When a company initiates a price increase, it’s common to fear pushback from the sales team. That pushback, however, can be overcome when you consider that pricing and commercial teams share a common goal: profitability. Most sales strategies are designed to drive more revenue and margin. Raising prices is, in fact, a driver for both outcomes.
When price changes are executed well, sales reps can actually make more money with less effort. The initial pushback from sales, however, can derail your best efforts. Here, we review three challenges associated with getting sales teams fired up about pricing and strategies to overcome them.
Challenge #1: Your sales team isn’t prepared to discuss value.
On many occasions, sales teams are asked to raise prices without being told why. There is no supporting documentation, leaving sales reps on their own to devise an explanation. This lack of preparation creates a lack of confidence and, ultimately, a lack of success.
Solution: Conversations about price increases are never fun. The best you can do, as a sales rep, is to be well prepared, confident and know that the organization is backing you up.
To successfully raise prices, organizations must provide information to support the reason why prices are being increased. Create documents for your sales team that explain what is impacting your pricing. Perhaps your business is investing in innovation or improving customer service. Maybe your costs have risen and, in order to maintain profitability and provide the service and value customers have become accustomed to, you need to ask for more.
When a sales rep is armed with good information and good talking points, he or she can clearly articulate the value your products deserve. When creating this documentation, consider: “What are we doing in terms of delivery, quality, innovation or service that justifies you paying a premium to us or a higher price to us than our competition?” How can you make it clear that while you are raising prices, your customer is still getting a good deal? The stronger your sales personnel believe it and the better they can communicate it, the more successful your price action will be.
For more information on preparing an effective pricing system, take a look at this article.
Challenge #2: Your executives override your sales reps’ best efforts.
It’s a classic scenario: A salesperson says, “I’m raising your price,” then the customer calls someone in an authoritative position of the company to complain. That executive, to avoid losing the customer, says, “We’ll waive the price increase.” The sales rep has just lost all credibility with the customer.
Solution: There needs to be one solid company message following a price increase. From sales reps to executives and customer service reps, everyone needs to be on board. There’s no room for a disconnect. This team stance gives sales reps the confidence they need and the backing they deserve following a price increase.
Learn more about communicating your price increase throughout the entire organization here.
Challenge #3: Your sales team isn’t compensated appropriately.
There is never one perfect way to design sales compensation plans. In extreme cases, sales reps are paid based entirely on revenue. Others are paid based on volume. These may or may not be the best approaches to maximizing your organization’s profit potential.
Solution: The best sales compensation plans are based on balance. Some INSIGHT2PROFIT clients use margin and revenue together to determine compensation. Another approach is to track how often sales reps follow your process for quoting. Are they within the range 80 percent of the time or 40 percent of the time? How do reps compare against their peers?
You can ultimately tie reps’ compensation to different metrics around not only achieving the sales quota and goal, but also to whether they are partners in implementing your pricing strategy.
It boils down to one simple truth: People do what you pay them to do. It’s up to you to provide the right motivation. If you want reps to drive volume, pay them to drive volume. If you want them to be more accountable for the profitability of the company and align their goals with the company's goals, that's when you start to look at more margin-based compensation.
Find more information regarding setting up a successful sales team compensation plan here.
The Bottom Line
With the appropriate preparation, it is possible to develop a confidence within your sales force that will effectively deliver a message of value for your organization. Through proper documentation, a team approach and balanced compensation, your sales team can be your best asset during a price increase.
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