You sell many different products to many different customers, and on any given day, what you sell to whom changes – that’s what we mean by mix. Every product and customer can have a different profit margin, so even if you have the same top-line sales from one month to the next, your profitability can vary considerably. You need to understand your mix.
When customers call you for a quote, how long does it take you to get one back to them? If your answer involves the words ‘hours’ or ‘days’, chances are you’re losing business due to lengthy response times.
Customers appreciate having market-relevant pricing available immediately when requested, especially if they’ve been shopping around. Businesses can benefit tremendously – in terms of operational efficiencies, customer satisfaction, win/loss rates, and profitability – by implementing a quoting process that gives customer service representatives the opportunity to close the sale before hanging up the phone. But how do you make that happen?
The measurable impact of import tariffs is beginning to ripple across the manufacturing and distribution landscape and financial markets. Alcoa dropped 13.3% to a seven-month low earlier this week — an indication of how aluminum tariffs are hurting, not helping, U.S. based aluminum manufacturers. Regardless of which industry you are in, chances are you will be impacted.
With the import tariffs announcement, there is concern of inflation in sectors that use steel and aluminum. In addition, several of our clients have seen cost increases in other commodities. Talk of inflation typically translates into panic. Here’s how we suggest you prepare for what’s coming...
It’s a common knee-jerk reaction for salespeople to focus on increasing volume by offering discounts on every sale – even if it means sacrificing margins. One way to mitigate the risk of excessive discounting is to establish a pricing system that manages pricing exceptions and balances volume incentives with well-defined boundaries that sales staff must operate within.
Ideally, in an effective pricing system, the framework should provide guidance for as many as 80 percent of sales. This guidance should consider a comprehensive range of factors, including the type and size of the customer, the market and the nature of the opportunity. The direction should be clear and unequivocal, providing sales staff with “guardrails” that establish minimum and maximum prices or margins. Sales staff can bounce between these guardrails as appropriate, but they should not be allowed to go above or below the established boundaries.
As mentioned in a recent blog post, getting your organization ready for raw material inflation includes preparing your sales team for price increase conversations with customers. It’s a skill that needs practice and developing backup strategies in case of pushback is a key component to your sales training plan.
Need help? You can use our Negotiation Tactics Infographic as a starting point.
Achieving significant pricing gains can feel like a long, hard-fought battle. This makes it all the more satisfying when the numbers start to roll in, validating your efforts and proving without a doubt that profitability is attainable.
The thought of losing those gains may keep you up at night. What safeguards can you put in place to protect the gains you’ve achieved and prevent your company from sliding back into past poor pricing habits?
It all starts with building a confident sales force.
In many cases, we see sales teams compensated based on the volume they bring in without much focus on pricing. Contrastly, pricing teams are compensated based on improved margins. This creates a natural tension.
So how can your organization improve alignment between pricing and sales teams to ensure business goals are met? Lots of our clients have had similar concerns, so here, we answer frequently asked questions to bring your pricing and sales teams together working toward improved profits and overall success.
Does this sound familiar? A new customer promised they would place a $30,000 order, but only at an average price per unit of $0.16. The sales rep ran the requested price through their internal process, and because $0.16 was above the required 20 percent margin, the sales rep approved the discount. End of consideration.
But here’s where the story gets interesting. After looking at the average price points for the top 20 customers of this product, the pricing manager determined that significantly bigger customers – with purchase volumes in excess of $100,000 – were paying $0.18 to $0.22 per unit on average. In fact, the third largest customer, at $468,000 in volume, was paying a $0.22 average sale price.
What was the justification for the lower price for the smaller customer – other than the fact that the customer simply asked for it?