Pricing power: How to command it in competitive markets

Your salespeople face numerous pressures, from sales quotas to revenue goals. Believe it or not, they care about your organization hitting its profit margins, and they especially have investment in their take-home.

Why, then, do salespeople so often jump to discounts at the first hint of objection? Why are they so tempted to “give away the farm” to reach their numbers?

While sales discounts offer an easy way to land a deal, they hurt your organization, your salesperson and even your buyer. It’s a lose-lose-lose. Why?

  • The deal is not positioned as the big priority it needs to be for all parties.
  • The deal is not getting as much executive attention it needs to be a successful program.
  • The discount sets a precedent for all future sales between that salesperson and that buyer.
  • The buyer has a lower overall perceived value of your solution.

Even if discounts help your team land sales — and give the impression that sales are meeting their numbers — they may cause your organization to lose profit, especially if discounts are relied on time and time again. Arguably, and more importantly, they hurt your solution’s perceived value.

Your salespeople can maintain the power of your solution’s price. Read more for how.

More pain, means more gain — and more pricing power.

If your salespeople are quick to discount, they are losing control of the conversation. Salespeople have the strength of pains on their side. Whose pains? The buyer’s.

The more a salesperson can expound the buyer’s pains and break the buyer’s status quo with a positive outcome for that pain, the greater benefit the solution will offer your buyer. And the greater the solution’s value to the buyer — the more they will be willing to pay for it.

Your salesperson will need to engage in the role of the trusted advisor. And just as they need to convey the pains and related gains in a clear, relevant conversation, they must present your value proposition in the same compelling manner.

More differentiation with more distinction — for more pricing power.

If you do not convey to your buyer why your solution is different and aligned to solve their specific needs, they will turn to price comparisons. And when the buyer sees a knock-off of your solution at a fraction of the price, they will choose the knock-off — or seek a hefty discount from you for what they perceive a relatively similar alternative.

Your salespeople must communicate your differentiators and what this means for the buyer.

Prepare to answer the hesitations in your buyer’s mind. They will be asking:

  • How is it better?
  • How does it meet my specific needs in a way alternatives do not?
  • Am I willing to pay a premium?

Think about it like this: If I have a mouse in my garage, I have three options. I can live with the mouse and accept it as my new status quo. I can get a mouse trap for $1.50. Or, I can hire an exterminator for $150.

The mouse causes my household too many pains to just ignore, so I may turn to the mousetrap — the cheap solution.

If the exterminator can help me see how much easier he can make my life, I would turn to him. Maybe he explains to me about the dangers of handling mice without expert knowledge. Maybe he heightens my pain by telling me that if I don’t get this mouse gone fast, it will turn into a dozen mice, then 30, then 50, then hundreds, until my whole garage is infested.

I see the value of the exterminator’s expert, specialized services, so I opt for him. The mice are gone at 100X the price point because the value was 100X for the exterminator over the mousetrap.

More clarity, more rewards — and a fight for stronger pricing.

The power of price lies with your salespeople. Ultimately, they need to feel motivated to demand stronger pricing and understand the dangers of offering discounts.

Seeing as salespeople earn their wages primarily from revenue and commission, you may think demanding a higher sales price is a no-brainer. But your salespeople need to understand, clearly, the direct rewards of higher sales deals — for your organization and specifically for their personal benefit.

Sometimes this boils down to the actual engineering of your compensation plan. And while reviewing your sales team’s compensation, consider how incentivizing the setup is.

Mainly, it is about bringing clarity to your salespeople. Sure, a 1% discount does not seem like much of a hit at the time, but educate your sales team to understand that if everyone discounts by 1 percent, your organization will miss the overall profit goals and everyone loses. Keep them fighting for the shared benefit of your company — and for their own wellbeing. When they know what is at stake personally, then they will be personally invested to defend the price.

Enable Your Sales Team for Success