experience. In fact, sales reps rely on imperfect knowledge. There is a wide gulf between what they think they know about their customers and what their customers actually want. The results are lost selling opportunities and over-discounting. In my own experience, I’ve seen variances of 70 percent between the highest and lowest prices that customers actually pay for the same product. By any measure, that’s an extraordinary differential.

That gulf is bridged by applying data science that provides real-time, actionable insight to each sales channel. Growing sales in this economy comes down to three essential factors:

1. Your ability to offer what your customer wants to buy.
2. Your ability to match your prices with your customer’s willingness to pay.
3. Your sales team’s ability to sell value and out-negotiate tough buyers and relentless competitors.

Making the leap from being the market follower to the market leader requires a proactive approach that empowers your frontline sellers with the knowledge to negotiate confidently. With a cutting-edge sales effectiveness solution, you can harnesses the collective intelligence of your sales force across every transaction, gaining a clear understanding of what customers are willing to pay for your products and services.

This highly lucrative insight can yield critical opportunities to increase margins and sales, even as you increase your customer’s perception of value.

McKinsey & Company research shows you’ll increase your margins by 10 percent with every 1 percent price increase. Meanwhile, Gartner estimates an average 2 to 3 percent revenue lift with price-automation technology.

Regardless of your industry or company size, the revenue potential is staggering. Here are the top four strategies I’ve seen winning organizations use to outperform in their markets and increase revenue:

1. Create customer buying groups. You need to know what specific customer microsegments are willing to pay for each product, in every market, channel, and region. Armed with these guidelines, you can take your selling effectiveness to the next level.
2. Align resources against your biggest selling opportunities. Which territories and accounts have the biggest opportunity for revenue growth this year? Do you know?
3. Eliminate your weakest links. Drill into your big data across every disparate system to truly understand your gross and net margins. You may be surprised at what you find. Stack rank your sales reps, and lose the bottom dwellers. Arrange your customers in order of profitability, and cut unprofitable accounts. (Yes, you probably have them.)
4. Build margin awareness into your commission structure. Most companies don’t want to expose margin information to frontline sales reps, nor do they often have the capability to do so. But clear, simple negotiation guidelines give them a fighting chance with buyers who are more informed than ever before. It’s their cheat sheet to winning.

When you understand why your customers buy, you can also turn on a multiplier effect that jolts revenue in a way you’ve never seen before.

To win in a tough market, selling must become a science, in addition to being an art. Winning organizations invest in better technology to complement their investments in the art of the negotiation, so their salespeople gain the confidence they need to win more deals at greater profit – and with greater commission.