Strategic pricing is as much about change management as it is about pricing analytics. Winning the support of the sales team is crucial to the success of an effort to improve business processes, especially when that change affects the way the reps do pricing and manage their customers.
Branch-based distributors typically deploy a sales force compensated with sales commissions based on gross margin dollars, or salary plus incentive based on gross margin dollars. There are two major inconsistencies with these approaches. First, the incentive is geared to gross margins (before expenses) instead of actual profits (after expenses). Second, the sales staff has much greater financial incentive to chase sales dollars rather than profit dollars.
If the sales team is fairly independent in their day-to-day work it’s natural that they have a great deal of pricing autonomy. This autonomy is a disconnect with their lack of market pricing information, as well as their lack of understanding of their own company’s profit structure. Management wants the sales staff to optimize pricing and profits yet the sellers don’t have the knowledge they need to make that happen.
SMART Pricing and SMART CPA provide the information and training to price at market and build profitable customers. The status quo sales compensation program may not support a strong effort to change behavior without a few tweaks, usually minor. Evergreen finds that dramatic changes to the sales compensation program are often counterproductive.
We work hard to formulate, test and suggest incremental changes that encourage the right behaviors without causing disruption. We also believe in transparency and in giving the sales team the information and time they need for smooth transitions that ultimately benefit the customers, the sales team and the company.