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Why Your Sales Team Isn’t Negotiating Prices: Train Them to Start

May 2, 2019

Tolu Oke /

Pricefx

Tolu Oke (pronounced “OK”) is indeed OK. Thanks for asking. She takes care of the content at Pricefx. Her hobbies include avoiding writing in the 3rd person and unearthing the insights and passions that drive pricing professionals at Pricefx and around the world. When she’s not doing that you will usually find her trying to answer one of life’s most pressing questions: “Is the price right?” Turns out, at Pricefx, it usually is.

Key Takeaways: 

  • A lot of sales teams are great at closing deals, but not all are great at negotiating at the price you set.
  • Build confidence with proper project planning and training to achieve pricing success

Search the web and you will find millions of results showing customers how to negotiate for a lower price. But an honest conversation with most sales people will reveal that customers might not need such an education in pricing negotiation – they do well on their own. According to experienced pricing expert and author Joanne Smith, “competitive business” is the main objection to pricing increases for top management and sales teams. And for those who thought they were successfully increasing prices for several quarters, many found after some analysis that they had net losses across most of those quarters. The price increases were often easier to pass onto smaller customers without affecting larger customers.

It turns out that setting a price is one thing, but executing on it is another.

So, how do you get your sales team to negotiate the fair prices that you set? It starts with confidence and courage. Here’s a scenario: The sales team is asked to increase prices for a specific product and segment of your business. In their portfolio are a couple of large customers they feel apprehensive speaking to about said increases. Why? The customers might order less, affecting volume, or worse, leading to a departure. With this in mind, salespersons may be walking into conversations unconsciously prepared to negotiate against themselves.

Building Confidence into the Sales Negotiation Process

Trickle Down Courage-nomics

Helping your sales team gain courage starts at the top. It means that management needs to be ready to back the sales team by having confidence in their decisions and knowing that their product is worthy of a fair price. It also means willing to allow customers to leave. In Joanne Smith’s experience, 99% come back or don’t leave at all. Another way to properly practice price negotiation is through training of both top management and the sales team. Both parties build confidence in their ability to close a deal at a fair price, and in each other.

Project-Based Pricing

When you decide to tackle pricing-related issues such as an increase, plugging leaks in the price waterfall, approval processes and more, you need to approach it like a segmented project.

  • Create a charter that starts with SMART goals and objectives. State the project team in detail and the amount of time they will need to meet your goals. At this stage, you will also need a steering committee to sponsor and take charge of the project. Everyone that is a part of the charter needs to be aware of its scope and dedicated to its success.

Project Charter Table

  • Data. Data. Data. One of the wisest ways to ensure that a project hits its target is by collecting and analyzing data. Often times, this is the part of the project that takes the longest. If you already have a pricing system in place, then the data might already be available to you and the time needed to collect and analyze the data is shortened. What might take weeks can be shortened to days or hours.
  • Another part of the project-based approach to critical pricing activities is analysis. Analysis involves all of the major stakeholders in the pricing method. By fostering an atmosphere that uses the breadth and depth of their knowledge and expertise, you can reveal truths that might not otherwise have been discovered.
  • Once you have the analysis, data and all of the stakeholders playing their part, you can recommend the ideal plan to execute. At this point, you should know that the plan you put together is based on expertise and data, thereby giving you the highest chance of success. Part of this planning, depending on the actual goal of the project, will require that managers and salespeople play out scenarios where there is push back from a customer. This gives the actors an opportunity to build confidence in their pitch
  • Last but not least, it is time to execute. As you execute, you should be monitoring any activity that could negatively and positively impact the project. The best teams can make adjustments on the fly.

The point of this step-by-step approach is to build a foundational plan of action. By grounding your process in facts, data and expertise, it will have a significantly higher chance of yielding success.

If you want to learn more about price negotiation and price increases, you can see Joanne Smith go into specific details here.

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