Sales leaders come in different flavors: VP Sales, Branch Manager, Regional Sales Manager, Sales Manager. No matter what the title is, the sales leader has a very tough management assignment. Most sales leaders manage a large number of sales reps in addition to many other time-consuming duties, often including personally handling key customers. Sales leaders are expected to find and develop new sales talent, meet sales goals, increase margins, attend meetings and keep everyone – customers, suppliers and staff – happy. It’s hard to find enough time to get the “day job” done and still handle the new initiatives and projects that seem to keep coming.
Pricing is one of the demanding tasks sales people are required to perform. In a typical distributor the sales reps have a good deal of pricing autonomy but not enough market pricing information. The pricing guidance is usually a price book with column pricing that isn’t market driven. The sales people may use book pricing as a starting point for negotiations, such as discounting from the “last bracket” (or the list price for distributors that use them). Many distributors simply give their sales people the product costs and instruct them to calculate selling prices using margin percentages.
Experienced sales reps are most often left on their own to price small and medium sized accounts, and even their largest customers except for the biggest deals. Busy sales leaders may consult on pricing decisions and review pricing periodically but they simply don’t have time to approve each line item on every transaction. Even the least experienced sales people often have to make their own pricing decisions in spite of the lack of experience and competitive information.
Most of the competitive feedback that sales reps do have comes from their customers. Needless to say that information is often inaccurate, stale or otherwise undependable.
Market-driven pricing matrices give the sales people pricing recommendations based on which segment the customer is in, how big the customer is and how sensitive that customer is likely to be that on that item. The suggested pricing includes “guardrails” to enable reps to negotiate on their own and stay within profit boundaries.
Sales leaders can focus pricing work with their sales reps on exception situations, especially larger deals.
SMART Pricing frees up valuable time for the sales team, provides faster responses to customer price requests, and results in more pricing consistency as well as higher margins.
Customer Profitability Analysis and Cost to Serve Analysis (SMART CPA) is built into each SMART Pricing project. Using proprietary cost allocation and assignment algorithms, we measure operating profit by customer, customer group, sales territory, branch and region. We use the insights to recommend tactics to increase order size and reduce cost to serve. We are also able to identify where and what price changes are needed by using pricing analytics to detect below market pricing.
Depending on the engagement, our advice may include adjustments to the sales compensation program to better align incentives with operating profits.